European Union leaders have called for “targeted economic sanctions” against Belarus following the forced diversion to Minsk of a Ryanair flight destined for the Lithuanian capital Vilnius from Athens on May 23 and the arrest of Belarusian opposition journalist and activist Roman Protasevichand his girlfriend, who were on board the flight.
The potash and oil sectors are expected to be likely targets, with reports the economic sanctions could be in place by this summer.
E.U. foreign ministers started the debate on targeted economic sanctions on May 27, following a move by the bloc – expected to be adopted on June 21 – to expand its sanctions list against Belarus officials to include officials known or suspected to have been involved in the forced landing of the plane.
The E.U. already has sanctions in place against seven Belarusian entities and 88 individuals, including Belarusian President Alexander Lukashenko. These were imposed following the disputed presidential election on Aug. 9 and the regime’s subsequent brutal crackdown on protests and protestors (GM Aug. 21, 2020). The E.U. does not recognize Lukashenko as Belarus’ legitimate president.
Following last weekend’s events, the bloc’s leaders have demanded the immediate release of Protasevich and his companion, and have called on the International Civil Aviation Organization to investigate the forced plane diversion.
The E.U. also has sealed its air space to Belarusian planes, and a number of European airlines are diverting their flights to avoid entering Belarusian air space.
Seen as a show of support for Lukashenko, Moscow late this week refused permission to at least two European airlines – Austrian Air and Air France – to fly to Moscow after the carriers requested to fly an alternative route bypassing Belarusian airspace, according to a CNN report.
“We really need to find the economic sectors, the companies, who actually benefit the regime, but not hurting the people,” Deutsche Presse-Agentur (DPA), citing Lithuanian Foreign Minister Gabrielius Landsbergis, reported on May 27.
Exiled Belarus opposition leader Sviatlana Tsikhanouskaya, speaking to the European Parliament’s Foreign Affairs Committee this week, has urged the E.U. to ban Belarusian exports of potash, oil products, and timber, as well as halting lending to Belarusian banks, according to a Bloomberg report.
Potash is Belarus’ second top export after refined oil products, and in 2019 Belarus’ potash and oil exports together accounted for some 25 percent of the country’s exports in U.S. dollar terms, according to U.N. Comtrade data. The split was 16.5 percent/8.7 percent for refined oil products and for potash, respectively, according to data from the Observatory of Economic Complexity.
VTB Capital analyst Elena Sakhnova believes the impact of any targeted economic sanctions would depend a lot on what type of sanctions were implemented, according to a Bloomberg report, citing the analyst. If, for instance, the sanctions were designed to limit the Belarus potash industry’s ability to secure financing in European banks, she said that would not cause any disruption to the potash market as Belarus uses alternative sources of funding anyway.
Belarusian Potash Co. (BPC) hopes for a “measured and reasonable” approach in the matter, given that potash supplies are important for food safety and the agriculture industry in the countries that buy the nutrient, according to the report, citing an emailed statement by the company’s press service.
More meaningful sanctions preventing European companies from trading with the Belarus potash industry would have a greater impact, according to BPC’s press secretary, cited by the report. But Belarus could still be able to divert potash volumes from Europe to other markets, primarily Asia, she said.
This may cause a short-term increase in potash prices in Europe, as Belarus supplies about 25 percent of the region’s demand, the BPC press secretary told Bloomberg. However, she believed the situation would normalize fairly quickly as the shortfall may be filled by producers like Russia’s Uralkali.
Belarus exported 11.75 million mt of potash last year, according to Trade Data Monitor data, accounting for approximately 25 percent to global export trade.
Yara International ASA, Oslo, has said it “strongly condemns” the events that took place in Minsk over the weekend, Bloomberg reported, citing an emailed response to questions. Belaruskali is a long-term supplier of potash to the Norwegian company.
Yara since the disputed presidential elections, has issued a series of statements on its website expressing “concern about the Belarus situation” (GM Sept. 18, 2020; Sept. 25, 2020; Nov. 25, 2020; and Dec. 11, 2020). In January, Tsikhanouskaya – as have others – called upon Yara to suspend Belaruskali potash contracts (GM Jan. 22, p. 31).
In this week’s statement, cited by Bloomberg, Yara said it was assessing the new situation and its implications, and was in close dialogue with a number of stakeholders, including the Norwegian Ministry of Foreign Affairs. It said its main concern was the safety, health, and well-being of Belaruskali workers.
Yara said it has “a broad portfolio of potash suppliers” and “continuously maps alternative supply options to be able to respond to supply chain disruptions.”
The company said a change of supply arrangements “could have a cost, but as a large and stable potash buyer we are typically able to secure competitive terms.”
Norway is not a member state of the E.U. However, it is associated with the E.U. through its membership in the European Economic Area (EEA).
U.S. President Joe Biden has applauded E.U. efforts to impose sanctions against Belarus and has ordered his team to “develop appropriate options” to hold those responsible accountable, Bloomberg reported on May 24.
The U.S. imported 614,893 st of Belarusian potash in the July 2020-March 2021 period, a 12.9 percent increase on the 544,705 st imported in the same year-ago period, and accounted for 6 percent of the most recent U.S. total (GM May 14, p. 15).
New Zealand’s farmers cooperative Ravensdown, which supplies about half of the country’s fertilizers, is reported to be closely watching rising tensions in Belarus. According to New Zealand news portal Stuff, citing the cooperative’s spokesperson, Ravensdown last year, among other actions to manage risk, was prompted to secure a potash shipment from Canada.
Farmers and growers need to count on its availability at certain times of year, especially spring, the report cited the Ravensdown spokesperson as saying. Spring shipments normally arrive in August and September, but there was no reason to think New Zealand would be caught short, he said.
Ravensdown is closely monitoring the current situation and will follow Ministry of Foreign Affairs and Trade guidance and advice if or as that changes, the spokesperson said.
Any measures taken by the E.U. will require the backing of all 27 member states. But forging unanimity between the bloc’s governments has proved tricky lately, according to a Bloomberg report, with several member countries keen to avoid hurting their economies or disputing controversial political alliances.