EU sanctions could hurt Belarus and help Russia
The new EU sanctions aim to put Belarus’ economic cash cows on pasture, targeting some of the ostracized country’s most important economic sectors and the richest and most influential donors.
But while the new measures are expected to hit Alyaksandr Lukashenka’s government directly in the wallet, in some cases there will likely be an unintended beneficiary – Russia.
The sanctions focus on seven economic sectors, including the lucrative tobacco processing and smuggling activities in Belarus; oil; finance; and the importation of weapons and surveillance technology that could be used against anti-government protesters.
But no one will feel the pinch of Brussels ‘sanctions – the fourth round of punitive measures since Lukashenka’s contested re-election in August – more than Belarus’ biggest export, potassium fertilizers.
The state-owned Belaruskali is the world’s largest producer of potash, accounting for around one-fifth of global potash supplies, with the EU accounting for around 8% of its sales in 2020. One of its main competitors? Russian company Uralkali, a major global exporter with development ambitions.
Experts suggest that with the loss of Belarusian potash exports to the European Union, the excess supply is likely to be bought up by Uralkali, thus strengthening its own position in the world market.
“We can expect Belarus to be trapped in an even tighter economic and political dependence on Russia,” Bota Iliyas, a Moscow-based analyst with the consultancy firm, told RFE / RL. political risks Control Risks, June 24, the very day of the new sanctions. have been approved. “The government cannot function without potash exports, so they will have to go somewhere.”
This somewhere, Iliyas said, is “most likely for Russia, which is committed to supporting the Belarusian economy in the event of sectoral sanctions.” And the Russian Uralkali, added the analyst, “could benefit from these sanctions by increasing its production and possibly by buying Belarusian potash”.
And this is not the only way for Russia to capitalize on the most significant efforts ever made by Brussels to hold Lukashenka accountable for his government’s continued crackdown on dissent after its claim to victory in the August 2020 elections, millions of voters believe it flew, and in direct response to Minsk’s forced hijacking on May 23 of a commercial airliner flying between two EU capitals.
The new measures will also eventually deny Belarukali access to its main sea route, the Lithuanian port city of Klaipeda, which handles 97% of Belarusian potash exports.
As current contracts are honored, Russian cities will be able to become the Belarusian state-owned company’s new port of call for potash shipments to China, India and elsewhere.
Igor Udovickij, owner of Biriu kroviniu terminalas (BKT) in Klaipeda, suggested on Facebook on June 22 that Belaruskali and Uralkali could merge to monopolize the global potash market, and that the Russian port cities of St. Petersburg and Ust -Luga could replace BKT.
“In all scenarios, the obvious losers are not Belaruskali, Russian ports or Uralkali.” Udovickij wrote. “Only Lithuania loses in any case. Because if Belarusian potash goes to Russian ports, it will be gone forever.”
In a follow-up article the next day, Udovickij stressed: “The main beneficiary of the sanctions is Russia”.
Belarus’ lucrative tobacco processing industry – the source of a flourishing trade in cigarettes smuggled into the European Union – has also been targeted by the ban on exports to Belarus of products used in the manufacture of cigarettes. tobacco products. Products listed include filters, cigarette papers, tobacco flavorings, and machines.
Cigarettes are a big source of money for Belarus and for one of the richest men in the country, Alyaksey Aleksin, who is now among the 166 individuals blacklisted to travel or do business with the European Union.
By adding Aleksin’s name to its blacklist, the European Council described him as having business interests in the oil and energy sector, real estate, development, finance and tobacco, and as “benefiting from the regime. of Lukashenka “.
Aleksin took part in the construction of a new tobacco factory in Minsk, is a major player in the distribution of cigarettes in Belarus and, in recent years, by presidential decree, obtained the exclusive rights both to import tobacco and to sell products both at home and abroad produced by the Hrodno tobacco factory, the largest cigarette manufacturer in Belarus.
As stated in a investigative article published by RFE / RL’s Russian service on June 24, Belarus is a dominant player in the cigarette smuggling game, which has recently rebounded with the increase in EU excise duties on cigarettes and the ban on menthol cigarettes in the block.
With the average price of a packet of cigarettes in Belarus being around $ 0.80, compared to $ 4.30 in Latvia and much higher in other parts of the European Union, smuggling offers plenty of opportunities for profit. . And a large part of those profits, according to the survey, ultimately go to Lukashenka.
A “powerful” signal
During a visit to an agricultural facility belonging to the Hrodno tobacco factory on June 24, Lukashenka used his stay near the Polish and Lithuanian borders to ignore the new sanctions as an opportunity for Belarus to expose futility of the West in trying to punish him.
Claiming that there would be no subsidies to support affected businesses, Lukashenka claimed that other countries were trying to protect their own tobacco markets and that “we have to show these scoundrels across the border let their sanctions show their powerlessness “.
The idea is to attack people in Lukashenka’s inner circle and sectors of the economy linked to his regime, as part of a vast effort to make the strongman and his supporters pay for brutal manner in which Belarusian authorities have treated the demonstrators protesting against the results of the August 2020 Presidential Vote, and more recently the hijacking of the Ryanair flight which led to the arrest of Raman Pratasevich, a Belarusian journalist on board, and of his girlfriend Sofia Sapaga, Russian citizen.
Financial punishments are designed to restrict access to EU capital markets by the Belarusian government and public financial institutions. And in an effort to protect Belarusian protesters and activists, Europeans will be prohibited from selling dual-use goods and any communications equipment, technology or software “primarily intended for use in monitoring or intercepting the Internet and telephone communications.”
Despite the rejection of the sanctions by Lukashenka, and skepticism of some experts about their power, many saw the sanctions as a strong message in Minsk.
Analyst Iliyas called the EU’s latest move a “sharp escalation in sanctions against Belarus”, while opposition leader Svyatlana Tsikhanouskaya, who claims to be the legitimate winner of the elections and to have left the country for her own security, told AFP on June 24. that the sanctions were a “powerful” signal which, she hoped, would force the state to seek “dialogue with civil society”.
The Belarusian foreign ministry, for its part, said in a June 25 statement that Minsk “was not going to observe in silence” what it called a joint attack by Western countries, and that it would react soon.