Zug and the East — a part of the book Zug: The Making of a Global Hub by Dr Alexander Ressos.
The commodity traders, holding companies and crypto projects of Zug have one feature in common that this part examines separately: their close ties to the former Soviet Union. Russian, Kazakh and Ukrainian raw materials passed through the trading desks of Baar and Zug for three decades. Russian state companies chose the canton as the seat of their European pipeline ventures, while wealthy families from the region settled on the shores of the lake. The war in Ukraine from February 2022 and the sanctions that followed put these ties to a hard test. Chapter I describes how they developed between the collapse of the Soviet Union and 2022. Chapter II tells the story of Nord Stream, the pipeline company whose seat in Zug made the canton part of European energy politics. Chapter III examines the sanctions and their consequences for the canton and its companies.
This part belongs to Zug: The Making of a Global Hub by Dr Alexander Ressos, published here in full, section by section.
From the Soviet Collapse to 2022 — conclusion
Between 1991 and 2022, Zug became one of the places through which the raw materials of the former Soviet Union reached world markets. Read more Zug · Zug and the EastThe opening of the East
The dissolution of the Soviet Union in December 1991 opened the largest reserves of raw materials in the world to international trade. Read more Zug · Zug and the EastGlencore and the Russian producers
Glencore, the successor of Marc Rich + Co, became the most important Western partner of the Russian and Kazakh raw material producers. Read more Zug · Zug and the EastOther traders and the Russian oil trade
Glencore was not alone. The Geneva traders Gunvor, Vitol, Trafigura and Litasco, the trading arm of Lukoil, handled a large share of Russian oil exports in the 2000s and 2010s. Read more Zug · Zug and the EastWhy Zug
The reasons why Russian and Kazakh groups chose Zug were the same that attracted other international companies: low taxes, the tax privileges for holding and domiciliary companies until 2020,… Read more Zug · Zug and the EastRussian residents in Zug
The economic ties brought people. Managers and employees of the Russian groups and their Swiss partners moved to Zug, while wealthy Russians, Kazakhs and Ukrainians bought property in the canton and… Read more Zug · Zug and the EastKazakhstan and Central Asia
Kazakhstan occupies a special place in the relations between Switzerland and the East. Read more Zug · Zug and the EastUkraine
Ukraine was a trading partner of Zug companies long before the war. Its exports of grain, iron ore, steel and sunflower oil passed through Swiss trading houses. Read more Zug · Zug and the EastThe trade in figures
Official trade statistics give only an incomplete picture of the commodity trade with the East. Read more Zug · Zug and the EastThe criticism before 2022
Criticism of the ties between Swiss traders and the producers of the former Soviet Union was not new in 2022. Read more Zug · Zug and the EastPrivatisation and the new owners
The trade with the East cannot be understood without the privatisation of Soviet industry in the 1990s. Read more Zug · Zug and the EastSwiss proceedings in the 1990s and 2000s
Swiss prosecutors and courts became involved in the affairs of the East early on. In 1998 and 1999, the Geneva prosecutor investigated the Lugano-based construction company Mabetex, which had… Read more Zug · Zug and the EastThe turning point of 2014
The Russian annexation of Crimea in March 2014 and the war in the Donbas marked the first break in the relations between the West and Russia. Read more Zug · Zug and the EastThe typical Russian structure in Zug
The structures that Russian groups used in Zug often followed a similar pattern. At the top there could be a holding company in Cyprus, the Netherlands or another jurisdiction with a favourable tax… Read more Zug · Zug and the EastGazprom's Swiss presence
Apart from the pipeline companies, the Russian gas company had other activities in Switzerland. It held stakes in gas trading and marketing companies in Europe, some of which had Swiss subsidiaries. Read more Zug · Zug and the EastService providers for the Eastern business
The Eastern business supported a group of specialised service providers in Zug. Law firms advised on trade contracts, prepayment structures, arbitration and sanctions. Read more Zug · Zug and the EastArbitration as the forum of the Eastern trade
Contracts between Western traders and producers from the former Soviet Union seldom had reason to provide for the jurisdiction of Russian or Kazakh courts. Read more Zug · Zug and the EastThe view from the producing countries
