Michael Scollon, Maria Kugel, Matthew Luxmoore
Fresh EU sanctions are intended to put Belarus’s economic cash cows out to pasture, targeting some of the ostracized country’s most important economic sectors and wealthiest and influential backers.
But while the new measures are expected to hit Alyaksandr Lukashenka’s government squarely in the pocketbook, in some cases there stands to be an unintended beneficiary — Russia. The sanctions are focused on seven economic sectors, including Belarus’s lucrative tobacco-processing and smuggling business; petroleum; finance; and the import of arms and surveillance technology that could be used against anti-government protesters.
But none will feel the pinch of Brussels’ sanctions — the fourth round of punitive measures since Lukashenka’s disputed reelection in August — more than Belarus’s biggest export, potash fertilizer. State-owned Belaruskali is the world’s largest potash producer, accounting for about one-fifth of global potash supplies, with the EU making up about 8 percent of its sales in 2020. One of its main competitors? The Russian company Uralkali, a major global exporter with ambitions to expand.
Experts suggest that, with the loss of Belarusian potash exports to the European Union, excess supply is likely to be bought up by Uralkali, boosting its own standing on the global market.
“We can expect Belarus to be trapped in an even closer economic and political dependence on Russia,” Bota Iliyas, a Moscow-based analyst at the political risk consultancy Cont-rol Risks, told RFE/RL on June 24, the same day the new sanctions were appr-oved. “The government cannot function without potash exports, so they will need to go somewhere.”
That somewhere, Iliyas said, is “most likely to Russia, which has pledged to prop up the Belarusian economy in case of sectoral sanctions.” And Russia’s Uralkali, the analyst added, “stands to benefit from these sanctions by increasing production and likely buying Belarusian potash.”
And that is not the only avenue for Russia to gain from the strongest effort yet by Brussels to hold Lukashenka accountable for his government’s continued crackdown against dissent following his claim of victory in an August 2020 election millions of voters believe he stole, and in direct response to Minsk’s forced diversion on May 23 of a commercial airliner flying between two EU capitals.
New Port Of Call?
The new measures will also eventually deny Belarukali access to its main shipping route — the Lithuanian port city of Klaipeda, which handles 97 percent of Belarusian potash exports.
While current contracts will be honored, Russian cities will be in a position to become the Belarusian state company’s new port of call for potash shipments to China, India, and elsewhere. Igor Udovickij, the 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 any scenario, the obvious losers are not Belaruskali, Russian ports, or Uralkali.” Udovickij wrote. “Only Lithuania loses in all cases. Because if Belarusian potash goes to Russian ports, it will go away forever.” In a follow-up post the next day, Udovickij emphasized: “The main beneficiary of the sanctions is Russia.”
Belarus’s lucrative tobacco-processing industry — the source of a flourishing trade in cigarettes smuggled to the European Union — was also targeted with bans on exports of tobacco and tobacco products from EU countries destined for Belarus.
Official state statistics do not provide specifics on which European countries export tobacco and related products to Belarus. But the Hrodno Tobacco Factory, Belarus’s largest cigarette manufacturer, lists Greece, Italy, and Bulgaria among its more than 20 suppliers, along with non-EU Moldo-va, Turkey, and Azerbaijan.
Cigarettes are a big moneymaker for Belarus, and for one of the country’s ric-hest men, Alyaksey Alek-sin, who now finds himself among the 166 individuals blacklisted from traveling or doing business with the European Union.
In 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 “benefitting from the Lukashenka regime.” Aleksin was involved 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 gained the exclusive rights both to import tobacco and to sell products both at home and abroad produced by the Hrodno Tobacco Factory.
As laid out in an investigative article published by RFE/RL’s Russian Service on June 24, Belarus is a dominant player in the cigarette-smuggling game, which rebounded recently with the increase in EU excise duties on cigarettes and the banning of menthol cigarettes in the bloc.
With the average price of a pack of cigarettes in Belarus running about $0.80, compared to $4.30 in Latvia and much higher in other parts of the European Union, there is plenty of room for profit in smuggling. And much of that profit, the investigation alleges, ultimately goes to Lukashenka.
A ‘Powerful’ Signal
During a visit to an agricultural facility owned by the Hrodno Tobacco Fact-ory on June 24, Lukash-enka took advantage of his time near the Polish and Lithuanian borders to shrug off the new sanctions as an opportunity for Belarus to expose the West’s futility in trying to punish it. Saying there would be no subsidies to prop up affected businesses, Lukashenka asserted that other countries were trying to protect their own tobacco markets and that “we must show these scoundrels on the other side of the border that their sanctions show their impotence.”
The idea is to go after individuals in Lukashenka’s inner circle and areas of the economy intertwined with his regime, as part of a broad effort to make the strongman and his supporters pay for the brutal way the Belarusian authorities dealt with demonstrators protesting the results of the August 2020 presidential vote, and more recently the Ryanair flight diversion that led to the arrest of Raman Pratasevich, a Belarusian journalist on board, and his girlfriend Sofia Sapaga, a Russian citizen.
Financial sanctions are designed to restrict access to EU capital markets by the Belarusian government, and state-owned financial institutions. And in an effort to protect Belarusian protesters and activists, Europeans will be barred from selling dual-use goods and any communications equipment, technology, or software “intended primarily for use in the monitoring or interception of the Internet and of telephone communications.”
Despite Lukashenka’s dismissal of the sanctions, and skepticism from some pundits about their potency, many saw the sanctions as a strong message to Minsk.
The analyst Iliyas described the EU’s latest move as ” a sharp escalation in sanctions on Belar-us,” while opposition leader Svyatlana Tsikhanouskaya, who claims she was the rightful winner of the election, told AFP on June 24 that the sanctions were a “powerful” signal that 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 “is not going to silently observe” what it called a joint attack by Western countries. “In the coming weeks,” the ministry pledged, “the responses we have announced on a number of occasions will gradually be triggered.”
