Analysts claim most Belarus potash exports will not be affected by EU sanctions

The curbs apply to Belarus Potash Co. (BPC) which exports potash – Belarus’s main foreign currency earner – mostly via the Baltic port of Klaipeda in EU-member Lithuania.

But potash is not on the EU’s list of sanctioned items, the industry analysts pointed out.

In total, the sanctions imposed on Belarus potash have put limits on only about 20% of exports of the product transported via Lithuania, the head of Lithuanian Railways said on Friday.

About 11 million t of Belarus potash crossed the Lithuanian border last year, with about 2.5 million t falling under EU sanctions, Mantas Bartuska told reporters.

Klaipeda port shipped almost 10.7 million t of Belarus potash last year via a terminal 30% owned by Belaruskali.

The ban was part of wide-ranging EU economic sanctions against Belarus, a month after Minsk scrambled a warplane to force a Ryanair flight to land in order to arrest a government critic who was on the aircraft.

Brussels imposed sanctions on Belarusian potash with a potassium content of less than 40% or more than 62% in the dry product.

“The measures do not cover the key Belarusian potash export, potassium chloride, which is 40-62% K₂O by weight, and accounts for 80% of the country’s supplies to the EU,” analysts at VTB Capital said in a note.

“It seems BPC can largely run unaffected,” analysts at BMO Capital markets said in a note.

Worries about possible damage to European agriculture from the sanctions on the fertilizer, as well as a wish to keep space for further pressure on Belarus, limited the scope of the sanctions on potash, two diplomatic sources told Reuters.

The sanctions on potash agreed by member states’ leaders are wider-reaching than were initially proposed by the European Commission, one of the sources said.

The ban on transit of production by state-run potash miner Belaruskali through the EU increases transportation costs, but this accounts for less than 10% of the current price, VTB Capital added.

BPC, Belaruskali’s export arm, whose supplies account for 20% of global potash trade, competes with Canada’s Nutrien and Mosaic among others.

“Every type of product is important to us, irrespective of the volumes supplied,” BPC said on Friday about the EU’s sanctions list, without providing details.

BPC will make every effort to meet its commitments to customers, which include China and India, it added.

The sanctions impact on Klaipeda port will not be major and is likely to be compensated by growth elsewhere, the port said in a statement.

Lithuanian Railways’ Bartuska said Belarus is likely to export the sanctioned produce via ports in Russia and Ukraine, to buyers outside the EU.

He added that Lithuanian Railways, which has a transportation contract with Belaruskali until the end of 2023, stands to lose €14 million in income per year due to the sanctions, which could result in it asking for about €10 million of state support for its infrastructure arm.

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