The Biden administration imposed new sanctions on Belarus on Aug. 9 targeting Belarusian state-owned potash producer Belaruskali OAO, along with the country’s Olympic committee, and business leaders and companies with ties to President Alexander Lukashenko.
The sanctions came on the one-year anniversary of the country’s presidential election, which has been widely condemned by the U.S. and European Union as fraudulent and prompted weekly protests in the Eastern European nation.
However, the marketer/exporter of Belaruskali’s potash, Belarusian Potash Co. (BPC), was not named in the sanctions, leaving the door open as to whether the potash actually being marketed by BPC is sanctioned. Belaruskali reportedly owns 48 percent of BPC.
Analysts quickly picked up on the omission and major industry players were assessing the situation.
“The penalties against Belaruskali add negative sentiments for the global potash market, but the fact that BPC is not the subject of the sanctions may ease the situation,” said Elena Sakhnova, an analyst at VTB Capital, according to a Bloomberg report.
BCS Global Markets analyst Kirill Chuyko also said it may be safe to continue dealings with BPC, as long as it’s not added to the sanctions list.
BPC is studying the situation and it’s difficult to estimate what impact the sanctions will have, the company told RIA Novosti. The trader said it will make every effort to fulfill its contractual obligations, adding that the sanctions will lead to higher potash prices and less availability on the world market.
“It’s too early to tell the impact” of the sanctions, said Nutrien CEO and President Mayo Schmidt in a phone interview. “If sanctions are placed against Belarusian Potash we would expect to see the supply of, particularly granular, potash into the U.S. market tighten.” He noted that the U.S. imports about 550,000 mt/y of potash from Belarus. He said Nutrien can increase potash production if needed to meet global demand.
Canada and the U.K. also imposed new sanctions, including those on potash against Belarus. However, Canada’s imports of potassium chloride are minimal, with the country importing just 22,352 mt in full-year 2020, of which, according to Trade Data Monitor (TDM), just 1,944 mt originated in Belarus. First-half 2021 imports amounted to 2,857 mt with 1,128 mt coming from Belarus.
The U.K. imported 427,866 mt of potash in full-year 2020 and 161,094 mt in the first five months of 2021 through May, according to TDM. Of these totals, just 353 mt and 25 mt were listed as coming from Belarus. But the data showed the U.K. importing 917 mt of potash from Lithuania in 2020 and 590 mt in the first five months of 2021, which could well be Belarus tons.
Switzerland also expanded its sanctions against Belarus on Aug. 11, including restrictions on trade in Belarus potash. Switzerland imported 9,665 mt of potash last year, according to TDM, of which Belarus was shown to have supplied 1,092 mt.
The new Swiss sanctions also hit Belarus’ financial sector, including the provision of loans to the Belarusian government and other public bodies and agencies.
Green Markets has learned that Belarus has also restricted access to its export statistics. Previously, the country exported about 1 million mt of potash per month, but official numbers were not available for the month of June.
Following their announcement of new measures against the regime, Lukashenko launched a blistering attack on the U.S., Canada, and the U.K. He warned that countries need to think carefully before imposing sanctions against Belarus, according to a report by Belarus state-news agency BelTA. “No matter how difficult it was, we have survived this year. It was not easy. We will withstand other years. We will not back down, we will not fall to our knees….”
In addition, the Belarus’ government announced Aug. 11 retaliatory measures against the U.S. including blocking the U.S. ambassador from entering its country.
The E.U.’s sweeping set of further sanctions against the Belarusian regime, announced on June 24, included restrictions on imports of Belarusian potash into member states, as well as other Belarus fertilizers, which predominantly comprise NPKs (GM June 25, p. 1). However, the measures excluded a key grade of Belarusian potash that accounts for about 80 percent of Belarus supplies to the E.U.
Belarus’ current supply contracts with India and China also are not subject to the Brussels sanctions.
Lithuania is threatening to stop the export of Belarusian potash and other fertilizers through Klaipeda port (GM Aug. 6, p. 1). Belarus rails most of its potash for export through the port, using Lithuanian railways, with some 10-11 million mt transshipped annually via the port.
Lukashenko on Aug. 9 said Belarus would reroute potash shipments to Russian ports if Lithuania halts the transit of Belarusian potash, according to a BelTA report. However, while Belarus and Russia in February inked an agreement on routing transshipments of Belarusian oil products through Russian ports, Belarus Transport and Communications Minister Alexei Avramenko said at the time the shipment of Belarusian potash via Russian ports would need “more consideration.”
However, the Deputy CEO of Russian Railways (RZD) Aleksey Shilo was cited this week as saying that as part of the rerouting shipments of Belarusian cargo to Russian ports, RZD is ready to receive for transportation not only oil products, but also fertilizers and timber from the country, according to media reports, citing the Belarus government press office.
While having to use other transit routes for the export of its potash and other fertilizers would have a serious economic impact on Belarus, the loss of transhipment revenues would also cost Lithuania dearly.
Belarus also exports NPK fertilizers via Klaipeda, with Belarusian goods providing for some 30 percent of the port’s [annual] throughput, according to a Tass report, citing the CEO of Lithuanian railway operator, Lietuvos Gelezinkeliai, Mantas Bartuska, speaking to reporters on Aug. 12.
According to Bartuska, the whole transit chain of Belarusian fertilizers would lose €100 million (approximately $117 million at current exchange rates).
He said costs required to maintain the infrastructure “can be shuffled off to other clients” or “rail tariffs can be raised by 30 percent,” according to the Tass report.
Bartuska warned that a €60-million subsidy is required to ensure that this doesn’t happen.