Details: Belarus govt preps for new western sanctions

<p> MINSK, Jun 15 - PrimePress. President of Belarus Alexander Lukashenko signed Ordinance #205 “On potash fertilizer sales” of 7 June 2021, which gave Belarusian Potash Company (BPC, a designated export trader in potash fertilizers) the right to pay the export duty on potash fertilizers in euros or dollars. Five out of seven paragraphs of the ordinance are marked “restricted circulation: for official use”. </p> <p>   </p> <p> Starting 1 July 2021 Belneftekhim Concern plans to transfer export trade in oil products, chemical and petrochemical products from the sanctions-stricken Belarusian Oil Trading House to Belarusian Universal Commodity Exchange. </p> <p>   </p> <p> Govt preparing for sectoral sanctions </p> <p>   </p> <p> One of the possible sanctions may affect the export of potash fertilizers. According to the Ministry of Finance of Belarus, in 2020 more than 10% of Belarus’ consolidated budget revenues were generated from taxes and duties from foreign economic activity - mainly import duties, as well as export duties on oil products and mineral fertilizers. </p> <p>   </p> <p> It is worth noting that Belarusian budget revenues in 2021 include export duties on potash fertilizers in the amount of Br1.6bn ($634.366m at the exchange rate of the National Bank). </p> <p>   </p> <p> In 2020, the export duty on potash fertilizers in Belarus was €55 per tonne. In 2021, the Ministry of Finance of Belarus did not report the size of the duty. Experts assume that the variation of the export duty on potash fertilizers, provided by the ordinance, may be due to the fear of the EU sectoral sanctions. </p> <p>   </p> <p> If the EU bans imports of Belarusian potash fertilizers, it would result in considerable losses for Belarus, despite the relatively small volume of potash supplies to the European market. In 2020 Belarus sold $196 million worth of potash fertilizers to the EU, whereas the entire export of Belarusian potash fertilizers amounted to $2.721 billion in value terms. BPC will probably be able to redistribute the European export volume, but it may entail not only the loss of traditional buyers, but also a serious blow to the supplier’s business image and financial losses. </p> <p>   </p> <p> Another sensitive commodity item that may come under EU sanctions is the export of oil products. In 2020, Belarus sold $596 million worth of oil products to the EU (Belarus’ total proceeds from oil product exports stood at $2.741 billion). It should be noted that this year's budget plan provides for revenues from export duties on oil products in the amount of Br379 million ($151.557 million at the exchange rate of the National Bank of Belarus), although in fact, more is expected, as the oil price used for budget planning is considerably higher ($40 per barrel). </p> <p>   </p> <p> At the same time, it is not quite clear what impact the US sanctions will have on the export of Belarusian oil products. June 3, 2021, the U.S. Department of the Treasury renewed sanctions against nine Belarusian companies - Belneftekhim Concern and its affiliate in the United States, Belshina, Grodno Azot, Grodno Khimvolokno, Lakokraska, Polotsk Fiberglass and Belarusian Oil Trading House, as well as Naftan. </p> <p>   </p> <p> Experts note that the U.S. sanctions are dangerous not because of direct damage, but because they affect the perception of Belarusian exporters by their business partners. In particular, financial institutions of Ukraine have recently expressed fears that major exporters of motor fuel and liquefied petroleum gas to the Ukrainian market - Belarusian Oil Company (BelOil, designated export trader in Belarusian oil products) and state-owned Belorusneft (they are not on the sanctions list, but BelOil is 52% owned by Belorusneft, Naftan and Mozyr Oil Refinery - 24% each) may be targeted by secondary sanctions. </p> <p>   </p> <p> Belarus has managed to circumvent potential problems. According to enkorr, BelOil-Ukraine (a subsidiary of BelOil) negotiated with Ukrainian banks that were willing to service payments regardless of sanctions restrictions, including the possibility of making payments directly from Ukraine to Belarus, bypassing correspondent accounts in Europe and the United States. </p> <p>   </p> <p> By this token, Ukrainian buyers of Belarusian motor fuel make unhindered settlements with Belarusian Oil Company. The traders say such payments are made through the Ukrainian Alfa Bank, Raiffeisen Bank Aval and the First Ukrainian International Bank (PUMB). </p> <p>   </p> <p> Nevertheless, in order to avoid possible problems with sanctions, Belneftekhim Concern plans to transfer export sales of oil, chemical and petrochemical products from the Concern’s single trading floor - Belarusian Oil Trading House, which has fallen under US sanctions, to Belarusian Universal Commodity Exchange (BUTB) starting July 1, 2021 (the term can be adjusted depending on the solution of organizational and technical problems). </p> <p>   </p> <p> LLK-Naftan, a major producer of additives to engine oil and motor fuel, has also hedged against possible sanctions costs. LLK Naftan was established in 2006, and its founders are Naftan and LLK International B.V. (the Netherlands, a subsidiary of LUKOIL, Russia). The joint venture was created on a parity basis. However, Naftan's stake in the JV was recently reduced to 47% (3% belongs to Novopolotsk City Executive Committee); the Russian owner’s stake has not changed. At the same time the founders removed the word "Naftan" from the name of the company and on May 17, 2021 it was renamed into “AddiTech” LLC. </p> <p>   </p> <p> Belarus counts on Russia’s assistance </p> <p>   </p> <p> The economic damage of Belarus from the Western sanctions may amount to no more than 2.9% of the country’s gross domestic product (GDP), and the government is ready to compensate for this loss at the expense of “other sources”. Prime Minister of Belarus Roman Golovchenko made a statement to this effect in a TV interview shown on June 5. </p> <p>   </p> <p> It is obvious that the Belarusian authorities expect to minimize the costs of the sanctions pressure with Russia's help. </p> <p>   </p> <p> Moscow is ready to support Belarus in the sanctions confrontation with the West. Russian Ambassador to Belarus Yevgeny Lukyanov said on June 10 that Russia would open up access to its market for Belarusian goods that fall under EU sanctions. “We will not abandon Belarus,” said Lukyanov. </p> <p>   </p> <p> Russia, for its part, is not interested in economic and political destabilization in Belarus and will provide support to the Belarusian authorities. However, if the sanctions pressure on Belarus intensifies, Russian companies may also be among the victims. Previously, major Russian oil companies have already announced their refusal to supply oil to Naftan for fear of secondary impact of the US sanctions. Therefore, Russian support for Minsk may be limited to a certain extent or may be subject to certain political conditions. End </p>

2021-06-16

Primepress