EU sanctions damage lifeline transit of Belarus potash via Lithuania

A general view shows waste heaps at Belaruskali potash mines near the town of Soligorsk, some 130 km (81 miles) south of Minsk, August 31, 2013. Photo taken August 31, 2013. REUTERS/Vasily Fedosenko/File Photo

MOSCOW, June 24 (Reuters) - An EU decision to ban potash from Belarus jeopardizes the lifeline export route for the world's top producer of the crop nutrient, a restriction that will tighten when an exemption for previously signed contracts runs out, analysts said.

The European Union banned imports or transfer of potash by the bloc from Belarus as part of its wide-ranging economic sanctions on Belarus on Thursday, a month after Minsk forced a Ryanair flight to land. read more

Belarus will now need to find other countries and ports to ship its top export via the Baltic Sea.

"At first glance, this looks like a killer measure for the industry," said Vadim Iossub, senior analyst at Alpari Eurasia.

The Baltic port of Klaipeda in Lithuania handles 97% of Belarusian potash exports - about 9.7 million tonnes a year. The potash exports are the main source of U.S. dollar revenue for Minsk's budget.

Potash contracts signed before June 25 will remain unaffected, according to the EU, and this factor will delay the effect of the sanctions.

Contracts that fall into this category include deals Belarus previously signed with China and India, the world's two largest importers of potash, which will run until the end of 2021.

"The real pain will come when these contracts are over," Iossub said.

Belarus potash company (BPC), which competes with Mosaic (MOS.N) and Israel's ICL (ICL.TA) among other producers, did not reply to a Reuters request for comment.

Supplies from Belarus account for 20% of the global potash trade. Restricting the supply of such size will lead to growth in potash prices and may add to current global food inflation, BPC said in a recent comment.

Potash prices have risen this year due to strong demand from farmers. Food imports costs are expected to surge to record levels this year, the U.N. Food Agency said in June. read more

There are no easy options to replace the Lithuanian port that moves almost all Belarusian potash out to world markets. Russia, whose President Vladimir Putin has been supporting Belarus' leader Alexander Lukashenko, does not have enough port capacity to handle Belarusian or its own fertilisers.

Belarus exported potash worth $2.4 billion in 2020, of which $200 million were supplied to the EU.

Writing by Polina Devitt; editing by William Maclean

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