Russian ports can earn on the Belarusian embargo on transit from Lithuania

The Belarusian authorities have been banning rail transit from Lithuania for a number of goods since February 7, Belarusian Foreign Ministry spokesman Anatoly Glaz said on February 2. His words are quoted by the state news agency of the country “Belta”.

A statement from the Foreign Ministry said that the ban would affect the transit of oil products, chemical and mineral fertilizers loaded at Lithuanian Railways (Lietuvos gelezinkeliai, LTG) stations. About 1.5-1.6 million tons of such cargo worth more than $ 1 billion a year are transported across Belarus, the agency said.

In essence, this measure is a counter-sanction in response to Lithuania’s ban on transporting Belarusian potash fertilizers through its ports from February 1. It is one of the main export goods of Belarus. The country has no access to the sea, so the export of potassium by sea went through the Lithuanian port of Klaipeda.

On January 12, the Lithuanian government decided to cancel the agreement on the transit of Belarusian fertilizers from February 1 due to US sanctions against Belaruskali imposed on December 8, 2021. On December 21, the Coordination Commission for the Protection of Objects Important to Lithuania’s National Security decided that LTG’s agreement with Belaruskali was not in the interests of national security. Based on these findings, the government decided to terminate the agreement that was signed with the Belarusian company for the period from 2018 to 2023. and provided for rail transit through Lithuania and loading of 11 million tons of Belarusian fertilizers per year at the port of Klaipeda.

Despite the fact that the ban applied only to Belaruskali, LTG did not approve the transit application of three other Belarusian companies, which are not subject to sanctions. The restrictions affected the Belarusian Potash Company, which is the exclusive exporter of Belaruskali products, the state transport and logistics company Belintetrans and Belkali-Migao.

After the introduction of restrictions by Lithuania, Belarus has reoriented potassium exports to Russia, said Prime Minister Roman Golovchenko on February 1. On February 2, Russian President Dmitry Peskov’s spokesman confirmed that the issue was indeed on the agenda. According to Golovchenko, due to the longer logistics arm in Russia, Belarusian producers have lost a bit in margins, but it will be offset by rising world prices. According to the Gazprombank Economic Forecasting Center, by the end of 2021 a ton of potassium would cost about $ 550-650. By the end of January, the price remains at $ 500 per tonne (FOB Baltic).

The Foreign Ministry of Belarus estimates that the direct losses of Klaipeda Port, LTG and other participants in the supply chain will amount to hundreds of millions of euros. In addition, Minsk plans to collect fines for the termination of contracts for transportation by Lithuania.

This ban will practically not affect Russia, because the cargo flow from Lithuania to our country via Belarus is extremely insignificant, says a source in the Russian operating company Vedomosti.

On February 1, LTG Cargo spokeswoman Kotrina Dzikaraite told the Baltic online publication Delfi that 14.4 million tons of cargo had been transported from Lithuania to Russia in 2020 and 14.3 million tons in 2021. ” Most of this cargo flow was transit trains to the Kaliningrad region, respectively 10.2 million and 11 million tons, “she said. Dzikaraite added that the cargo flow should reach 11 million tons in 2022. For comparison, in 2022 they plan to transport a total of 38.8 million tons of cargo, ie cargo to Russia will account for 28.4% of the total cargo flow.

“There are very few Russian cargoes in their pure form: due to the policy of banning work with the Baltics, our transit has practically dried up. Now it is transportation to Kaliningrad. There is transit to Ukraine and Kazakhstan, ”agrees Pavel Ivankin, president of the National Research Center for Transportation and Infrastructure. The imposed bans could play into Russia’s hands – the north-western ports could benefit from this, he told Vedomosti. The expert added that Kazakhstan will also suffer if the transit to Lithuania is banned and vice versa.

Mikhail Burmistrov, CEO of Infoline-Analytics, believes that the sanctions will primarily affect companies that transport products through Belarus to Ukraine, such as Achema (nitrogen fertilizers) and Orlen Lietuva refinery (petroleum products). “These companies will be able to reorient shipments to routes through Poland,” he admits.

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