The European Union has agreed to a broad package of sanctions against Belarus that target its key sectors, including sanctions against the financial sector, and overcoming objections from Austria, it was reported on June 18.
The sanctions come after Minsk forced a Ryanair commercial flight between Athens and Vilnius to land as it passed through Belarusian airspace, which infuriated Brussels and ended in the arrest of Roman Protasevich on May 23, a prominent opposition blogger living in exile in Lithuania.
It is not clear whether the new sanctions package will include a ban on the primary and secondary trading of Belarusian Eurobonds, but from details that have been made public, it appears that Belarusian Eurobonds will be included and that the country will be cut off entirely from the international capital markets as a result.
Among the targeted sectors are Belarus potash business, which accounts for about one-fifth of the country’s fiscal revenues, and its refined petroleum products, which make up another third of the country’s GDP. While Minsk should be able to redirect these exports to Asia and Russia, and so the sanctions will not cause the economy to collapse, they will always harm and increase Minsk’s dependence on Moscow. .
The strategy behind the sanctions is to increase the cost for Moscow of supporting Belarusian President Alexander Lukashenko’s regime to the point where it becomes unaffordable. Currently, the Kremlin is estimated to spend some $ 2-3 billion a year on Belarus in subsidized loans and debt relief, but sector sanctions could increase that amount to $ 6-10 billion, according to the report. various estimates, to a point where the Kremlin might balk at spending more.
As bne IntelliNews reported, the Kremlin is already spending as little as possible to keep Lukashenko in power. At their last meeting in Sochi, Putin authorized the release of the second $ 500 million of a $ 1.5 billion loan, but offered no new money, despite looming sector sanctions from the ‘EU. The National Bank of the Republic of Belarus (NBRB) has already lost around $ 1.9 billion due to foreign currency withdrawals by the population since mass protests erupted over the conflict August 9 presidential elections, and currently has less hard currency reserves than the three months of import coverage, which is considered the minimum necessary to preserve the stability of the Belarusian ruble.
The imposition of the new sanctions package was blocked by Austria, which threatened to exercise its veto because the package also targets the financial sector. Austrian bank Raiffeisen International has major investments in the sector through its ownership of Priorbank, which has been operating in the country for years and has business with most of the largest state-owned enterprises (SOEs).
However, an agreement was reached on June 18 to ban further loans to Belarus, Austria’s foreign ministry and three diplomats said, Reuters reported.
Restrictions on the Belarusian financial sector that have yet to get final approval from EU governments include: a ban on new loans, a ban on EU investors from trading in securities or buying short bonds term and a ban on EU banks to provide investment services. EU export credits will also end. EU leaders meet again on June 24 to approve the new sanctions at a scheduled summit.
“With this agreement, the EU sends a clear and targeted signal against the unbearable acts of repression by the Belarusian regime,” the Austrian Foreign Ministry said in a statement, quoted by Reuters.
The new sanctions are the broadest ever imposed on an Eastern Bloc country and specifically target economically valuable sectors for the first time.
The sanctions also include restrictions on EU purchases from Belarus of tobacco products, as well as petroleum and petroleum-related products, and an import ban on potash.
There will be waivers of financial sanctions for humanitarian purposes, while the private savings of Belarusian citizens will not be affected, one of the Austrian diplomats said.
The EU has already imposed three rounds of sanctions on individuals, including Lukashenko, since last year, freezing their assets in the EU and banning travel as part of a package of sanctions seen as mostly symbolic, as the Links between Belarus and the EU are extremely weak. and its elite do not hold many assets in the EU, unlike their Russian and Ukrainian peers.
Foreign ministers are also expected to expand the list of those under sanctions in a bid to put pressure on the elite surrounding Lukashenko in the hope that they will abandon him at some point, leading to the downfall of the regime. Another 78 people and eight business entities linked to Lukashenko are to be blacklisted, diplomats said.
Potash exports – a salt rich in potassium used in fertilizers – are a major source of foreign exchange for Belarus, and the Belaruskali state-owned company says it produces 20% of the world’s supply.
The EU’s statistics agency said the bloc imported 1.2 billion euros ($ 1.5 billion) of chemicals, including potash from Belarus last year, as well as more € 1 billion worth of crude oil and related products such as fuel and lubricants.
While the boycott of imports of refined petroleum products accounts for only a small share of total EU imports of refined products, the ban will particularly affect Ukraine, which is heavily dependent on diesel imports from Belarus and suffers already from a shortage of supply. Kiev has backed the EU’s sanctions against Belarus and has imposed its own sanctions alongside those coming from Brussels, including a flight ban and the closure of its airspace to Belarusian state carrier Belavia.