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Russian business raises stake in small market

Russian investor Viktor Vekelberg informs the Swiss media about his latest plans

(Keystone)

Having previously dipped a toe into the market, Russian firms have been gradually building up a presence and diversifying in Switzerland over the last few years.

One observer of Russian business interests in Switzerland estimates that the number of enterprises has nearly doubled in the last five years to reach around 200 separate entities.

The presence is still mainly felt in the commodities market with Switzerland trading some 75 per cent of all Russian oil exports.

Russian commodities heavyweights Rosneft, Bashneft and TNK-BP have recently joined a growing number of compatriot traders in Geneva, Zurich and Zug.

But other firms in the financial services, real estate, tourism and manufacturing sectors are starting to move into Switzerland, according to Regula Spalinger, general manager of the Swiss-Russian business consultancy firm Kommunikation Ost-West.

“We have seen a strong movement of Russian business into Switzerland in the last five years, not quite doubling in number but getting along in that direction,” Spalinger told swissinfo.ch.

“We are now seeing a broader range of enterprises coming over here, defying the stereotypical image that Russian business interests are all about commodities traders.”

Modernisation drive

Detailed data on Russian enterprises is hard to come by as Switzerland does not keep official statistics and cantons are reluctant to name individual firms.

Most companies (up to 70) are based in canton Geneva, according to Ost-West, with Vaud, Zug and Zurich also popular destinations.

That statistic alone suggests that commodities companies are still in the majority, but Spalinger believes this dominance is being slowly diluted.

Included in the Ost-West data is Swiss manufacturer Sulzer, which is owned 31.2 per cent by Russian investment firm Renova.

Swiss technology is coveted by Russia as it moves to modernise its economy by updating infrastructure and reducing its reliance on the oil and gas sectors. In July, Switzerland signed an agreement to help Russia in its modernisation drive.

“We are seeing more Russian enterprises setting up offices in Switzerland looking to forge closer links with Swiss manufacturers and bring their technology back to Russia,” Spalinger said. “These enterprises either produce in Switzerland or buy Swiss technology to export to Russia.”

Others specialise in facilitating the export of machines and other manufactured goods, such as EIT Export Industrial Technology in Neuchâtel, Erapa in Volketswil, canton Zurich, Eurochem Trading and Cronos Im-Ex in Zug.

Size is everything

Despite the lure of Swiss technology, the domestic market and most companies are too small to attract large scale Russian interest, according to Walter Fetscherin, chairman of the joint chambers of commerce, that represents trade interests between Switzerland, Russia and several other former Soviet states.

“Apart from Renova there has been very little direct investment in the Swiss manufacturing sector from Russia,” the former Swiss ambassador to Russia told swissinfo.ch. “Russia is concentrating on larger markets, such as Germany, that can bring added value to the country’s raw materials trade.”

“Most Swiss companies are too small at this stage of Russia’s modernization movement, but I have the impression that more Russians will discover Swiss innovative niche products in the coming years.”

Russians are coming

There is at present far more Russian activity within Switzerland in the real estate, hotel and tourism sectors, Fetscherin added.

One niche sector that has gained a foothold in recent years is the arrival of small enterprises that specialise in locating high quality Swiss medical clinics for Russian health tourists, according to Regula Spalinger.

While the number of Russian enterprises setting up shop in Switzerland is on the rise, it is far more difficult to gauge the size of such operations in terms of investment and jobs created.

Nor is it known how many such enterprises are set up as brass plate firms, using Switzerland as a tax shelter for their international activities.

On the whole, Russian business interests appear to be small with sparsely staffed representative offices.

The numbers of Russians resident in Switzerland has topped 10,000, according to official figures but that number pales in comparison to the German, Italian, British, French, American and many other foreign groups.

Both Spalinger and Fetscherin agree that increasingly closer economic links between Switzerland and Russia should lay the foundations for further trade.

“I think the trend of Russian companies coming to Switzerland is set to intensify in the coming years because of the greater cooperation between the two countries,” Spalinger told swissinfo.ch.

Swiss-Russian trade ties

Trade between Switzerland and Russia has picked up since the financial crisis.

Exports from Switzerland to Russia jumped 26% last year to SFr2.6 billion ($3.1 billion) while goods and services travelling the other way totalled SFr1 billion (+41%).

Swiss direct investments in Russia reached SFr6.2 billion in 2009, with 150 Swiss firms employing 75,000 people there.

Switzerland is holding talks, as part of the European Free Trade Association (Efta), for a free trade agreement with the customs union of Russia, Belarus and Kazakhstan.

A three year action plan of economic cooperation between Switzerland and Russia was in 2010 extended for three years, until the end of 2013.

Switzerland signed a new agreement in July to extend cooperation on Russia’s drive to modernise its economy.

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swissinfo.ch


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