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The Abu Dhabi subsidiary of a Swiss commodities trader was able to buy tens of millions of dollars in Russian gold despite a ban on such activities by Swiss entities, the latest evidence of loopholes in Western sanctions against Moscow.
Switzerland Last August, the European Union passed a ban on the “direct or indirect import, purchase or transfer” of Russian gold, including its export to third countries, as the West responded to Russian President Vladimir Putin’s attacks on Ukraine One of a series of measures.
But a provision in Swiss law allows its companies’ overseas subsidiaries to trade in Russian goods “legally independent” – a term that Switzerland’s sanctions enforcement agency declined to define.
Open Mineral Ltd, registered in Abu Dhabi a year ago, is wholly owned by Zug-based Open Mineral AG, according to the Financial Times and a Swiss commodity trader.
The documents were corroborated by Russian customs declarations provided to the Financial Times by pro-democracy group Free Russia Foundation.
The UAE, a major trade and financial center in the Middle East, has positioned itself as a neutral regional power.
Open Mineral AG, which is backed by Abu Dhabi wealth fund Mubadala, said it “takes compliance very seriously and takes all appropriate steps to confirm that Open Mineral Ltd is not violating any applicable laws”.
The deal by Open Mineral’s UAE subsidiary is further evidence that some traders have employed a strategy to keep Russian oil and gold flowing.
Open Mineral’s approach has similarities to that of Paramount Energy & Commodities SA, a Switzerland-based trader that owns Paramount Energy and Commodities DMCC in Dubai.
The Financial Times reported last month that Paramount’s Dubai-based entity had Keep Trading Russian Crude Oil Shipments are made from the eastern oil port of Kozmino, where price agencies have been assessing that cargoes trade above the G7 price ceiling aimed at cutting Moscow’s oil revenues. Paramount has denied violating any sanctions based on the Dubai company’s “completely independent” operations and management.
While Switzerland mirrors EU sanctions, the country’s State Secretariat for Economic Affairs (Seco) says, “legally independent subsidiaries of Swiss companies abroad . . .[are]are generally not subject to the Swiss sanctions provisions”.
It said this was because of the “principle of territoriality”, which means Swiss law only applies to nationals resident in the country and companies incorporated there.
The EU, by contrast, does not allow overseas affiliates to continue trading in banned Russian goods because a “non-circumvention” clause designed to ensure companies abide by the spirit and letter of the law is included in all of its sanctions.
Seco declined to outline any conditions under which the two entities would not be considered “legally independent”.
“These issues will be analyzed on a case-by-case basis. There is no general policy,” it said.
The Emirati entity has its own offices, directors based in the UAE, employees, bank accounts and lines of credit, Open Mineral AG said, adding that it pays no dividends to its Swiss parent. In response to a query about whether the Swiss entity exerted control or oversight over the UAE entity, Open Mineral AG said Open Mineral Ltd “operated in the usual manner as an independent company”.
Switzerland, which has traditionally valued neutrality during conflict and has a regulatory system that protects the secrecy of its banking and commodities trading sectors, surprised the international community last year by emulating the European Union. sanctions against russia.
But Agathe Duparc, a researcher at the Swiss NGO Public Eye, said that if Seco had concerns about any such business arrangement, it would do well to “examine the link between the two entities to see whether the legal separation exists only on paper, And in fact, the decision was made in Switzerland.”
Open Mineral was founded in 2017 by a group of former Glencore executives.
Mubadala led a $33 million funding round in 2021 for the Swiss company, which started as an eBay-style metals marketplace but has moved into niche markets such as copper and lithium concentrates. Mubadala declined to comment.
Additional reporting by Henry Foy and Sam Fleming in Brussels and Polina Ivanova, David Sheppard and Tom Wilson in London
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