Economists on Belarus Threats to Close the Border: Who Would Suffer Most in Lithuania? | Deal

This September began with Lukashenko’s threats to Lithuania, harshly criticizing the leader of the regime for fraudulent elections and violence against peaceful protesters.

After announcing on September 1 that he would teach Lithuania by directing Belarusian cargo from the Klaipeda port to other ports, A. Lukashenko announced on Thursday that he would close the border with Lithuania and Poland.

So far, none of these threats has been implemented: Belarusian cargo moves through the Klaipeda port, as well as traffic on the border with Belarus.

How 15 minutes Lukashenko’s threats to divert Belarusian cargo from the port of Klaipeda to other countries are nothing new; Belarusian politicians have made such a statement more than once, but they have not implemented their threats. By contrast, Belarusian cargo volumes in Klaipeda have only grown in the last decade, because it is the most convenient, cheapest and fastest for Belarus to transport its cargo through our country.

However, experts do not rule out the possibility that a few days ago from the promise of Russian President Vladimir Putin of 1.5 billion. Lukashenko, who has received a $ 1.26 billion loan from the government, will try to follow through on his threats, at least temporarily.

So what would happen in such a scenario and which companies in Lithuania would suffer the most losses? Economists 15 minutes He argued that even if no major tragedies occurred, individual sectors would face significant challenges.

Economists point out that closing the borders with Belarus would affect more companies that export to the country, the transport sector that transports goods to other countries via Belarus and Lithuanian companies that import cheap raw materials. The construction sector, where Belarusians come to work, would also be affected.

It is true that Belarus would suffer even more, because cooperation with Lithuania is even more important to us than to us.

The impact on exports is small

Aleksandras Izgorodinas, an economist at SME Finance, believes that the impact of border closures on Lithuania’s exports and imports must first be assessed. According to him, although in theory Lithuanian exports would suffer, in practice the impact would be small.

“If we look at the exports from Lithuania to Belarus – 86 percent. It consists of re-export, these are products that we do not produce, but they pass through the territory of Lithuania to Belarus. If we look at the export of goods of Lithuanian origin, only 0, 9 percent. The goods go to Belarus, which ranks 25th in the export structure, ” 15 minutes Izgorodin said.

He added that most of the goods leaving Lithuania for Belarus are machinery, iron, dairy products, plastic and paper.

Including both exports and re-exports of goods of Lithuanian origin, it can be seen that Belarus ranks seventh.

“The fact that 86 percent. Of exports consist of re-exports, which means that Belarus is a sufficiently important country in terms of transit and transportation. 5.5 percent travel to Belarus. Export flows of transportation services : this country ranks sixth in the export structure ”, says the economist.

Therefore, for carriers transporting cargo to Belarus or through this country to Russia, Ukraine, closing the borders would be quite painful. Economists, on the other hand, have no doubt that the impact would be short-lived, as transport companies would find alternative routes through Poland and Latvia rather quickly.

By the way, although the border has not yet been closed, life has become difficult for transportation companies. Romas Austinskas, President of Linava 15 minutes He said Thursday that the inspection of all Lithuanian trucks had been intensified, if before Lithuanian trucks were inspected by border guards selectively, now, all of them.

Meanwhile, Sigitas Besagirskas, President of the Vilnius Business and Industry Association 15 minutes He said that two Lithuanian transport companies have undergone a full inspection, which means that each of their trucks is inspected at all points on the wall, so the time during which they deliver the order has increased.

And the biggest blow to economists speaking to Lithuania is the influence on the state seaport of Klaipeda and the Lithuanian railways, where Belarusian cargo makes up a significant part of all cargo.

For example, in the sea port of Klaipeda, Belarusian cargo accounts for up to 30 percent. all cargo.

Furniture manufacturers will be affected

After the closure of Belarus, companies importing cheap Belarusian raw materials, especially furniture manufacturers, would suffer losses in Lithuania.

S.Besagirskas 15 minutes He said that Lithuania imports a lot of wood and metals from Belarus.

“Why do we buy? It is the cheapest raw material we have. For example, Western Timber Group 25 percent. buys its raw materials from Belarus. Most furniture manufacturers work at IKEA, they work with small margins, therefore the increase in the price of raw materials will further limit their margins ”, S.Besagirskas sees a negative impact.

These companies would have to look for alternative suppliers of raw materials, but could raise prices due to the situation.

Therefore, in the opinion of S.Besagirskas, furniture factories may have to reject some orders, because they will no longer be able to fulfill them at the price agreed with the customer.

A. Isgorodin also agrees with S. Besagirskas, who estimates that wood and metals alone make up 37 percent. of total imports of Belarus.

“If the border is closed, these raw materials do not enter Lithuania and our companies cannot temporarily produce their products and export them; the reputation and the export contracts have been lost,” adds the economist.

And Algirdas Bartkus, professor at the VU’s Faculty of Economic and Business Sciences 15 minutes He mentioned another area that still relies heavily on cheap Belarusian raw materials: biofuel power plants. Until now, they have been actively buying Belarusian wood waste.

“Biofuel power plants receive Belarusian forest waste at very low cost. Therefore, it produces electricity at low cost for us, costs are lower for companies,” said the economist.

It is true that Lithuanian biofuel suppliers have been complaining about the cheap mass of Belarusian biofuels for several years. Thus, the latter would recover lost positions if the border with Belarus is closed.

A. Izgorodin summarizes that, in general, Belarus is a fairly important country in the structure of Lithuanian imports: imports account for 2.5 percent. and Belarus is ranked 14th among all countries.

Among the victims is tourism

S.Besagirskas emphasizes that after closing the borders, there will be no Belarusian tourists, who are important in the Lithuanian tourism sector, because they come to party.

Another threat is Lithuanian investment in Belarus. S.Besagirskas claims that Western Timber Group has opened a large factory in Belarus, whose products are destined more for the Eastern markets, but if part of the production also travels to the West, there will be problems, because it will have to be transported.

A. Izgorodin adds that the construction sector would also feel the closing of borders, as Belarusian builders come to work in Lithuania.

Still, economists emphasize that the decision to close the borders would return a boomerang to Belarus itself.

“Its economy depends particularly on the export of money, since the domestic market is weak, very affected by the coronavirus and mass protests. Therefore, it is important to support exports and bring the necessary currency to the country to maintain stability. It will harm Lithuania, but it will harm itself even more, because it could transport cargo through Russia, but it will be more expensive and it will take time to redirect it, ”said A. Izgorodinas.

S.Besagirskas notes that Belarusian companies established in the Lithuanian market will also be directly affected. For example, Lithuanian farmers have liked cheap Belarusian MTZ tractors, which have won a significant share of the market here. If the walls are closed, not only the tractors, but also their parts will be cut. And this may encourage farmers to choose a more reliable supplier in the future.

Therefore, economists, who have given many examples of why closing the borders for Belarus would be much more painful than for Lithuania, hope that this time Lukashenko’s threats will remain only empty words.

“The chances of threats being implemented are very slim, because when we look at the historical events, we see that every major threat became not the imposition of sanctions, but rather clinging to the details that have given us a lot of life.”

Mr. Lukashenko is a pragmatist and estimates that these sanctions would be costly for Belarus. It will probably be the same as always: more trucks will be inspected, borders will be closed for a few days, but there will be no radical border closures, as the Belarusian economy will also suffer, ”concludes S. Besagirskas.