As the beginning of war in Ukraine saw financial advisers scramble to help international companies get around sanctions placed on Russia, much of the world’s focus turned to how the situation would impact global oil and gas prices. But now, after Switzerland sanctioned Russia at the start of the war, a combination of Western and retaliatory Russian sanctions are beginning to bite Switzerland’s luxury businesses.
Since the start of the COVID-19 pandemic, many luxury businesses in Switzerland have struggled. Unlike online shopping platforms, many of the luxury purchases that support Switzerland’s economy are made at face-to-face at auctions, VIP events and in-store. Now that all federal COVID restrictions have been repealed, one would expect the industry to begin booming once again. Unfortunately, there is one important set of wealthy clientele who are noticeably missing from the auction rooms, sales counters and house viewings this summer: Russians.
Earlier this year, the Swiss government followed the lead of many other European and North American nations in placing sanctions on Russia after it invaded Ukraine. Switzerland’s sanctions focused mostly on asset freezes and targeted sanctions on powerful Russian individuals with connections to the government and large Russian companies.
Some Swiss banks were ordered to work overtime to comb through the mass of Russian assets in the country. Since the sanctions began there has also been a large retaliatory pushback from Russia. Wealthy Russians are major players in the Swiss luxury market, often being seen at events and festivals in Switzerland, auctions of luxury goods and, of course, as big players in the Swiss housing market.
Current estimations put the amount of Russian money circulating in Switzerland between 24 and 200 billion Swiss francs. Initially, Switzerland's sanctions saw 7,5 billion Swiss francs worth of assets frozen in response to the Ukraine war, but were forced to release some of the funds due to “insufficient grounds” for holding them. Frozen Russian assets in Switzerland now total around 6,3 billion francs.
There are now 1.000 Russians on Switzerland’s sanctions list, of whom a handful hold Swiss residence permits. In total, more than 16.000 Russian citizens are currently living in Switzerland, excluding the ones that have Swiss citizenship as well.
While other Swiss cities are also home to top luxury brands impacted by Russian sanctions and low demand, Geneva has been hit the hardest. Some airports in the region have reported that Russian jets have simply been abandoned in the hopes that they won't be seized, while luxury real estate in the region is also taking a hit.
According to one Geneva real estate agent, many Russians are delaying buying houses in Switzerland in the hope that the sanctions will be dropped soon. The agent, who did not want to be named, told SWI news that clients are concerned about the way that “newspapers report when there is an important sale in Geneva, and they don’t want people to speak about them."
Russia has also imposed sanctions on Swiss luxury brands in recent months. Retaliatory sanctions from Russia are comparatively rare, but in March 2022, Russian authorities attempted to make a point by seizing millions of Swiss francs' worth of Audemars Piguet luxury watches, damaging the reputation of Swiss businesses in Russia in the process.
This double-edged sword means that Swiss luxury firms can no longer rely on stable income from wealthy Russians in Switzerland, who are hampered by western sanctions, or selling luxury items in Russia, where they may be pulled from shelves at a moment’s notice.
Conversely, Russian President Vladimir Putin is allegedly also a big fan of Swiss-made luxury goods. Putin, who wears a watch on his right hand despite being right-handed, has been spotted on several occasions wearing expensive Swiss watches including pieces from Patek Phillipe, F.P. Journe and IWC Schaffhausen. At a summit held in Switzerland in 2021, Putin is said to have received yet another Swiss watch to add to his collection as a diplomatic gift from the country.
In 2009, Putin also famously took one of his Swiss watches off his wrist, only to give it to a factory worker seeking a memento to remember the president by. The watch, which was from Swiss watchmaker Blancpain, is said to have cost nearly 7.000 Swiss francs at the time. The worker expressed shock despite asking for a souvenir, saying he did not expect a gift of that magnitude.