The transit of Belarusian fertilizers through Lithuania will end the US sanctions – up to 120 million. Lithuanian railways, set to lose € 1 billion, will need help

“Belaruskali is one of the world’s largest producers of potash fertilizers and the main source of income and foreign exchange for the Belarusian regime.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions on Belaruskalij on Monday for the rigged presidential elections in Belarus a year ago. The extended sanctions cover 23 people and 21 companies. The sanctions list, which organized or contributed to the brutal crackdown on peaceful protesters, is also linked to the Ryanair incident on May 23, as well as benefiting and supporting the Belarusian regime at the expense of the country’s population.

US sanctions prohibit any transaction involving Belaruskalij or its controlled entities. The sanctions will go into effect on December 8.

The United States has given 120 days to suspend and terminate transactions involving Belaruskali or any other entity directly or indirectly controlled by that company (which owns at least a 50% stake).

A report from the US Treasury Department said the decision was made in agreement with transatlantic partners.

“A year ago today, Belarusians went to the polls and voted for change. In response, Alexander Lukashenko launched a brutal campaign of repression that stifled democracy while continuing to profit from endemic corruption. We support the people of Belarus and will continue to use all the means available, including the new sanctions signed today by the president, “said US Treasury Secretary Janet Yellen on August 9.

On Monday, the Lithuanian Foreign Ministry welcomed the additional sanctions and noted that it was looking to extend the sanctions applied by the EU as well.

Lithuanian railways can lose up to 120 million. EUR: help may be needed

Tomas Digaitis, head of public relations for Lithuania Railways, has no expectations that the transit will survive.

“Our team is currently analyzing OFAC documents, but their spirit is clear: it will certainly affect the transport of potassium fertilizers. Please note that the sanctions apply to the entire supply chain, not just rail. We believe that the sanctions will also be reflected in the banking systems. We are committed to implement Lithuania’s position and, if necessary, to react promptly, “says T. Digaitis.

He reported that per year the cargo from Belarus brings 120 million tons to the Lithuanian Railways. Belaruskalij fertilizers account for the largest share.

“In turn, we make great efforts to diversify freight flows, we see many opportunities to increase flows from Western Europe, as well as between Eastern and Western Lithuania in intermodal freight transport,” explains T. Digaitis.

He presented that a train with a European track from the Netherlands started running regularly last month, the goal is to increase this traffic.

“It is true that possible losses in the direction of Belarus will not be compensated so quickly, during the transition period our infrastructure manager may need state help,” admitted T. Digaitis.

Sanctions imposed on Belarus by the EU in the past have been much more lenient, with only new agreements entering into force and only a fifth of imported fertilizers affected. However, even this would have cost the Lithuanian railways up to 20 million. entry.

Payments will no longer be possible

Eimantas Vytuvis, director of the Competence Center for the Prevention of Money Laundering, is convinced that the US sanctions fundamentally change the terms of trade.

“These sanctions, I believe, are changing the situation quite strongly, especially for financial sector players. If the financial sector wants to maintain its correspondent bank accounts, it must also fully implement OFAC sanctions. This is because, I believe “It will have to change a lot; it would make the movement of fertilizers much more difficult, especially through Lithuania or other countries. However, overall, this is a welcome step and a step that the EU institutions will also follow in the future.” says E. Vytuvis.

Delfi also contacted the managers of the Bulk Cargo Terminal to assess the situation, but company representatives are still evaluating the documents released Monday and could not comment.

Skuodis will work to ensure that rail rates do not increase for companies

The Minister of Transport and Communications, Marius Skuodis, assured that an evaluation is still being carried out, but there is no doubt that the impact on the cargo flow will be as soon as the sanctions take effect in December.

“If we look at similar examples, it is likely to have a big impact. Practice shows that our banks and everyone else are simply stopping the settlements, even in euros. Naturally, the sanctions affect all companies for settlements in US dollars, but payments in euros are likely to stop here as well. That would have an effect. What we can see from experience is that many different companies in the world simply refuse to buy to avoid some negative impact. This will inevitably have an effect, unequivocally, ”says M. Skuodis.

He assured that the government will strive to keep rail services and businesses competitive and, if necessary, provide support.

“For the company to remain competitive, the transport rates of the Lithuanian railways should not increase as they remain one of the highest in Europe. And this is because the infrastructure manager does not receive any subsidies from the government. According to EU legislation, infrastructure costs must also be covered and if freight transport falls, infrastructure costs for the remaining companies will rise. The question then arises whether we can rapidly increase the number of loads. That is why diversification is very important ”, explains the minister.

In the absence of opportunities to quickly restore cargo volume, state aid would be needed, according to M. Skuodis.

“We really know all the numbers in the government and naturally, depending on the situation, we will react,” says M. Skuodis.

The Ministry of Transport and Communications, together with the company, is looking for opportunities to expand freight forwarding to the West, as well as opportunities for freight transportation from Ukraine.

“There is really a lot of discussion and a lot of work being done to increase traffic on alternative routes. And the direction of the West is our completely untapped potential,” said M. Skuodis.

Romanowski: No one will even want to touch this fertilizer.

The sanctions block all assets of companies or individuals in the US and block payments.

“The principle is the same as when the sanctions were applied to Belaz: nobody wants to even touch the company’s product. Even the Russians. Once the sanctions are applied, there will simply be no one to export that fertilizer. The Lithuanian railways They will not be able to transport fertilizers. Even in Russian ports, no one will be able to transport those fertilizers unless there is some smart plan. By this definition, they will only be able to fertilize in Russia, “says A. Romanovskis.

He noted that, in principle, the sanctions in Lithuania will affect three companies more: Lithuanian Railways, a stevedoring company in Klaipeda (Bulk Cargo Terminal), as well as the state sea port of Klaipeda.

“In this situation, it would not be correct to focus on the discussion of how much it gains and how many it loses. The neighboring country is aggressive against us, it behaves aggressively, this is not a discussion about sizes or economic units,” emphasized A. Romanovskis.

He noted that companies had begun to adapt to the changing situation earlier: tolls at the port were revised.

“Everyone has realized in the past that this is a logical continuation of the action. In the port, of course, there will be a stronger competition for the handling of other products, as someone’s handling capacity will be released and competition will intensify. (…) There are doubts about how the State will react. The agreements between market participants and the level of port quotas were a kind of compromise, where the company also participated in the changes itself, taxes increased, but the part is also depreciated by the state. The same happens with the railways of Lithuania: the state, as a shareholder, will have to think about how to amortize these losses, “says A. Romanovskis.

Additional excise revenue will build the wall

A. Romanovskis also saw a positive economic benefit for Lithuania due to the sanctions imposed on Belaruskali: a large part of the smuggled Belarusian cigarettes travel in company cargo.

Last year, Lithuania’s budget increased excise duties on tobacco products by € 306.2 million. Illegal cigarettes represent more than 22% of the population of Lithuania. market, last quarter of year III. calculated by Nielsen, who conducted a survey of “Empty Packages”.

“There will be clear economic benefits from borders and sanctions, as it is clear that we are second in Europe in terms of the illegal tobacco market. And if the border with the Royal was smuggled, Belarus was the main source of the smuggling. “If the border and sanctions reduced the illegal market to only 5-10%, as in Estonia, imagine that it is possible to partially cover the costs of the border and apply a different state excise policy,” said A. Romanovskis.

The Grodno Neman Tobacco Factory, a state-owned tobacco factory, is a major source of illicit cigarettes. Cheap domestic cigarettes are imported into the EU as lucrative contraband.