Swiss authorities are failing to properly enforce the price cap on Russian oil, a report from non-profit Public Eye has claimed, suggesting that traders are swapping operations in Switzerland for sanctions-free Dubai.

In a March 20 report, Public Eye argues that Switzerland has “non-existent controls”, with traders not required to keep documentation relating to the purchase of Russian oil or notify the Swiss authorities, including the State Secretariat for Economic Affairs (SECO), which oversees sanctions implementation.

According to the report, before the war with Ukraine 50% to 60% of barrels of oil exported by Russia were sold by Swiss traders, most of whom were based in Geneva, with Swiss banks providing hefty credit lines.

In December last year, a price cap on Russian oil implemented by the European Union, G7 countries and Australia came into force, setting an upper limit of US$60 per barrel of crude oil.

Although Switzerland is not part of the price cap coalition, it adopted the relevant package of EU sanctions, meaning the price cap applies in the banking hub, but traders do not have to attest that they have bought barrels of oil at prices below the cap.

The report notes that SECO’s approach to date “aligns with the general policy conducted so far by Bern to maintain the attractiveness of Switzerland as a trading hub”.

Public Eye cites a report released this week by NGO Global Witness, which found that 20 million barrels of Russian ESPO – a grade of crude oil – were sold for a sum “well above” the price cap, raising questions over whether the cap is being adequately enforced.

Last year, Public Eye also suggested Switzerland may be ill-equipped to enforce sanctions against Russian coal traders.

Meanwhile, its most recent report also points to the fact that the sanctions only apply to those individuals with a Swiss passport and living in Switzerland, which means that those living abroad are not subject to the restrictions and thus “risks offering some room for manoeuvre”.

Public Eye notes that some Switzerland-based traders have moved to Dubai in the wake of the sanctions, where there are currently no sanctions against Russia.

“Dubai now seems to have been taken siege by hordes of wealthy Russians while its status within the oil trade, previously modest, is developing spectacularly,” the report says.

A former Swiss banker and trade finance specialist is quoted in the report as saying that Dubai is “a good destination for those who do not want to be caught buying or selling products under sanction”.

They expect that “most traders will retain a strong presence in Geneva to conserve their credit lines to fund their global activities” on account of the lack of trade finance availability in Dubai.

According to the Global Witness report, the UK may also be failing to properly enforce the price cap, although Public Eye describes it as having the “strictest” controls in place.

The Office of Financial Sanctions Implementation (OFSI), introduced a general licence to allow services to be provided to Russian oil exports below the price cap.

First tier companies, which include importers and commodities traders, must notify OFSI within 40 days whenever they undertake an activity covered by the general licence.

Freedom of information requests submitted by Global Witness revealed that OFSI “collected zero attestations from tier one entities (traders of oil) and only five reports from tier two and three providers (charterers, shippers, and insurers) through February 15”.

Yet the NGO claims that 12% of ESPO trades carried out since the price cap “involved British firms in some capacity”, not including other grades of crude oil.

“With OFSI seemingly the only agency collecting these attestations, the enforcement of the entire price cap scheme rests on these five pieces of paper,” the report says. The US requires parties to a price-capped oil trade to keep records but, like Switzerland, does not require transactions to be reported to the authorities.

“The oil price cap is limiting Russia’s ability to use oil to finance its illegal war – since it was introduced on crude oil in November the global discount on Russian oil has increased by 50%,” a UK government spokesperson tells GTR in a written comment.

“There is a robust enforcement regime for the price cap with strict penalties for breaking the rules, including criminal prosecution. We continue to work with industry and our international partners to ensure firms are sticking to the rules,” they add.

SECO did not respond to GTR’s request for comment.