Swiss people are proud of their clocks, chocolate, cheese, green pastures, tall mountains, crystal clear blue lakes (save for the ones they filled with ammunition) and their county’s neutrality. (They also love their secretive banks, but those are all well connected to clocks and neutrality.)
The latter seems suddenly be facing an existential crisis.
The nation famous for sitting on the fence is now embroiled in a heated debate over whether that fence is even worth sitting on anymore.
Blame the war in Ukraine, EU sanctions or a government that seems a bit too eager to break up with its society’s majority.
Whatever is the cause, even if the majority still believes in neutrality, the West is losing (or has in fact lost), its best independent actor who could negotiate (could have negotiated) among parties in an eventual conflict.
Swiss neutrality has been a thing since 1815.
Back then, at the Congress of Vienna, Switzerland got a sweet deal: declare perpetual neutrality, and all the major European powers would leave it alone.
This deal had worked for two centuries. Through two World Wars, the Cold War, and all kinds of global skirmishes, Switzerland remained cool and aloof. No alliances, no entanglements, no messy political drama—just how the Swiss like it.
But neutrality was more than just a political stance.
It became a part of the national identity, a point of pride for the Swiss. Even if the world burned, Switzerland could sip its coffee by the Alps, safe and secure in its fortress of neutrality.
Political neutrality combined with its banking privacy laws, created a safe haven for not just for business investors, but also for authoritarian regimes who view Swiss banks as safe from political risk or confiscation due to their long-standing neutrality and strict banking secrecy laws. This combination is also part of the Swiss economy and identity.
Neutrality during war times was financially profitable to Switzerland. Following World War II, it was revealed that Swiss banks had held significant sums of money deposited by Nazi officials, collaborators, and victims of the Holocaust. Much of this wealth remained in Swiss banks after the war because many account holders—either Nazi leaders or their victims — could not reclaim their assets after the war ended.
For a moment after Russia invaded Ukraine, it looked like the Swiss were sticking to their principles. But this moment was extremely brief.
After all, neutrality means no military alliances and no economic sanctions that might pick sides, right?
Wrong.
On February 28, 2022, just days after the Russian invasion, the Swiss government made a historic shift by adopting sanctions against Russia, aligning with the EU’s measures. This included freezing assets and restricting financial transactions with Russian oligarchs and banks. The Swiss Federal Council justified this move by citing the threat to European security posed by the invasion. This was a significant departure from Switzerland’s usual avoidance of economic or military entanglement in international conflicts.
This historical step (and the ensuing several others) influenced Switzerland’s political and financial outlooks.
The impact of these sanctions on Switzerland’s financial sector has been substantial. Swiss banks reportedly held up to CHF200 billion in Russian assets prior to the sanctions. The freeze on these assets, combined with restrictions on financial transactions, has caused a capital outflow from Switzerland, particularly affecting Russians, and clients from other authoritarian countries. Many wealthy individuals and entities have since shifted their assets to countries like the UAE.
The biggest question remains unanswered. Whether Switzerland followed its own heart and conscience and took these steps because of the responsibility they felt for Ukraine; or they had no choice but to adopt the sanctions (given the extra-territorial reach thanks to the power of the dollar and the American financial system).
Swiss banks weren’t enthusiastic about this new era of sanctions’ enforcement.
Russian oligarchs, who once found Switzerland a neutral haven for their billions, are now seeing their assets frozen. It’s been estimated that around CHF 7.5 billion in Russian wealth is stuck in Swiss financial institutions, and that’s just what’s “on the books”. For a country whose banking secrecy is practically sacred, this has created ripples—or rather, avalanches—of concern.
Swiss banks now find themselves in an awkward position being at the same time parts of a country that’s neutral, but parts of a sanction’s regime targeting Russia. They feel like they have been dragged into a fight they never wanted to join, and it is needless to say that the Russian billionaires aren’t sending thank-you notes.
On the other hand, this might have been one giant leap for Swiss banks, but many deem it (only) one small step for righteousness.
Transparency International Switzerland declared that authorities were not active enough in looking for hidden assets of sanctioned persons, proposing that “they should implement sanctions proactively by joining international task forces.” It also demanded that lawyers, financial advisors plus real estate and art transactions be subjected to the same anti-money laundering measures as banks.
Switzerland has so far rejected this type of international cooperation, arguing that Swiss sanctions already function perfectly well.
