The UBS chapter and the resulting news headlines that sought to brand Switzerland as a "tax haven" took a toll on U.S.-Swiss relations. But the August compromise deal announced by the two governments will help refocus Washington and Bern on the positive aspects of their relationship. Indeed, Switzerland has enormous credibility in handling sensitive matters of international diplomacy, a fact the Obama administration values greatly as it seeks to broaden America's global outreach.

THE UBS SAGA

UBS had argued that complying with U.S. demands that it hand over all U.S. account holders would force it to break Swiss law. For their part, Swiss officials who visited Washington argued that complying with the summons would compromise Swiss sovereignty.

In the end, Switzerland agreed to hand over 4,450 names, but only under the condition that any actions comply with current bilateral information-sharing agreements and Swiss law. The agreement states that those who are singled out will have an opportunity to declare to the U.S. tax authorities before their names are passed officially to Washington. This gives account holders a small window of time to take advantage of a U.S. tax amnesty, called a Voluntary Disclosure Program, which ends on September 23, 2009.
Lee Shepherd, a lawyer and tax expert who writes for the trade journal Tax Notes says it also draws a line under the dispute. "We no longer have a diplomatic problem," she says. "That was the whole point of this, to let everyone save face and make a deal to get the big picture back to normal."

SWITZERLAND'S ROLE IN IRAN

Switzerland has a constructive role to play in U.S. diplomacy on many fronts.  
For instance, during the period in which American journalist Roxana Saberi was held in Tehran's notorious Evin political prison, the Swiss were able to visit her and pass messages back and forth.

The U.S. State Department repeatedly emphasized the crucial role played by the Swiss, culminating in Saberi's release, in the run-up to the Iranian presidential elections. The Swiss will remain a key interlocutor there, given the current domestic political tensions in Iran combined with the continued international disagreements over Iran’s nuclear program.

CUBAN INTERESTS

Switzerland houses a U.S. interests section in Havana, Cuba. The Cuban government has a similar set-up in the Swiss embassy in Washington.

Daniel P. Erikson is a senior associate for U.S. policy and director of Caribbean programs at the Inter-American Dialogue in Washington. He says the Swiss involvement "gives Switzerland a special role in the U.S.-Cuban relationship, makes it privy to many of the diplomatic issues that the two countries face, and also gives it a very tangible role in the U.S.-Cuban relationship."

President Barack Obama has signaled a cautious approach to U.S. engagement in Cuba under the new leadership of Raul Castro.  Erikson says that guarantees that Switzerland will continue to be a "vital link" for some time to come.

RUSSIA-GEORGIA TENSIONS

Switzerland is helping to keep the peace between Russia and Georgia at a time of great tension. Russia's invasion of South Ossetia and Abkhazia in July 2008 tested the limits of U.S.-Russian diplomacy.

At the time, then-U.S. Sen. Joe Biden visited Georgia and called for Russia to withdraw its forces , saying: “The war that began in Georgia is no longer about that country alone. It has become a question of whether and how the West will stand up for the rights of free people throughout the region. The outcome there will determine whether we realize the grand ambition of a Europe that is whole, free, and at peace.”

Switzerland stepped in to represent Russian interests in Georgia and Georgian interests in Russia. In addition, international talks are taking place in Geneva between the two sides. Daniel Warner, director of the Center for International Governance at the Graduate Institute of International Development Studies in Geneva, says it soothes a diplomatic problem for the United States.  "Switzerland punches above its weight on various diplomatic issues,” he adds.

HUMAN RIGHTS AND SECURITY POLICY

The Obama administration has demonstrated a willingness to engage more closely with multilateral institutions based in Geneva. The United States is joining the U.N. Human Rights Council.

Officials at the Pentagon say they've started informing the International Committee of the Red Cross (ICRC) within two weeks of capturing new detainees in Iraq and Afghanistan. The U.S. military has two camps designed for the early interrogation of captured militants, but they have refused to grant the ICRC access to those prisoners.

Daniel Warner says that it's now time for the president to appoint an effective diplomat to the post of ambassador to the U.N. mission in Geneva. The position has been left empty since Obama took office in January. "Certainly for international Geneva, the American ambassador here in charge of mission has a potential leadership role" says Warner, adding, "The last two ambassadors under Mr. Bush were both political appointees."

TERRORISM FUNDING

Switzerland also plays an important role in helping to track the sources of funding for terrorism. Raymond Baker, the director of the Global Financial Integrity Program in Washington says that "Switzerland has been very cooperative in seeking out suspected terrorism funds and responding to inquiries concerning suspected terrorist funds." That may not be something that's talked about much in public by officials, but according to Baker, it goes beyond the official channels.

He says this issue is deemed a "special case, requiring special cooperation." So clearly, that's an important aspect of bilateral information-sharing that goes well beyond the recent tax evasion disputes.

DEEP TIES

The UBS affair has certainly dominated U.S.-Swiss affairs for months now.  But the fact that the two sides made a deal which respects the sovereignty of Switzerland will help build confidence.

The Swiss federal system is, historically, partly modeled on the U.S. Constitution, and there are numerous other historical linkages.

Swiss-American Joëlle Attinger, the president of The European Institute, says government-to-government ties are much stronger than many people think. "I will tell you honestly, I think the broader Swiss-American relationship has always been strong and will remain strong. The Swiss-American relationship is much, much broader and involves a lot of very difficult foreign policy and economic policy issues that both sides have been working on, before, during, and will continue after this current situation."