No rapid growth of exports due to suspension of sanctions against Belarusian companies

The EU and US have suspended sanctions against a number of Belarusian companies for four to six months. Due to sanctions, Belarusian exports have been losing USD 200 million annually. The temporary suspension of sanctions is unlikely to lead to a significant improvement in exports. Only full lifting of sanctions would enable Belarusian enterprises to increase exports and reduce costs.

On October 29^th, the US partially suspended the sanctions against Belneftekhim. Nevertheless, the company’s property remains under arrest. Transaction with Belneftekhim are allowed, but any transaction exceeding USD 10,000 is subject to a report to the US State Department within 15 days. The decision is valid until April 30^th, 2016, after which it may be withdrawn or extended. The EU suspended sanctions against ten companies from Belarus for four month, four more companies were removed from the sanctions list.

Sanctions introduced by the United States the most sensitive. Several hundred million US Dollars worth assets were frozen, and exports of potash fertilizers a total worth of USD 100 million a year, were suspended. Grodno Azot lost the US market, which roughly meant USD 50 million annual profits since 2008. Belshina exports fell by USD 20-25 million a year. In addition, oil supplies dropped to a minimum (in 2006 and 2007 they earned USD 240 million). The EU sanctions were not particularly damaging. Petroleum products were still supplied to the European market, as well as bituminous mixtures, antioxidants and solvents, which were produced by companies from the EU sanctions list.

The temporary suspension of sanctions by the United States will not lead to a significant boost in Belarus’ exports. While the Belarusian companies were absent from the US market, their place was take over by others. Belarus has lost its competitive advantage in the form of low prices for the natural gas needed to produce nitrogen fertilizers. Belarusian companies will need at least half a year in order to re-enter the market in the current circumstances. The requirement to coordinate each transaction between buyers and the Belarusian companies from the suspended sanctions list is an additional obstacle.

Belarusian companies are unlikely to resume activity provided that sanctions may be resumed after April 30^th, 2016. Rather, they would use this time to restore contacts on the US market and to make smaller deals. If sanctions are lifted after the suspension expiry, Belarusian enterprises may increase their exports to the US market, provided, that market prices are favourable. If all restrictions on payments in US dollars are abolished, Belarusian companies will significantly reduce their costs on South and North American markets.

The Belarusian authorities have achieved a temporary suspension of sanctions against a number of key Belarusian companies. Meanwhile, they will be unable to recover their positions on the US market swiftly. Only if sanctions are abolished completely, Belarusian tyre manufacturers and fertilizer producers may be able to reduce their costs on other markets due to the use of US dollar as a transaction currency.