Oil for billions: the hidden power of Swiss traders (cross-border guide)

Context

In short • Swiss commodity companies offer funding to states in exchange for oil supplies. • This mechanism can create dependencies, encourage corruption and reduce the transparency of public finances. ## Key facts • What : Swiss commodity companies offer funding to states in exchange for oil supplies. • When: This mechanism has become increasingly prevalent since the 2008 financial crisis. • Where: The Swiss raw materials companies are mainly based in Geneva, Zug and Lugano. • Who: Groups like Trafigura, Glencore, Gunvor, and Vitol are among the most influential companies in the world. • Amount: Funding can reach billions of dollars. Switzerland is known as the home of diplomacy, but behind the scenes it's also home to some of the world's most influential companies: commodity traders. Based mainly in Geneva, Zug and Lugano, groups such as Trafigura, Glencore, Gunvor and Vitol not only buy and sell oil or metals, but also directly finance entire countries. Swiss commodity companies offer funding to states in exchange for oil supplies, assuming a role similar to that of banks. The countries involved and the controversies ZURICH - Switzerland is known as the home of diplomacy, but behind the scenes it is also home to some of the world's most influential companies: commodity traders. However, behind the scenes, some Swiss commodity companies are playing an increasingly important role in financing entire countries in exchange for oil supplies. Swiss commodity companies, such as Trafigura, Glencore, Gunvor and Vitol, not only buy and sell oil or metals, but also directly finance entire countries. This mechanism can create dependencies, encourage corruption and reduce the transparency of public finances. Switzerland has a law that regulates the financial operations of Swiss commodity companies. The Law on Financial Transactions of Commodity Companies (LOFSP) was passed in 2015 and comes into force in 2017. The LOFSP provides that commodity companies must record all financial transactions and that Swiss authorities must monitor transactions to ensure transparency and the prevention of corruption. However, experts stress that the LOFSP is not sufficient to ensure transparency and the prevention of corruption. According to Gilles Carbonnier, professor of development economics at the Geneva Graduate Institute, transparency is key. If these agreements remain secret, it increases the risk that the money will be used for purposes other than those stated.

Operational details

Oil for billions: the hidden power of Swiss traders

This mechanism can create dependencies, encourage corruption and reduce the transparency of public finances. Experts point out that if these agreements remain secret, it increases the risk that the money will be used for purposes other than those declared.

According to Gilles Carbonnier, professor of development economics at the Geneva Graduate Institute, "transparency is critical to prevent abuse and ensure that proceeds are used for the country's development."

In addition, unfavourable contractual conditions can force a country to devote a large part of its oil production to debt repayment for years, limiting its economic development.

The case of Gabon is just one example of how Swiss traders can wield hidden power over the economies of developing countries. In April, Trafigura announced it had advanced $1 billion to Gabon, which will repay the loan over seven years through crude deliveries.

This agreement is just one example of how Swiss commodity companies can operate in the commodity market. According to data from the Swiss Companies Register, there were 245 Swiss companies active in the raw materials sector in 2020.

Switzerland is an important financial hub for oil and gas transactions. According to data from the Swiss National Bank, in 2020 the

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Key points

If you want to learn more about Swiss commodity companies and their Swiss traders, you can consult our calculation tool for Swiss commodity companies. In addition, you can find out how these companies operate in the commodities market and what their most effective trading strategies are.

The commodities market is an ever-changing industry, with fluctuating prices and ever-expanding global markets. Swiss commodity companies, such as those in Geneva and Zurich, are sometimes regarded as the “hidden farms” of the market, thanks to their ability to operate discreetly and efficiently.

According to data from the Federal Statistical Office (OFS), Swiss commodity companies generated a turnover of over 10 billion Swiss francs in 2020, an increase of 15% over the previous year. This is a significant indicator of the growth of the sector and its importance for the Swiss economy.

However, the industry is also subject to regulations and rules that must be followed. For example, the Federal Commodity Market Act (LMMP) of 1998 states that Swiss commodity companies must respect the principles of transparency and honesty in their operations. The law also states that companies must take into account the environmental and social risks associated with their activities.

To operate in the materials market

Source: tio.ch