Middle East embargo hinders Swiss arms exporters

Saudi airstrikes in Yemen have been condemned by NGOs Reuters

The Swiss armaments industry says it is taking a hard hit financially due to a ban on sales to Middle East and Gulf states. Swiss export restrictions prevent weapons being used to violate human rights.

The recent military action by Saudi Arabia against Houthi rebels in neighbouring Yemen led the Swiss government in March to impose restrictions on exports to the lucrative Middle East region.

The state-owned armaments company Ruag, already under pressure from the strong franc, has sounded the alert.

“Ruag has not received export permits to the Middle East since March 2015. Export applications are pending for most of the countries affected by the moratorium,” the company said in a statement emailed to swissinfo.ch. “This has affected Ruag financially to the tune of several tens of millions of Swiss francs.”

“There is a danger that Ruag will lose its business to other competitors in the long term. Furthermore, its security-relevant industrial base in Switzerland will be weakened. If restrictions continue, Ruag sites in Switzerland [which employ 4,300 staff] will be significantly affected.”

The State Secretariat for Economic Affairs (SECO) confirmed that strict export restrictions also applied to Kuwait, Jordan, Qatar, the United Arab Emirates, Bahrain and Egypt, which are also involved in the Yemen conflict.

Last year Bahrain and UAE each placed orders in excess of CHF14 million. Saudi Arabia’s orders were just under CHF4 million, but the country has been a lucrative market in the recent past, regularly ordering in vastly greater quantities.

Protest letter

In June, several lobby groups backed by politicians sent a protest letter to the government, according to a Neue Zürcher Zeitung (NZZ) newspaper article. This letter complained that Swiss restrictions had handed the advantage to exporters of other countries, particularly Germany.

The Swiss-based Rheinmetall Air Defence company also said in the NZZ article that its business had been affected by the Middle East export block.

But the armament companies’ business pressures pale in comparison to alleged war crimes that have been carried out in the Saudi-Yemen conflict, according to the Swiss chapter of Amnesty International. “Saudi aircraft bombing are known to have bombed civilian targets,” Alain Bovard told swissinfo.ch.

“The arms lobby in Switzerland is well represented and powerful enough to force through changes in legislation that benefit its members’ financial interests,” he added.

Bovard is referring to a controversial change in the law last year – that crept through by a single vote – to ease the export of Swiss war materiel abroad.

The change means that Swiss weapons exports are only banned in countries where there is a major risk that the arms are used to commit human rights violations. Otherwise, it’s up to the government to decide on a case-by-case basis.

Swiss weapons sold abroad made up only 0.26% of all exports last year. Germany is the strongest market but Indonesia has emerged as a major buyer in the last year and is filling the hole left by the Middle East.

In 2014, a significantly larger order from Indonesia bumped up the value of Swiss arms sold abroad to CHF563.5 million ($585 million) from CHF461 million in 2013. Income has risen slightly further in the first half of this year ($217 million) thanks again to increased Indonesian demand, but sales are still far off their 2011 full year peak of CHF873 million.

Despite the relatively small numbers compared to other export sectors, the Swiss weapons industry is nevertheless considered an important industrial asset and supplies the Swiss army.

India kickbacks

But by the very nature of its products it also comes under close public scrutiny, both in Switzerland and abroad. India has been investigating two Swiss-based companies for allegations of taking kickbacks to secure contracts.

Earlier this year Swiss Attorney-General’s office (OAG) denied an Indian request for judicial help to probe Rheinmettal Air Defence and SAN Swiss Arms of Schaffhausen (both German-owned firms).

OAG eventually decided against offering assistance after asking the Indian authorities for extra information. “As the information provided by the Indian authorities did not fulfill the requirements of the relevant legislation [on international mutual assistance in criminal matters], the OAG was unable to execute the request for legal assistance,” the OAG said in a statement.

Neither company concerned replied to swissinfo.ch requests for a statement.

This is not the first time that the Swiss weapons industry has come under fire. Laws on armaments exports were tightened up in 2012 after Swiss arms were found to have been re-exported by other countries to third states.

But Amnesty International’s Bovard concedes that overall Switzerland’s record in the arms trade stands up to scrutiny. “There have been a couple of situations where the authorities have been quite naive but Switzerland has a fairly good record,” he told swissinfo.ch.