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bne September 2022 Companies & Markets I 13
What's the current outlook for Belarus' export sector?
bne IntelliNews
In early February, before Russia began its full scale invasion of Ukraine, bne IntelliNews reported on the expectations for Belarus’ foreign trade in 2022. Only 15 days later, the situation changed immensely, as sanctions piled up against Belarus and its most important trading partner Russia.
Throughout the year, Belarusian officials have admitted that the sanctions are taking a heavy toll on the foreign trade- dependent Belarusian economy. Belarusian strongman Alexander Lukashenko has nevertheless repeatedly stated that the Belarusian economy should perform just as well as last year. However, that Belarus will be able to maintain the same level of growth as last year is more than doubtful.
Blocked transit routes
As Lithuania implemented a transit ban on the transit of Belarusian fertilisers on February 1, Belarus was deprived of one of its most important transit routes.
Shortly after, Estonian journalists revealed that Belarus had most likely been circumventing EU sanctions on its refined petroleum products through Estonian ports, which led to the Estonian government cutting off Belarus from another transit route. As it stands today, Belarus has no chance of exporting over 30% of its yearly exports through the Baltic ports as it usually does.
Following the war in Ukraine, Belarus was also deprived of access to the Odesa port; and despite Lukashenko’s sugges- tion to UN General Secretary Antonio Guterres, no deal was struck to allow Belarusian fertilisers to go through the Baltic ports in exchange for Ukrainian grain being let through Belarus.
Moreover, having invested in railway transit through Ukraine, a lot of Belarusian assets remained in Ukraine after February 24. As of July 28, Ukrainian media reported that UAH39bn (approx. $1bn) of Russian and Belarusian assets had been seized in Ukraine.
Last year, Ukraine received 3% of Belarus’ exports. Today, Ukraine has more or less terminated all economic ties to
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Belarus as its National Bank has even prohibited the trading of the Belarusian ruble (BYN).
To make matters worse, many of the seized Belarusian assets in Ukraine are freight railway carts specifically needed to transport fertilisers and petroleum products. Therefore, Belarus will need to buy new ones even if it manages to use Russian ports, a cost which the Belarusian state budget most likely can’t bear at the moment.
In the short term, the negative outcomes of this transit problem are obvious – Belarus exports will fall tremendously. Last year’s GDP growth of 2.5% was mostly driven by high commodity prices on foreign markets, and while prices of fertilisers and petroleum products remain high, Belarus simply cannot access these markets today.
“Belarus has no chance of exporting over 30% of its yearly exports through the Baltic ports as it usually does”
The long and medium term effects are a little more unclear. However, as some of Belarus’ largest potash buyers (Brazil and India) are currently looking to broaden their potash supplies to new trading partners, Belarus risks losing long-term potash deals.
Other industries suffering under sanctions
Belarus’ military-industrial complex has also been hard-hit by western sanctions due to the sanctions against certain dual-use machinery.
According to Belarusian PM Roman Golovchenko, Belarusian defence companies today engage in both import substitu- tion as well as joint R&D projects with Russian companies to counteract the effects of these sanctions.
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