The relations between Zug and the East appear differently from the perspective of the producing countries. Read more Zug · Zug and the EastZug in the Russian business press
The Russian business press also took an interest in the Zug connection. Reports on the annual accounts of Russian groups could mention their Swiss trading companies and the profits booked in the… Read more Zug · Zug and the EastThe Caucasus and the Caspian
The Caucasus and the Caspian region formed a further part of the Eastern business of Zug. Read more Zug · Zug and the EastPractitioner's note: the legacy of Eastern ties in Zug structures
Advisers who take on companies in Zug with a history of ties to Russia or the former Soviet Union should examine that history carefully. Read more Zug · Zug and the EastNord Stream: A Pipeline Company in Zug — conclusion
Nord Stream AG was established in Zug in 2005 as a joint venture of Gazprom and European energy companies. Its pipeline through the Baltic Sea began operating in 2011 and 2012. Read more Zug · Zug and the EastThe project
The idea of a gas pipeline through the Baltic Sea from Russia to Germany dates back to the 1990s. Read more Zug · Zug and the EastWhy Zug
Several factors made Zug a plausible seat for the pipeline company. The shareholders came from four countries, which made a neutral seat attractive for their joint venture. Read more Zug · Zug and the EastConstruction and operation
Construction of the pipeline began in April 2010. The first of the two lines was inaugurated in November 2011 in the presence of German Chancellor Angela Merkel, Russian President Dmitry Medvedev and… Read more Zug · Zug and the EastNord Stream 2
In 2015, Gazprom and several European companies agreed to build two further lines parallel to the first pipeline. Read more Zug · Zug and the EastThe American sanctions and the Swiss contractor
The United States adopted sanctions against the project in December 2019 through the Protecting Europe's Energy Security Act. Read more Zug · Zug and the EastThe end of Nord Stream 2 AG
On 22 February 2022, after Russia recognised the separatist regions of eastern Ukraine, the German government stopped the certification of Nord Stream 2. Read more Zug · Zug and the EastThe sabotage of September 2022
On 26 September 2022, explosions destroyed three of the four lines of Nord Stream and Nord Stream 2 in the Baltic Sea, near the Danish island of Bornholm. Read more Zug · Zug and the EastWhat Nord Stream meant for Zug
Nord Stream AG itself was not placed on the Swiss or European sanctions lists, since its shareholders included European companies. Read more Zug · Zug and the EastThe politics of the boards
The composition of the Nord Stream boards made the pipeline companies political from the start. Read more Zug · Zug and the EastFinancing Nord Stream
The financing of the first pipeline was one of the largest project financings in Europe. Read more Zug · Zug and the EastLegal disputes with the European Union
Nord Stream 2 AG fought the European Union's attempts to subject its pipeline to the rules of the internal gas market. Read more Zug · Zug and the EastThe local dimension
For the canton of Zug, the pipeline companies were employers and taxpayers like others. Nord Stream AG and Nord Stream 2 AG together employed a few hundred people in the canton at their peak. Read more Zug · Zug and the EastThe German side of the story
In Germany, the history of Nord Stream became the subject of political reckoning after 2022. Read more Zug · Zug and the EastNord Stream and the Swiss authorities
The Swiss federal authorities had no direct role in Nord Stream. The pipeline did not cross Swiss territory, and Switzerland bought only small amounts of gas through it. Read more Zug · Zug and the EastGovernance lessons from Nord Stream
The Nord Stream companies offer lessons for the governance of international joint ventures with state-linked shareholders. Read more Zug · Zug and the EastA chronology of Nord Stream
The main events in the history of the Nord Stream companies can be summarised as follows. Read more Zug · Zug and the EastWhat remains of the pipelines
One line of Nord Stream 2 survived the explosions of September 2022 but has never been put into operation and has been under pressure since the sabotage. Read more Zug · Zug and the EastNord Stream and the image of Zug abroad
Before 2022, the international press mentioned the seat of the Nord Stream companies in Zug mainly as a detail. After the invasion and the sabotage, the detail attracted more attention. Read more Zug · Zug and the EastEnergy security and the Swiss gas supply
