Publication: Eurasia Daily Monitor Volume: 4 Issue: 221

Belarusian President Alexander Lukashenka

On November 14, the United States Treasury announced financial sanctions on the Belnaftakhim gas and chemical conglomerate and its subsidiaries outside the country. With this maneuver, Washington expressed its dissatisfaction with the Belarusian government’s failure to improve the human rights’ situation within the country. It follows other moves directed against the Lukashenka government by the EU and the United Nations.

The recent sanctions comply with the order given by U.S. President George W. Bush permitting the Department of the Treasury to freeze assets of those individuals or companies believed to be responsible for human rights violations in Belarus. The United States has blocked the undisclosed personal assets of 16 Belarusian officials, including President Alexander Lukashenka, since last year. The EU, meanwhile, has expelled Belarus from its preferential list of partners, a decision that became effective in June 2007. It is estimated, however, that the annual losses incurred by Belarus from this move will amount to €12 million annually, or about 0.4% of the value of all Belarusian exports to the EU. In this sense, the punishment might be considered more symbolic than severe.

On November 21, the United Nations General Assembly committee dealing with social, humanitarian, and cultural issues accepted a draft resolution led by the United States, the EU, Canada, Israel, Japan, and Switzerland that condemned the continuing violations of human rights in Belarus and demanded that the government adhere to international standards in the conducting of elections. The resolution was approved by 68–32, with 76 abstentions (Charter 97, November 22). Likewise such admonitions have become somewhat ritualistic, given the Minsk government’s apparent refusal to change its ways.

The impact of the sanctions on Belnaftakhim is harder to assess. Some analysts believe the company has a relationship to Belarus similar to what Gazprom is to Russia – one of the government’s principal assets. It consists of 38 enterprises, of which 23 are industrial companies. It includes chemicals and oil output, transport, and procurement technology and employs about 120,000 people. Over 70% of the output produced by Belnaftakhim divisions is distributed to 90 different countries. The company accounts for about 35% of the exports and over 30% of the country’s industrial output. The most important export products are mineral fertilizers (especially potassium chloride) and oil products. The company has offices in Russia, Ukraine, Latvia, Germany, and China, and a subsidiary firm, Belnaftakhim USA. New company branches are being created in Turkey and Poland.

Belarus’s response to the U.S. decision was two-fold. On the one hand, a protest note was handed to U.S. Ambassador Karen Stewart on November 15. The authorities claimed that the new sanctions were “illegal” and derived from exclusively political motives. It demanded that the company’s assets be immediately unfrozen. The note also stated that the decision of the Bush administration was contrary to the norms of international law and WTO trade guidelines. It also reportedly violated the current trade agreement between the United States and Belarus, by which Washington agreed to promote the supply of Belarusian goods and services on the U.S. market.

On the other hand, the Belarusian side was insistent that the new sanctions would not affect the smooth operation of the Belarusian economy. Speaking to the German-run Minsk Forum conference, Uladzimir Sizou, head of Belnaftakhim’s oil processing arm, remarked that the only branch of the company affected was the one in United States. He maintained that the sanctions would not impede the transport of crude oil through Belarus or domestic oil refining. A separate report suggests that Latvia will suffer adversely from the sanctions, as transport of Belnaftakhim exports in 2006 yielded the Baltic country some $174 million in transit fees that will now presumably be lost. Some impact may be felt by other enterprises, such as the Mazyr oil refinery, which sells the United States about 50,000 tons of gasoline monthly.

Belarusian analyses have speculated that the united stance of the United States and the European Union on human rights violations and the need to release political prisoners in Belarus may be undermined by the new sanctions, since the Europeans, in their view, do not support these additional measures. However, there has been no overt opposition from Brussels to the announcement from Washington, and similar sanctions on EU trading with Belarusian companies would be potentially devastating to the Belarusian economy.

The direct financial impact on Belarus of the sanctions is difficult to gauge without access to Belnaftakhim company records. What is clear, however, is that the country’s energy sector has come under intense pressure over the past year through increased costs of imported oil and gas from Russia and a distinct cooling of relations with its traditional ally. The U.S. sanctions step up the pressure on the Lukashenka regime’s main economic asset: reprocessed oil products, which, at 54% of the total volume of exports, are the country’s most important export item outside the boundaries of the Commonwealth of Independent States.

Although the latest sanctions may not elicit immediate internal changes, they may lead the Belarusian government to seek new accommodation with Russia or to make some concessions to the demands of the EU – perhaps by releasing some prisoners. Other options seem distinctly limited.

(Belorusy i rynok, November 19-26; www.charter 97.org, September 25, November 22; Belorusskaya delovaya gazeta, Belapan, November 23; BelGazeta, November 19)