While the government seems to be eager to walk on this path with participation in EU sanctions, Swiss public isn’t exactly thrilled.
To many, neutrality is more than just a policy – it’s a bedrock of Swiss life.
Thus, when the government announced its support for sanctions, a group of Swiss citizens decided to push back with an initiative that could force a national referendum on neutrality.
A citizens’ initiative organized by Pro Switzerland group aimed at organizing a referendum on “Safeguarding Swiss neutrality (neutrality initiative)” called for perpetual and armed neutrality to be enshrined in the country’s constitution.
Swiss neutrality gained momentum, collecting over 133,000 signatures to organize referendum. The goal is to return to a stricter interpretation of neutrality, free from sanctions or military cooperation.
The Swiss government, however, is firmly against this proposal. They argue that adapting Swiss policies in response to global security threats is necessary, even if it means aligning more closely with the EU. For instance, Switzerland has joined EU cybersecurity initiatives and is engaged in broader military cooperation, actions critics view as further eroding neutrality.
According to Swiss law, if 100,000 citizens support an issue, a constitutional amendment is put to the vote. A double approval is required for an initiative to be accepted: over 50 percent of the electorate plus a majority of the 26 cantons must accept the initiative. The Federal Council and the two chambers of parliament then draw up a law, which may also be put to a referendum.
As of now, the government holds on. According to the governmental statement issued in June, the new constitutional provision would, among other things, disallow Switzerland from taking sanctions against belligerent states in the future. At its meeting of 26 June 2024, the Swiss Federal Council decided to recommend that the people and the cantons reject the Neutrality Initiative.
Public opinion is divided, such as citizens understanding on the issue.
A 2023 survey of Swiss voters found 91 percent of respondents approved of neutrality in general, though 75 percent believed sanctions against Russia were compatible with the principle.
While some Swiss citizens and political factions argue for a return to traditional neutrality, particularly in light of its economic implications, others support the government’s stance, seeing the sanctions as a moral and necessary stand against aggression. The younger generation seems more open to the idea of redefining neutrality, seeing international cooperation as a necessity in a globalized world. The older generation, however, clings to the belief that neutrality is Switzerland’s best defence against being dragged into conflicts it has no business in. After all, staying neutral worked for centuries—why change it now?
Many Swiss view neutrality as a core part of national identity, and any deviation from this principle is seen as a betrayal, leading to tensions between the electorate and the Federal Council.
In summary, Switzerland’s neutrality is at a crossroads.
As the neutrality referendum looms, the Swiss government faces a tricky balancing act. On one hand, they want to stay relevant and engaged with Europe. On the other, they risk alienating their own citizens, who still value Switzerland’s independent stance. If the referendum passes, the government might be forced to backtrack on its newfound enthusiasm for sanctions and EU cooperation. But if it fails, it could be seen as a green light for more involvement in global affairs.
Whatever happens, one thing is clear: Swiss neutrality isn’t the untouchable principle it once was. And as the debate drags on, it’s becoming harder to tell whether Switzerland is still sitting on the fence—or slowly inching off it.
There is a less debated factor of this issue, though.
Switzerland was an independent, neutral island in the middle of the Western European block. The country’s special position allowed it to be able to negotiate and communicate between different entities in case of conflicts.
This role has been significantly challenged by the decision to join EU sanctions against Russia in 2022. Once considered one of the last Western countries capable of mediating between conflicting parties, Switzerland’s participation in the sanctions against Russia led to a loss of trust from Moscow. Russia no longer views Switzerland as a neutral party, stripping the Alpine nation of its unique diplomatic leverage in global affairs.
This shift is particularly evident in the context of the Russian-Ukrainian war. Once seen as a neutral ground for peace negotiations, the Ukrainian-Russian peace talks have been sidelined, as Russia doesn’t participate on these events.
With Switzerland out of the picture, Saudi Arabia has taken on a more prominent role, particularly in organizing prisoner exchange programs between Russia and Ukraine. (The other frontrunner is China, which had presented its own peace plan.) Riyadh’s growing influence reflects a vacuum left by Switzerland’s compromised neutrality, positioning Saudi Arabia as one of the few countries still able to communicate with both parties in the conflict. This shift underscores how Switzerland’s departure from strict neutrality, while symbolically aligning it with Europe, has weakened its traditional diplomatic standing that can cause harm for Western countries on long term.