Little known but important commodity fuels The geopolitical controversy in Eastern Europe

KLAIPEDA, Lithuania — For nearly two decades, long freight trains laden with russet grits have rumbled into Lithuania’s main port on the Baltic Sea, providing an economic lifeline for Aleksandr G. Lukashenko, president autocracy of neighboring Belarus.

That lifeline will be cut off February 1 following the Lithuanian government’s decision to halt shipments of vehicles carrying Lukashenko’s biggest source of money: potash for export to Europe and beyond through the port of Klaipeda.

Lukashenko’s opponents welcomed the move, but others worried about an undesirable consequence: It would benefit Russia, which is supposed to take over Belarus’ potassium transport and could win gain control over a substantial portion of the world ‘s obscure but indispensable commodity supply .

Potash, which Russia also produces, may not look like much, but, valued as a key crop nutrient for global food security, it has more than doubled in price over the past year, generating revenue. adding billions of dollars to Mr. Lukashenko and other manufacturers. The closure of Belarus’ only export route for goods through the Baltics will drive prices even higher.

State railways and the port of Klaipeda derive a large portion of their revenue from potash. Debates among Lithuania’s political and economic elites about what to do about trade restrictions have become so heated that the government in December offered to resign over the issue. The conflict erupted after the chairman of the congressional foreign affairs committee, Zygimantas Pavilionis, accused the government of betraying the United States, a key ally that last year imposed sanctions on the potash producer state-owned by Belarus, and facilitated a dictator.

Mr. Pavilionis, a former Lithuanian ambassador to Washington, said in an interview that the matter became tense because “it involved very large amounts of money”.

In a letter to the Lithuanian state railways in December, the US Treasury Department explained that US sanctions against a major Belarusian potash producer do not apply to foreign entities, but it urges what it calls a “risk-based approach” to compliance, suggesting that could be problematic in the future.

Belarusian opposition leader Svetlana Tikhanovskaya, who lives in exile in Lithuania and has long lobbied to stop potash shipments, said she was pleased to see the outcome, in an interview. , she called an “unscrupulous” business whose termination would help. empty “the deepest pocket of the dictator.”

That out-of-pocket pocket is Belaruskali, a huge state-owned potash producer that serves as a cash cow for Mr. Lukashenko’s government. Belarus’ largest taxpayer and largest exporter, it accounts for about 20% of the world’s potash supply.

But the bankruptcy momentum of the American-led Lukashenko has raised warnings of the risk of defeat for Russia. Canada, the world’s largest potash producer, will also raise prices due to expected price increases, but Russia’s profits far outweigh prices.

“Russia is welcoming,” Algis Latakas, the director of the Klaipeda port, said in an interview. Belaruskali, he said, will most likely simply switch to Russian ships and deliver cargo to Ust-Luga, a Russian port near St.Petersburg, whose development has long been a pet project of the company. President Vladimir Putin.

Mr Latakas said he understood his government’s desire “to counter undemocratic forces” but warned that the end result in this case would most likely be “Russia gains a huge economic advantage” and ” control over food prices”.

Whether sanctions are effective has long been the subject of political and academic debate, but in the case of those imposed on Belarus, the results to date have been particularly meager.

During the past year, as the European Union and the United States imposed several rounds of economic restrictions on Belarus, the value of trade between Europe and the Eastern European country nearly doubled. That is largely due to the sharp increase in the prices of items that Mr. Lukashenko exports, mainly potash and oil products, whose values ​​have skyrocketed in part due to supply uncertainty due to sanctions. cause.

“Lukashenko is just earning more money,” lamented Laurynas Kasciunas, chair of the defense and security committee of the Lithuanian Parliament.

Instead of being persuaded to release political prisoners as he had hoped, Mr. Lukashenko only arrested more people, with about 980 people currently behind bars for their political activities. according to Viasna, a human rights monitoring group in Belarus. This is more than double the figure reported last June when the current round of sanctions began after forced landing in Minsk, capital of Belarus, of a Ryanair passenger jet carrying a young dissidentwho was caught in time.

Ms. Tikhanovskaya admitted “paradoxically that sanctions have been imposed but Belarus’s income is still growing” and said it is necessary to tighten the squeeze on Lukashenko to create “unbearable pressure”. ” intended to shake the loyalty of the officials and businessmen on which Mr. Lukashenko depends. to take power.

Crucial to his economic existence is potash, of which Russia and Belarus together produce about 40% of the world’s supply.

Manufacturers of the two countries have for years competed fiercely for export markets, but with Belaruskali now likely to become dependent on Russian railways and ports to sell their products abroad. , Moscow will gain strong leverage over the Belarusian company. That would put it in a position to use as much potash as it used control of its vast natural gas reserves to skew markets and put pressure on European countries.

Igor Udovickij, majority owner of a bulk cargo terminal at the Belaruskali-owned port of Klaipeda, predicts: “Everybody throws around beautiful slogans about democracy but the result will be the exact opposite of what it is. what they want.

“Whoever controls potassium controls food supplies around the world,” he said. “We just gave Putin a nuclear weapon, but, unlike the weapons he already has, this is a weapon he can actually use.”

Mr. Udovickij is clearly interested in keeping freight trains from Belarus running to Klaipeda. But others without the money also worry that Russia will be the main beneficiary of efforts to stem the flow of potassium through Lithuania, formerly part of the Soviet Union – against their will – but now a member of the Soviet Union. members of the European Union and NATO.

“We need to be very careful in imposing sanctions not just to create opportunities for others,” said Kasciunas, chairman of the national defense and security committee. He said that as a firm ally of the US, Lithuania has a duty to support the sanctions imposed by the US Treasury Department on Belarus, but it also has other concerns, namely Russia.

“Nobody here supports Lukashenko, but everyone is most worried about Russia,” he said. “There are very complex geopolitics playing with potash.”

So far, Russia has struggled for years to gain control of Belaruskali, the crown jewel of Mr. Lukashenko’s mostly degraded industrial base. Unlike Belarus’s other main source of revenue, petroleum products depend on crude oil supplies from Russia, the potash producer is not dependent on Russia for business. At least not until this month.

Mr. Lukashenko, who had called for help from the Kremlin to quell massive street protests caused by a presidential election deemed rigged in August 2020, has gradually lost his ability to resist. Russian requirements. And Belaruskali is now looking increasingly vulnerable.

In recent weeks, the company has not only lost its export route through Lithuania, but has also lost its largest customer in Europe, Yara, a partially state-owned Norwegian company.

Yara announced on January 10 that it will remove all purchases from Belaruskali and will stop purchasing by April 1.

Ms. Tikhanovskaya dismissed concerns that sanctions would only push her country closer to Russia as an argument pushed by Mr Lukashenko and his supporters to “try and stop acting principled – all It’s all a hoax.”

However, Lithuania will lose hundreds of millions of dollars from stopping Belarusian exports through Klaipeda, and according to an internal government report assessing potential damage, it could face legal claims up to $15 billion in broken contracts. Mr. Udovickij, said he plans to sue the government for excessive damages.

But for a small country that depends on the United States for security against an increasingly assertive Russia, more is at stake than just money, Transport Minister Marius Skuodis said in an interview. interview. Potash, he added, “is a very difficult geopolitical question.”

Tomas Dapkus Contribution report from Vilnius, Lithuania. Little known but important commodity fuels The geopolitical controversy in Eastern Europe

Fry Electronics Team

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