Belarus is losing a key transit route for its potash exports, a move that could add further pressure to already record-high fertilizer prices and food costs.
Transport Minister Marius Skuodis said Wednesday that Lithuania will terminate its contract between Lithuanian Railways and state-run Belaruskali OAO from Feb. 1. Any future intermediary for the potash producer, seeking transit via Lithuania’s rail system, would need approval from the country’s national security commission, he said.
Washington is targeting potash, one of Belarus’ key exports and its only abundant mineral resource, as part of measures to pressure the regime of President Alexander Lukashenko over the country’s presidential election, which has been widely condemned as fraudulent.
Lithuania previously shipped about 12 million tons a year of Belarus potash via its Klaipeda port to international markets. The country’s railways have continued to allow transit of Belarusian shipments of the fertilizer despite U.S. sanctions targeting Belaruskali coming into force on Dec. 8.
Bloomberg Intelligence analyst Alexis Maxwell said U.S. sanctions will make Belarus’ potash shipments to other countries “difficult to finance” because most regions rely on American institutions to back the letters of credit and insurance needed for trade. “U.S. imports from Belarus are only 6% of U.S. potash demand so the impact is more limited in the U.S.,” Maxwell said.
Belarus had signaled earlier it could opt to redirect Belarus potash to transit via Russian ports. However, Moscow may also be reluctant to agree due to the U.S. sanctions, said VTB Capital analyst Elena Sakhnova.
“The decision is significant as it affects Belarus’s shipments to Asia, including India and China,” Sakhnova said.
Maxwell said Belarus “is in dire need of customers” for its potash after a supply contract with China expired in December.
“While China is the largest global buyer able to finance trade with a U.S.-sanctioned company” that means Beijing is “in a better negotiating position and able to leverage a Belarus contract for less than the Southeast Asian spot-market price,” Maxwell said.
The European Union last year stepped back from sanctioning Belaruskali over concerns it would lead to price spikes and lower-quality supplies. Spot prices in other key markets like Brazil surged to a record $780 a ton in December, adding pressure to global food prices which remain near all-time highs.
