U.S. cuts off Lukashenko from main foreign currency source
Belarus began to have problems with the sale of oil products abroad, a key source of income in hard foreign currency for the country’s economy.
Argus Media reports, citing market sources, that European banks began to refuse to finance deals after the US announced the imposition of sanctions against the largest Belarusian refinery Naftan.
Although the sanctions officially come into force in June and formally apply only to American legal entities, the payment for Belarusian goods in dollars has become more complicated for clients from other countries.
Oil products produced from Russian oil, which is supplied to Belarus at a discount, provide 20% of the export revenues of the Belarusian economy.
Oil traders surveyed by Argus reported that supplies would decline in May. In addition, market participants expect that the European Union may soon impose similar sanctions. This will close the sale of oil products for Belarus and for the euro too.
The loss of export earnings will be a painful blow for the regime of Alexander Lukashenko, which is rapidly burning its foreign exchange reserves.
The total amount of the Belarusian National Bank’s foreign exchange reserves from January 2020 to April 2021 collapsed by 25%, to $6.9 billion, while only 2.8 billion dollars remained in liquid assets.
Belarus already has reached levels below the IMF’s critical threshold, which recommends keeping the equivalent of three months of imports in foreign exchange reserves. Belarus’ external debt exceeds reserves by 6 times and amounts to 42.1 billion dollars (as of January 1).
Lukashenko is aware of the danger and is preparing for the severe currency crisis in the country. On 21 April, he signed a decree giving the Central Bank the right to prohibit foreign exchange and currency transactions, set limits and deadlines for such transactions, and to require special permission to buy and sell foreign currency.
In addition, the National Bank of Belarus will be able to de facto confiscate the currency from the accounts of legal entities, forcibly converting it into Belarusian rubles, as well as limit the opening and maintenance of accounts in foreign banks.
The decree was signed the day after the United States announced the blacklisting of nine Belarusian state-owned companies.
“Due to the blatant disregard for human rights,” “Belarus’s failure to fulfill its obligations under international law” and “rigged presidential elections”, Washington imposed sanctaions on Belarus’ largest oil-trading concern Belneftekhim and Naftan oil refinery, Grodno Azot fertilizer manufacturer and Grodno Khimvolokno fiber manufacturer built under Khrushchev.
All these companies “finance and support Lukashenko’s regime” by “contributing to repressions against the Belarusian people and undermining the rule of law,” the U.S. Treasury Department said at the time.