Belarus PM claims that exports are recovering while Minsk eyes a new route out for potash fertilisers

Belarus PM claims that exports are recovering while Minsk eyes a new route out for potash fertilisers
Russia's Murmansk harbour /
By bne IntelliNews September 19, 2022

Prime Minister Roman Golovchenko told state Belarusian media last week that country's exports are recovering. According to Golovchenko, Belarus had a “positive trend in the monthly recovery of exports,” also adding that the export of goods had been increasing by 6-8% since June. Golovchenko also mentioned that Belarus’ foreign trade surplus was improving, claiming that “at the moment the surplus is $2.3bn, and we expect it to increase by $500mn in August.”

On September 12, Belarusian President Alexander Lukashenko commented on a report about the performance of Belarus’ transport sector amid Western sanctions. According to Lukashenko, Belarus’ transport industry ensured that the country acquired nearly half (45%) of its foreign currency earnings from exports.

Lukashenko emphasised that since many ministers have been told to increase production this year, it was important that Belarus’ Transport and Communications Ministry managed to solve all problems concerning the sanctions-affected logistics chains in order to increase the profitability of both exports and domestic sales.

Last year, Belarus’ large export revenues helped it maintain a stable exchange rate for the Belarusian ruble (BYN) without wasting any of the National Bank’s FX reserves. This year, sanctions have helped Belarus keep a relatively stable exchange rate through decreasing imports. However, sanctions knocked out Belarus’ state-owned railway company's subsidiary Belintrans as a reliable foreign currency earner. Since January this year, Belarusian Railway’s cargo transit has decreased dramatically, according to leaked data from Belarusian Railways.

Belarusian exports and imports have both been hit hard by Western sanctions this year, as Belarus is reportedly unable to export around $18bn worth of goods abroad. Most of these goods also belong to some of Belarus’ highest foreign currency earning products such as fertilisers and oil.

To make matters worse, a large part of Belarus’ rolling stock used for shipping potash fertiliser is stuck in Ukraine. During a press conference following Lukashenko’s meeting on Monday, Belarus’ Deputy PM Anatoly Sivak noted that Belarus’ Mogilev Car Building Plant has been working hard throughout the year to produce new rolling stock for sanctioned Belarusian potash giant Belaruskali.

Belarus eyes new potash export route

Belarus’ fertilisers exports is one of the country's main foreign currency earners. Sanctions against foreign currency earning sectors are hitting the debt-heavy Belarusian economy especially hard as it quickly needs to receive more dollars and euros in order to pay off upcoming Eurobond payments.

While first being mentioned as an optional route in August last year, Russia’s Murmansk region has since fallen off the agenda as Belarusian officials have focused on redirecting potash exports to Russia’s ports around St Petersburg.

However, since those ports are currently busy with exporting Russia’s own sanctioned potash there has been talks of Belarus building its own port in Russia’s Leningrad region. It is perhaps due to this that Murmansk has returned as an important alternative route for Belarus’ redirection of its potash exports.

On September 8, Lukashenko announced that Belarus intends to redirect a portion of its potash exports through ports around Murmansk; this idea was also supported by Russian President Vladimir Putin.

However, as always, the official statements may initially make out that all problems has been solved while this is actually far from being the case. According to the news outlet Sea News, local media in Murmansk reported that this also concerns the building of a Belarusian port in the Murmansk region on the west coast of the Kola Bay with a planned terminal capacity of 5-7mn tonnes per year (tpy). No immediate larger redirection of Belarusian potash exports can therefore be anticipated in the short term.

Furthermore, Lukashenko told Murmansk Regional Governor Andrei Chibis that “The parties have already reached the necessary agreements, but still have not determined the cost of shipping cargo by rail. I know that this is a federal government issue, but nonetheless, if you get involved in this, we'll solve this issue faster. Key decisions have been made.”

This issue is the same problem which some analysts brought up last year when Belarusian officials seemed certain that working out transport agreements with Russia would be done swiftly. Not only is there a problem with the capacity of Russian ports, and now with the rolling stock being stuck in Ukraine; the procurement discussions on rail transit from Belarus to Russian ports also pose a serious problem.

Belarus’ transport sector is especially important to Minsk since its state-owned and as a part of Belarus’ centrally run economic model, Minsk also ensures that it owns and handles as much as possible of the transport route. However, being dependent on Russia, Belarus will probably have to give in to Russian cargo handlers’ demands to also be allowed to handle some of the exports.

These procurement negotiations are not easy as Russian logistics operators likely want to maximise their profits, while Minsk wishes to minimise them. It thereby becomes a political question, and perhaps Lukashenko hopes that Chibis can help him get the Russian government's help to solve this issue.