In 2021, Switzerland depended on imported gas for about 15 per cent of its final energy consumption, having no domestic production and no large storage facilities of its own. Read more Zug · Zug and the EastA Geneva comparison
Geneva had no Nord Stream, but it had the Russian oil traders. Litasco, the trading arm of Lukoil, and Gunvor, founded by a close associate of the Russian president, were based there, as were the… Read more Zug · Zug and the EastPractitioner's note: composition proceedings for a sanctioned company in Zug
The Nord Stream 2 case offers lessons for advisers of companies that become insolvent because of sanctions. Read more Zug · Zug and the EastSanctions and Their Aftermath (2022–2026) — conclusion
On 28 February 2022, Switzerland adopted the European Union's sanctions against Russia in full. Read more Zug · Zug and the EastSwitzerland's turn of 28 February 2022
In the first days after the Russian invasion of Ukraine on 24 February 2022, the Swiss government hesitated. Read more Zug · Zug and the EastThe content of the sanctions
The sanctions adopted by Switzerland comprise financial measures, trade measures and measures against persons. Read more Zug · Zug and the EastThe traders' withdrawal
Glencore announced at the beginning of March 2022 that it would review its stakes in Rosneft and En+. Read more Zug · Zug and the EastRussian companies in Zug under sanctions
The sanctions hit several Russian-owned companies in Zug directly. EuroChem, the fertiliser producer headquartered in the canton, was affected when the European Union placed its founder Andrey… Read more Zug · Zug and the EastFrozen assets
The freezing of assets of sanctioned persons became the most visible part of the Swiss sanctions. Read more Zug · Zug and the EastThe question of confiscation
The question whether frozen Russian assets can be confiscated and used for the reconstruction of Ukraine has been debated in Switzerland as elsewhere. Read more Zug · Zug and the EastEnforcement and prosecution
The enforcement of the sanctions requires both administrative supervision and criminal prosecution. Read more Zug · Zug and the EastKazakhstan and the transit trade
The sanctions have increased the importance of Kazakhstan and other Central Asian states as transit countries. Read more Zug · Zug and the EastThe effect on Zug's economy
The effect of the sanctions on the economy of Zug has been limited in aggregate. The Russian-linked companies accounted for a small share of the canton's employment and tax revenues. Read more Zug · Zug and the EastNeutrality and the sanctions debate
The adoption of the sanctions has raised questions about Swiss neutrality that go beyond the economy of Zug. Read more Zug · Zug and the EastSECO and the machinery of sanctions
The implementation of the sanctions placed a heavy burden on the State Secretariat for Economic Affairs. Read more Zug · Zug and the EastThe prohibition of trust services
The sanctions extended to the professional services that form an important part of Zug's economy. Read more Zug · Zug and the EastDelisting and legal protection
Persons placed on the Swiss sanctions list can ask the Federal Department of Economic Affairs, Education and Research (EAER) to remove them. Read more Zug · Zug and the EastRussian residents and their permits
The sanctions did not automatically affect the residence permits of Russian nationals in Switzerland. Most Russian residents were not sanctioned and continued to live and work in the country. Read more Zug · Zug and the EastInsurance, shipping and the price cap in practice
The oil price cap rests on the control of services that the Western economies dominate: insurance, shipping, finance and brokerage. Read more Zug · Zug and the EastBelarus
The sanctions against Russia were accompanied by sanctions against Belarus, which supported the invasion. Read more Zug · Zug and the EastRussian countermeasures and Swiss companies in Russia
The sanctions war ran in both directions. Russia adopted countermeasures against the states that imposed sanctions, which it classified as unfriendly states. Read more Zug · Zug and the EastSanctions in the courts: contracts that could not be performed
The sanctions produced a wave of commercial disputes. Traders had concluded long-term contracts with Russian producers and with customers who had counted on Russian supplies. Read more Zug · Zug and the EastSanctions against third-country intermediaries
From 2023, the European Union increasingly listed companies in third countries that helped Russia to circumvent the sanctions. Read more Zug · Zug and the EastPractitioner's note: sanctions compliance for a Zug company
A company in Zug that trades internationally must build a sanctions compliance programme that covers several legal systems. Read more