An unusual sighting took place in a picturesque canton of central Switzerland last week: protesters took to the streets with flags and placards reading “No to Putin’s war” and “Money Dyed in Blood”.
The inhabitants of this small town had reason to protest. The name Chug may not be widely known in relation to Swiss resorts such as Davos and St. Moritz, or financial capitals such as Zurich and Geneva.
Chug is home to many international companies, but mainly Russian companies. And the residents wanted to protest about the role of their city as a “shelter” for these companies.
“We urge Switzerland to support Ukraine and stop doing business with Russia,” Tatiana, a Ukrainian living in Switzerland and whose family is still trapped in Kyiv, told Bloomberg.
About 80% of Russia’s goods pass through Switzerland, which makes it critical for Russian exports. Last month, Switzerland abandoned its notorious neutrality, deciding to take part in the European Union’s sweeping sanctions against Russian individuals and entities.
The “map” of Russian companies in Chug
However, in Chug, a city “hidden” between Zurich and Lucerne, the sanctions do not affect anyone. At least 40 large Russian companies with offices and other facilities in the city continue to operate normally.
Among those companies is Metal Trade Overseas, a sales unit of Norilsk Nickel, whose largest investor is Vladimir Potanin, the second richest man in Russia.
A few blocks below the train station are Rusal Marketing and Rusal Products, United Rusal International’s main commercial arms, which supply aluminum to hundreds of customers around the world. Rusal’s parent company was once under the control of Oleg Deripaska, against whom US sanctions have been imposed since 2018.
Nearby are the headquarters of EuroChem, a producer of fertilizers and agricultural products whose founder Andrei Melnichenko resigned from the board and relinquished his majority stake last Wednesday as he joined the new wave of EU sanctions.
Chug is also home to East Metals, a Evraz steel plant whose main shareholder is Roman Abramovich.
Britain has announced sanctions against the owner of Chelsea, saying that Evraz is involved in activities that helped Vladimir Putin’s war in Ukraine, such as “the possible supply of steel to the Russian army for the production of tanks”.
None of the aforementioned metal giants have been sanctioned by the European Union – and consequently by Switzerland. Most of them, moreover, have denied any involvement in the war in Ukraine.
“We are financing Putin’s war”
Swiss Green Party MP Manuela Weichelt claims that the city of Chug indirectly financed the Russian president’s war economy.
“Putin has filled his coffers with funds and money from companies in Chug that are going to war with Ukraine,” he said.
It is difficult to assess the true extent of Russian companies operating in Chug, as the registration rules in Switzerland are quite flexible and do not require much information from companies.
Local officials say at least 40 liaison companies in Russia, with about 900 employees, operate in the Swiss canton.
At least 20 companies of Russian interests paid taxes of 31 million Swiss francs in 2020. This is a very small amount, but this is also the reason why this quiet village suddenly became a hub of foreign companies.
With a population of 127,000, ie one registered company for every two taxpayers, Chug has the lowest corporate tax rate of any canton in Switzerland.
The city’s finance chief says Chug could survive without Russian companies.
The only Russian company in Chug that closed
Of all the companies based in Chug, the only one “hit” by the sanctions is Nord Stream 2, which operates the gas pipeline connecting Russia and Germany. It is now in de facto bankruptcy, and its 106 employees have been laid off.
The Russian flag is no longer flying outside the offices of Nord Stream 2, while sponsorship of Chug’s hockey team has been suspended.
Money Review
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