How companies of Swiss commodity traders make money with Russian gold – quite legally

In response to the Russian attack on Ukraine, Switzerland imposed sanctions on Russia last year. Among other things, Swiss companies were prohibited from “directly or indirectly importing, purchasing or passing on Russian gold, including shipment to third countries”.

But the sanctions do not appear to deter Swiss companies from being involved in trading Russian gold, as Zug-based Open Mineral AG recently demonstrated. And everything was right.

Because a provision in Swiss law allows the subsidiaries of Swiss companies to trade in Russian gold – as long as they are “legally independent”. And Open Mindral AG has such a subsidiary: Open Mineral Ltd.

Traded $44 million worth of gold

As evidenced by documents, the Open Mineral Ltd. $44 million worth of Russian gold to the United Arab Emirates between January and August. These documents are available to the “Financial Times” and have been authenticated by the Swiss commodities trader.

Open Mineral AG assured the British newspaper that they take the regulations very seriously and have taken all appropriate measures to ensure that Open Mineral Ltd. not violate applicable law.

What does “legally independent” mean?

Back to the ominous expression “legally independent” referring to subsidiaries.

Seco explained that “legally independent subsidiaries of Swiss companies abroad are generally not bound by the Swiss sanctions provisions.” The reason for this is the “territoriality principle”. This means that Swiss law only applies to nationals residing in Switzerland and Swiss-based companies.

The Seco does not want to provide information on the conditions under which companies are considered “legally independent”. The Financial Times reports:

The EU shows that things can be done differently: even subsidiaries abroad are not allowed to trade in banned Russian goods. All EU sanctions have a “non-avoidance clause”.

Open Mineral AG declares that Open Mineral Ltd. have their own office, their own director, their own employees and their own bank accounts and lines of credit. In addition, no dividends were paid to the Swiss parent company. Ergo, the Open Mineral Ltd. “as a separate company in the usual way.”

Links to Abu Dhabi sovereign wealth funds

According to Agathe Duparc of the research platform Public Eye, Seco would do well “to investigate the connection between the two companies to understand whether the legal separation only exists on paper and whether the decisions are actually made in Switzerland.”

By the way: Open Mineral AG is supported by the Abu Dhabi state fund Mubadala. Mubadala invested $33 million in the Swiss company in 2021. According to the Financial Times, Mubadala declined to comment.

(oo)