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Consider Raising Country Risk for Switzerland?

by Monte Friesner

 24 September 2010

The imposition of sweeping US, EU and UN sanctions upon Iran has raised the levels of risk for any nation whose commercial banks continue to conduct financial transactions with sanctioned Iranian banks. Whilst it is unusual to raise country risk upon a nation located in Western Europe, where conditions demand it, risk managers must objectively consider taking such action. Switzerland's €18bn gas agreement [EGL] with the National Iranian Gas Export Company, [through a subsidiary, NIGEC] an entity on the UK Non-Proliferation List [Proliferation Concerns List], when coupled with the continued banking relationship that reportedly exists between at least a dozen Swiss banks*, and their correspondents in Iran, is cause to reexamine your present country risk calculation for the Swiss Confederation.

There is, of course, an increased risk that regulatory agencies in countries that have adopted the strict Iranian sanctions will impose fines and penalties upon Swiss companies and/or financial institutions that assist in sanctions evasion, and that assets, international contractual relationships, and privileges could become methods of enforcement action.

The extraordinary warnings, delivered personally through senior US Government officials traveling abroad, indicates that the United States intends to fully enforce its sanctions; All this affects risk calculation.  

Whilst we understand that there have been calls for it from the US, the Swiss Government thus far has resisted the imposition of strict sanctions against Iran, instead believing that diplomacy is the better path in dismantling Iran's WMD and ballistic missile programs. The problem is that sanctions evasion has consequences.


When the Swiss banks who still maintain correspondent banking relationships with Iranian financial institutions are publicly identified, there will also probably be some reputation damage, with resultant client exits; this is another reason to increase country risk at this time.


*          Please note that most major Swiss financial institutions have terminated prior relationships with the Iranian economy; it is the few banks that continue to trade with Iranian banks, either directly or indirectly, who are increasing country risk, due to their exposure to international regulatory action, and potential loss of major assets abroad, or critical correspondent banking relationships in the countries that have imposed sanctions.


The facts and opinions stated in this article are those of the author and not those of WANTED SA. WANTED SA does not warrant the accuracy of any facts and opinions stated in this article; does not endorse them, and accepts no responsibility for them.