Swiss Won't Force Commodity Traders to Join Transparency Drive

  • Swiss government wants traders to follow Trafigura's lead
  • Government officials signal they won't impose mandatory rules

Switzerland said it wants other commodity traders to follow Trafigura Pte Ltd.’s commitment to disclosing oil-related government payments, but signaled it won’t impose reporting requirements on the industry.

“We welcome very much the step taken by Trafigura,” Monica Rubiolo, head of the macroeconomic support division at the Swiss State Secretariat for Economic Affairs or SECO, said during a panel discussion in Bern. “We would welcome others to join.”

Swiss government officials and executives from the commodity trading sector, which generates about 4 percent of the Alpine nation’s gross domestic product, met this week before the Extractive Industries Transparency Initiative’s two-day board meeting starting on Thursday in Bern. Trafigura, the world’s second-largest independent oil trader, broke ranks with other trading houses last year by announcing plans to disclose payments made to EITI governments, which include Chad, Ghana and Nigeria.

Most of the world’s largest publicly traded mining and oil companies, including BP Plc, Royal Dutch Shell Plc and Rio Tinto Plc, have agreed to voluntarily adhere to the EITI standards, which require them to disclose payments made to governments, state companies and officials in the 48 member EITI countries in an effort to root out corruption. The activities of mainly closely held commodity trading companies, most of which have major operations in Switzerland, are not captured by the EITI.

December Report

Trafigura says it will publish oil-related payments in a December report and wants other commodity trading houses to do the same. That report won’t include metals-related payments or crude oil for refined product swap deals.

The EITI “is now backed by the entire extractive industry,” Andrew Gowers, global head of corporate affairs at Trafigura, said during the panel discussion in Bern on Tuesday. “We expect the same will be the case for trading. When you see such a trend, as a commodity trader, it is always a good idea to get ahead of it.”

So far, no other major commodity trading house has committed to joining Trafigura.

Stephane Graber, secretary general of the Swiss Trading and Shipping Association, which represents the trading houses, said the EITI is not designed for the commodity trading industry, adding that it should be up to foreign governments to decide how to increase payment transparency.

“Governments and national oil companies should take the lead,” Graber said.

Swiss Hub

Compliance and senior management executives from Vitol Group, the world’s largest independent oil trader, Gunvor Group Ltd. and Mercuria Energy Group Ltd. attended the event held on Tuesday at the Gurten Park Pavilion, a glass structure perched on a mountainside south of the Swiss capital. Some of those executives later attended a closed-door meeting between EITI board members and Swiss government at the same venue.

The Swiss government has published a draft report on the commodities sector, which includes recommendations for governing and maintaining the industry consisting of some 500 trading companies, responsible for about 10,000 jobs. Switzerland is home to more than a third of the world’s oil trade and is the top location for commodity trade finance, according to the STSA.

While encouraging more transparency from traders, Switzerland has no plans to take the lead in regulating the trading industry.

“We are looking very carefully at what other jurisdictions are doing and we are interested also in pursuing this dialog and discussing what means can be applied to increase transparency,” SECO’s Rubiolo said. “But it has to be in a coordinated manner.”

By agreeing to publish some payments under the EITI, Trafigura has won allies at some Swiss non-governmental organizations, which are calling for more transparency and regulation of the industry. 

“Trafigura’s move shows this is commercially viable,” said Lorenz Kummer, a policy adviser to SWISSAID. “It can be done.”

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