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    Home » The West’s sanctions on Belarus will be a boon for Putin and his allies

    The West’s sanctions on Belarus will be a boon for Putin and his allies

    npsBy nps26 September 2021Updated:4 July 2024 No Comments4 Mins Read
    — Filed under: Focus
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    Belaruskali, the Belarusian potassium chloride (potash) producer, is facing difficult times.

    The country’s largest state-owned enterprise (SOE), and the producer of 20% of global potash supplies, it was first hit by EU sanctions in June of last year, caught up in the bloc’s attempt to weaken Belarus’ President, Alexander Lukashenko.

    Any of its products with a potassium content of more than 40% and less than 62% will face an import ban, a move which implicitly targets a 15-20% annual decline in the EU’s total potash imports from Belarus.

    Following suit, the US government announced last month that it will be pushing American companies to start the process of winding down their business with Belaruskali.

    What’s clear is that the sanctioned nation will pay a heavy price. Belaruskali’s exporting arm, the Belarusian Potash Company (BPC), in which it owns a 48% stake, is a key source of foreign currency for the Lukashenko government and with roughly a third of BPC’s premium potash going to European markets, the restrictions will undoubtedly damage government revenues.

    Disadvantaging one firm always advantages another and according to the CRU Group, a business intelligence consultancy, the potash producers most likely to profit from a hamstrung Belaruskali are the Kremlin-linked Russian company Uralkali, and two of Canada’s largest exporters.

    Elena Sakhnova of VTB Capital, the Russian investment bank, confirms this view, noting thar Uralkali in particular will be a significant beneficiary of the West’s intervention.

    Yet it is not only Western sanctions that play into the Kremlin’s hands. The EU’s ongoing transit restrictions on Belarusian potash are pushing Belaruskali to reorientate its business to the Russian energy market.

    Prior to the imposition of these restrictions, 11 million tonnes of Belarusian potash exports were transported via Lithuania’s Klaipeda port, but as Lithuania is an EU member, this route has been heavily impacted.

    Putin, who always has an eye out for opportunities to expand his sphere of influence, will be all too pleased to deepen ties with Belarus. Commenting on Putin’s expansionist ambitions, Brian Whitmore, a Senior Fellow at the Atlantic Council, argues that Russia will not attempt to subsume Belarus by means of an invasion, but instead through a ‘slow, stealthy and methodical operation?an annexation hiding in plain sight’.

    This looks to have begun with Whitmore pointing out that Uralkali, who’s board contains a number of Putin’s allies, has set its sights on acquiring Belaruskali and Hrodna Azot, another Belarusian fertiliser company.

    Roman Protasevich, the Belarusian journalist illegally removed from the ill-fated Ryanair flight, recently revealed that a Russian businessman from the Urals, thought to be the billionaire Dmitry Mazepin, had funded his media efforts to encourage the West to impose sectoral sanctions on the Belarusian economy.

    As an Uralkali board member and shareholder, it would certainly be in Mazepin’s interests to competitively disadvantage Belaruskali. In a clue that a takeover isn’t far off, the Russian Maritime and Transportation Agency recently announced the building of a new terminal at the Russian port of Ust-Luga, a transparent attempt to aid the import of Belarusian potash.

    If Uralkali were to get its hands on Belaruskali, the Kremlin would in effect control a sizeable share of the global fertiliser market, providing it with leverage over transnational agribusinesses and therefore the world’s food supply.

    For Belarus, it seems that its prized assets will be exchanged for continued Russian economic and military support. The West might see the siphoning off of Belarus’s mineral wealth by Putin’s allies as an acceptable price to pay to weaken Lukashenko, but weakening the President will only increase his reliance on the Kremlin, to the detriment of the Belarusian public.

    Yet equally as perverse as this injustice is the fact that while Belaruskali suffers, those like Sergey Chemezov, an Uralkali board member, look set to prosper. Why perverse? Because Chemezov is still blacklisted by the US himself, as one of the names on Congress’ so-called ‘Putin List’, making the West’s sanctions policy as inconsistent as it is ineffective.

    There are also real concerns surrounding the macroeconomic ramifications of continued export restrictions on premium Belarusian potash. In June, The CRU Group reported that due to mounting supply constraints, potash prices in recent months have been at their highest levels since 2012 and the Independent Commodity Intelligence Services (ICIS) note that rocketing fertiliser prices have the potential to decrease agricultural yields, pushing up the cost of food, thus further exacerbating the West’s inflationary crisis.

    What’s clear is that the weakening of Belaruskali is a boon for Uralkali and Russia, and a potential merger of the two firms would only serve to entrench the idea of a Belarusian-Russian union. The West has its reasons for putting economic pressure on Lukashenko’s regime, but the bigger game is between NATO and Russia, and its actions so far have played straight into Putin’s hands.

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