For a few hours, the Liechtenstein financial center speculated that it would be among the winners of the war. While tens of thousands of Russian soldiers made their final preparations to invade Ukraine, finance executives in Vaduz pondered the benefits of the crisis. Experience has shown that in geopolitically uncertain times, rich investors from Germany and other countries would look for “safe havens” for their money, it said. And such are the Swiss franc as a currency, the Liechtenstein banks, which specialize in asset management and are also well-funded, and the Principality itself, which, as a tiny but very rich monarchy, guarantees stability in every respect. Therefore, “it can be assumed that the ongoing uncertain political situation will certainly make itself felt in the half-year figures of the banks,” predicted Simon Tribelhorn, Managing Director of the Liechtenstein Bankers Association – namely in the form of a lot of fresh money from abroad.
Less than 24 hours later, Putin’s troops marched into Ukraine. And the government in Vaduz announced even faster than neighboring Switzerland that it would fully adopt the EU sanctions against Russia. Undoubtedly a decision made by the Reigning Prince Hans-Adam II, who immediately called Vladimir Putin a “ruthless dictator” who must be stopped at all costs (and who, by the way, doesn’t know anything about the economy). While the leaders of the sixth-smallest country in the world, with less than 40,000 inhabitants, were still sorting themselves out, another prominent Liechtensteiner resigned from his post: Klaus Tschütscher, the country’s head of government from 2009 to 2013, had been the Russian honorary consul in Liechtenstein since 2014, as before one of his predecessors.
The fact that two top-ranking politicians succeeded as Russian honorary consuls after they left is an indication of how important Russia is for Liechtenstein. After all, quite a few rich Russians have been bunkering a lot of money there for years. In trusts, family foundations or other structures discreetly managed by trustees, or directly with banks. The government’s announcement that it would also take action against oligarchs and other of Putin’s minions whose names are on the EU sanctions lists made everyone sit up and take notice. According to the official interpretation, Liechtenstein does not want to become an accomplice for Putin and his followers. The other part of the truth is that the principality under no circumstances wants to come under pressure from the EU and the USA again, as it did after the big tax scandal in 2008.
The example of VP-Bank shows how important Russian customers are for Liechtenstein banks and trustees. In 2020, she explicitly defined Russia and Ukraine as target markets. This week, its CEO Paul H. Arni said that over the past ten years, ten percent of net new money inflows have come from Eastern Europe, most likely from Russia. Accordingly, the Liechtenstein sanctions policy also affects the financial center. Experts estimate that many hundreds of millions of Swiss francs of Russian money are stashed there.
Not every Liechtensteiner supports the sanctions policy against Russia
There is no question that Liechtenstein was also involved in questionable money flows. One of the beneficiaries is said to have been Vladimir Putin himself. In 2014, two businessmen close to him are said to have siphoned off the equivalent of $200 million in Russian tax money that was actually intended for modernizing hospitals. The money flowed, among other things, via a British company to Swiss accounts of a company called Lanaval, which in turn transferred 48 million dollars to Liechtenstein. On the account of a Medea Investment, which according to media reports was controlled by the Italian architect Lanfranco Cirillo. He is the planner of Putin’s bombastic palace on the Black Sea, which is said to have cost one billion euros. And it was allegedly paid with the 200 million euros that were actually intended for hospitals.
When Russia annexed Crimea in 2014, Liechtenstein only pledged not to violate the sanctions imposed by the EU and the USA as a result. In practice, however, many financial managers avoided even the appearance of evading sanctions for fear of the Americans. Now, after the invasion of Ukraine, Liechtenstein is oddly divided. Officially, Vaduz is pursuing a hard, clear course. In the country itself, some consider it bad for business. The right-wing populist DpL accused the government of “unconditional surrender and complete EU submission”, which is why Liechtenstein ended up on a Russian list of “unfriendly states”. And by the way: The fact that 699 Russian citizens are listed on the EU sanctions list by name, place of residence and date of birth violates data protection.