The U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) on Dec. 2 announced sanctions on the Belarusian Potash Co. (BPC) to limit the financial benefits that President Alexander Lukashenko’s regime derives from potash exports.
BPC markets potash from Belarus producer Belaruskali, which was sanctioned in August (GM Aug. 13, p. 1). BPC’s previous absence from the sanctions list had been seen by some as a loophole that allowed Belaruskali to continue to sell its potash via BPC sanction-free.
BPC has been given to April 1, 2022, to wind down transactions. According to the sanctions, BPC is not authorized to enter into new purchase contracts or the stockpiling of inventory that are not ordinarily incident and necessary to the winding down of transactions. Belaruskali’s own wind-down period expires Dec. 8, 2021.
Belarus controls about a fifth of the global potash market, or about 11 million mt, and supplies major consuming nations, including China, India, the U.S., and Brazil. While it is not yet clear to what extent the planned sanctions will affect trade, the market is already extremely tight, and prices for potash, along with other fertilizers, have soared.
“This is a more serious threat than the previous inclusion of Belaruskali,” Elena Sakhnova, an analyst at VTB Capital, told Bloomberg. “This news will further support the already elevated potash price.”
“Tighter sanctions on Belarus potash will further squeeze a market scrambling for tons,” said Alexis Maxwell, Green Markets Director of Research. “Belarus’s export options are shrinking as many regions finance trade with U.S. banks. Other financing options are dwindling. China’s state-owned bank froze funding for the Slavkaliy mining project in 3Q.”
Maxwell noted that Belarus supplies about 6 percent of U.S. potash imports. She expects the U.S. to increase potash purchases from Canada. Shares of the two largest Canadian producers of potash, The Mosaic Co. and Nutrien Ltd., closed up 3 and 2.2 percent, respectively, after the news on Dec. 2.
Potash is one of Belarus’s key exports, and its only abundant mineral resource. Separately, the U.S. also sanctioned Slavkaliy, a potash development project in Belarus that was started by Russian billionaire Mikhail Gutseriev, who transferred his stake to a family member after he was sanctioned by European Union this year.
In addition to prohibiting transactions and financing of Belarus’s sovereign debt sold on primary and secondary markets, OFAC also designated for sanctions 20 individuals and 12 entities, and identified three aircraft as blocked property.
The move represented the fifth time Treasury has levied a package of sanctions against Belarus since the country’s presidential election in August 2020, which the U.S. said was fraudulent. Treasury said that the action was taken in coordination with the E.U., the United Kingdom, and Canada. Those three also applied their own sanctions.
The allies have accused Lukashenko of orchestrating a migrant crisis by allegedly luring migrants to the country’s borders with Latvia, Lithuania, and Poland in retaliation for mounting sanctions the bloc imposed over his crackdown on opposition protests following last year’s disputed presidential election.
“The Lukashenka regime is luring migrants, including many families with small children, to travel to Belarus by coordinating the issuance of visas, increasing flights from the Middle East to Belarus, and then transporting people to the borders of E.U. member states,” the Treasury Department said in the statement. “Once at the border, Belarusian officials direct and force migrants across the border to facilitate their passage into the E.U. Belarusian authorities do not allow them to return to Minsk, so many migrants are now stuck at the border in Belarus, exposed to harsh winter conditions that have already claimed the lives of at least a dozen vulnerable individuals.”
The Belarus Foreign Ministry slammed the sanctions. “The depth of the absurdity of the E.U.’s decision on the latest sanctions against sovereign Belarus and its very content is by now difficult to comprehend,” it said in a statement, which also accused the West of “demonizing” Belarus, and vowed “tough” retaliatory measures. “The burden of responsibility is placed on Belarus while blatantly ignoring the true causes of the global migration crisis,” it said.