EU Proposes Sanctions on Main Belarus Potash Companies

(Bloomberg) --

The European Union has proposed sanctioning Belarus's main potash producer, Belaruskali OAO, and its export arm, Belarusian Potash Co., as part of a sixth package of measures member states will discuss on Wednesday, according to a person familiar with the matter.

The EU also proposed sanctions on the Belarusian oil refinery Naftan, said the person, who asked not to be identified because process is confidential. The measures could be adopted by member states this week and the details may change before then.

All three companies provide significant revenue to President Alexander Lukashenko's regime and have been previously sanctioned by the U.S. The EU and the U.S. have accused Belarus of aiding Russian President Vladimir Putin's invasion of Ukraine.

The measures are part of the EU's latest sanctions package, which aims to raise the stakes for Putin and the war in Ukraine. The EU will also propose a ban on Russian oil that will be introduced gradually until it takes full effect at the end of the year, according to people familiar with the plan.

Potash Exports

Belaruskali OAO is the world's second-largest producer of potash, the soil nutrient which is used to improve crops. The company, which controlled about 20% of the global potash market until new restrictions jeopardized its exports, ships the bulk of its products to China, India and Brazil. State-owned Belarusian Potash Co. handles all exports of potash from Belarus.

Shipments to the EU brought Belarus 8% of its total $2.4 billion potash export revenue in 2020, according to data on the national statistical committee website at the time.

Belarus netted most of its foreign-currency revenue from exports of potash and fuels produced from discounted Russian crude oil but the impact of any new restrictions is difficult to measure as both sectors have been hit by multiple rounds of sweeping sanctions ever since a crackdown on protesters in 2020 and Minsk has classified relevant statistics.

Its potash exports took a further blow earlier this year after Lithuania stopped allowing transits through the Baltic country. Belarus was hit with more sanctions last year in response to the forced landing of a Ryanair flight and the arrest of a journalist in Minsk, and again this year for providing material support to Russia's war in Ukraine, including by making available its territory as a launchpad for Russian forces to mount the invasion.

The EU is also expected to cut more Berlarusian banks from the international payments system SWIFT as part of a package that is expected to be approved this week, the person said.