Triple Blow: What Will the Sanctions of the USA, Canada, and Great Britain Lead To Against the Regime in Belarus

Expert opinion on unprecedented measures of influence on lukanomics.

On August 9, US President Joe Biden signed a decree on new sanctions against the Belarusian authorities. Now the US authorities can freeze all dollar assets of Belarusian state institutions, companies, and individuals. And also a ban was introduced on their insurance, lending, and financial transactions.

Canada and the United Kingdom imposed sanctions at the same time as the United States. Such a triple blow by sectoral sanctions is the most serious in the entire history of independent Belarus.

ERB has looked at what experts say about the new sanctions and further prospects of the companies that have come under pressure.

A Closed Window for Oil Products Trade

BEROC Academic Director Katerina Bornukova believes that the UK sanctions will seriously affect the Belarusian petrochemical industry. If earlier there were only EU sanctions, then Britain remained a possible window for the export of oil products to the West. Now, this window has been closed. As for the US sanctions, the expert is sure that this is a very serious thing:

“Firstly, they de facto exclude settlements in dollars for all sanctioned persons. This seriously complicates foreign trade. Secondly, the US sanctions “scare off” counterparties with the possibility of secondary sanctions,” Katerina Bornukova explains in an interview with Zerkalo.io.

In a situation with secondary sanctions, the loyalty of counterparties will be an important factor. For example, in the case of working with sanctioned enterprises, entities begin to conceal the facts of cooperation with them, says Bornukova.

Example: Transneft denies supplies to Naftan. However, the refinery gets enough oil from somewhere to operate. But if the counterparties are less loyal, then they can change the client.

Belaruskali is on the sanctions list, but the Belarusian Potash Company is not. But there is a nuance

The US Treasury Department called Belaruskali "the main source of tax revenues and foreign exchange earnings for the Lukashenka regime." The company exports potash fertilizers through a monopoly trader - the Belarusian Potash Company. In 2019, the United States imported potash fertilizers from Belarus for $ 220 million, in 2020 - for $ 125.7 million, and in the first half of 2021 - for $ 91.2 million.

Even though BPC was not subject to sanctions, this does not mean at all that it will be able to continue to calmly conduct trade with settlements in dollars and supply potash fertilizers to the United States.

"BPC actually acts as an export agent of Belaruskali, and the exported potash products, according to OFAC's rules and usual interpretations, should still be considered "blocked property" of Belaruskali, even if formally BPC purchases the product from Belaruskali and then sells it on the international market," Brian O'Toole, a former senior adviser to the OFAC sanctions agency at the US Treasury, explains to RBC.

As for secondary sanctions, the expert believes, Biden's “Belarusian” decree gives the right to impose sanctions against any non-American persons for “substantial assistance or provision of financial, material, or technological support” to companies included in the sanctions list.

"Even if Belarus sells potash only to China or India, the US will be able to punish buyers."

Sviatlana Tsikhanouskaya's assistant for economic reforms, Ales Aliakhnovich, believes that the United States is closing the gray zone left after the introduction of sectoral EU sanctions. While only about 15% of Belaruskali's products fell under EU sanctions, the US sanctions apply to all.

“Yes, the Belarusian Potash Company, which does not extract but sells potassium, is not banned. But then it would have to sell non-Belarusian potash, because it would be penalized for cooperating with Belaruskali together with all its counterparties in the chain,” Tsikhanouskaya's assistant explains in an interview with Nasha Niva.

Aliakhnovich believes that the US sanctions will force the Norwegian company YARA to stop buying potassium in Belarus, as well as allow the Lithuanian authorities to ban the transportation of potassium to the Klaipeda port: “Even if Belarus sells potassium only to China or India, the US will be able to punish buyers.”

How will US sanctions affect those who have been blacklisted?

Among those who fell under the American sanctions press was Mikalai Varabei, a well-known Belarusian oil trader. Although he has officially withdrawn from participation and control over his companies, all of his large enterprises were included in the US sanctions list: New Oil Company, Interservice, BelKazTrans, Absolutbank, Bremino Group, and the Russian company NNK Vostok.

Biden's executive order leads to the fact that, for example, Absolutbank will no longer be able to conduct transactions in US dollars through correspondent accounts in American banks. This means that the company will not be able to work with US dollars.

"In addition, the oil operations of the companies controlled by Varabei will definitely not be carried out in euros or dollars, as it was before. Thus, either the ruble or, for example, the yuan can become the currency of the NOC's work. No public oil company will work with NOCs anymore. That leaves China or the Arab world. Or something else, more exotic," the authors of telegraph channel zaprauka.by say.

But the sanctions may not be limited to just Absolutbank. The National Bank and seven other banks, in which the state has a share, may fall under them. According to the executive order of Biden "On blocking the property of other persons to facilitate the situation in Belarus," further expansion of sanctions is possible. For example, the document mentions the National Bank of Belarus, so that "at least all state-owned banks or banks with the participation of the state or state bodies can be added at once."