The situation with regard to the transhipment of Belarusian potash through Lithuania and the country’s Klaipeda port was confused as the week drew to a close.
State-owned Lithuanian Railways (LTG) – as cited in a Reuters report – said on Dec. 8 it will continue to transport Belarus potash in December and into January, despite the U.S. sanctions on Belaruskali. However, it is unclear if LTG will continue to transport Belarus potash beyond January.
Belarus rails most of its potash for export through Lithuania, into the Lithuanian port of Klaipėda for onward shipment
Sanctions imposed by the U.S. on Aug. 9, which prohibit sales to that nation by Belarus state-owned potash producer Belaruskali, OAO, kicked in on Dec. 8 after a four-month wind-down period (GM Aug. 13, p. 1).
On Dec. 2, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) announced sanctions on the marketer/exporter of Belaruskali’s potash, Belarusian Potash Co. (BPC), which was not included on the initial U.S. sanctions list (GM Dec. 3, p. 1). Under these latest sanctions, BPC has been given to April 1, 2022, to wind down transactions.
LTG expects to continue transporting Belarus potash despite the U.S. sanctions because they only apply to U.S.-connected entities, the report cited the railway company’s CEO Mantas Bartuska telling a Lithuanian parliamentary hearing on Dec. 8.
The CEO said LTG has a contract with Belaruskali that expires at the end of 2023, and the railways company cannot terminate it.
According to the report, citing Bartuska, while Lithuanian banks will not process Belaruskali payments due to sanctions, Belaruskali paid in advance for rail transportation services through December and into January. The CEO said Lithuania’s Foreign Ministry was notified of the payment.
Lithuania’s Foreign Minister Gabrielius Landsbergis has said he is ready to resign over a decision by the railways company to continue to transport Belarus potash in December despite U.S. sanctions on Belaruskali.
What is unclear at this time is whether LTG will stop transporting all Belaruskali potash once the advance payment is used up, or whether Belaruskali will be able to get further payments to the railways company processed.
The European Union (E.U.) sanctions imposed against the Belarusian regime, which came into force on June 25 (GM June 25, p. 1), restrict imports of Belarusian potash into E.U. countries and a transit ban via E.U. countries, of which Lithuania is one.
Crucially, though, a key grade of Belarusian potash was excluded from the E.U. ban. Potassium chloride with a potassium content evaluated as K2O by weight, exceeding 40 percent but not exceeding 60 percent on the dry anhydrous product, is not included on the sanctions list. Additionally, Belarus’ current supply contracts with India and China – i.e., those concluded before June – are not subject to the Brussels sanctions.
According to the Reuters report, Lithuanian Prime Minister Ingrida Šimonytė told reporters on Dec. 8 that she expects the potash transportation “would not last for long,” without giving further details.
According to a Dec. 9 report by Charter 97, a Belarus pro-democracy and a pro-human rights news site, Lithuanian Transport Minister Marius Skuodis is to ask the country’s National Security Commission to assess the agreement between LTG and Belaruskali.
The Commission will decide whether the agreement is in Lithuania’s national security interests, according to the report.
U.S. sanctions do not cover Lithuania, but – as with E.U. sanctions against the Belarusian regime – many of Belarus’ banks are under sanction, as well as U.S. financial entities being prohibited from doing business connected with Belarusian potash.
According to the Charter 97 report, the further fulfilment of LTG potash transportation obligations will depend on the decisions of the Lithuanian authorities and the position of the banks processing orders for Belaruskali.
According to a Dec. 9 report by the Baltic News Service (BNS), citing Igor Udovickij, the majority shareholder of Klaipėda’s Bulk Cargo Terminal (Birių krovinių terminalas, or BKT), which handles Belaruskali shipments via Lithuania, the transit of Belarusian potash via Lithuania cannot be suspended, as he said “that would run counter to Lithuania’s international agreements.”
Udovickij, who owns a 70 percent stake in BKT, said “there are no, and there cannot be any U.S. sanctions on Belarusian potash transit via Lithuania since transit, as a procedure, cannot be subject to sanctions.” Belaruskali owns the remaining 30 percent stake in the terminal.
According to Udovickij – as cited by the report – all states, including the U.S., are subject to international treaties – the World Trade Organization agreement and the United Nations Convention on the Law of the Sea. They guarantee the freedom of transit for states without sea access.
He said the U.S. and the E.U., having ratified these agreements, cannot violate them.
According to Udovickij, those involved in the transit of potash, including Lithuanian state institutions, have consulted the U.S. Treasury and the European Commission on the application of the sanctions. They were told that Belarusian potash can be transported via Lithuania if payments are made in euros instead of U.S. dollars, according to the report.
If the transit of Belarusian potash via Lithuania were to be halted, Belaruskali/BPC would have to ship through Russia. But as yet, there is no agreement with Moscow on this.