Lithuanian Railways stops Belarusian fertilisers due to US sanctions

Lithuanian Railways has concluded a resolution concerning the transport of Belarusian fertilisers by the state company Belaruskalij. As of 1 February, the Lithuanian operator will not transport the product since it terminated the contract that was otherwise valid until the end of 2023.

This development comes as a consequence of the sanctions imposed by the US and the EU on Belarus. In late 2021, Lithuanian Railways declared that the sanctions were not binding and that it could still transport Belarusian fertilisers until the end of 2023. Simultaneously, LTG Cargo, the Lithuanian rail freight operator, drew its future strategy without calculating the volumes coming from Belaruskalij to avoid all risks included.

Better safe than sorry

On 21 October 2021, LTG amended the existing contract with Belaruskalij and changed the payment terms, moving to a prepayment policy to secure the income by the provided services. Later, it reviewed the agreement to find a safe way to break it. The review focused both on finding a legal path to stop cooperating with Belaruskalij but also assessing the risks of such a decision since the company can lose millions from stoping the partnership.

The results of this process found that LTG is not obliged to keep the contract with Belaruskalij running until late 2023 and that the risks of continuing the partnership were greater than terminating it. “Amendments to contracts, additional agreements and their possible consequences are always carefully assessed by the company’s specialists. An additional agreement signed in October, which switched to prepayments, does not change LTG’s ability to suspend services to the Belarusian company,” stated Kęstutis Šliužas, board chairman of LTG, in early January.

As a result, and after following the directions of the Lithuanian government, who wanted to conclude the partnership with Belaruskalij, LTG decided that it would no longer transport its products. “We are ready to implement the resolution adopted by the Government from 1 February. According to it, we will terminate the provision of services to Belaruskalij under the agreement concluded in 2018. We understand that the situation is complex, requires maximum care and concentration,” commented Egidijus Lazauskas, general director of LTG.

LG Cargo train, source: Lithuanian Railways
An LTG Cargo train. Source: Lithuanian Railways.

Other customers still eligible

Losing Belaruskalij’s volumes could pose a certain financial threat to LTG. However, it does not seem to be the end of the world. The sanctions imposed on the transport of fertilisers seem to touch only the Belarusian state company. As LTG mentioned, other customers in the fertiliser industry can be eligible for transit through Lithuania.

Lazauskas explained that “the near future will be critical in making other relevant decisions on the transit of Belarusian fertilisers through Lithuania. The government has decided on a contract with Belaruskalij. However, Belaruskalij is not the only company that can order the transportation of this cargo. LTG Cargo can be contacted by other companies not included in the sanctions lists”.

At the same time, even Belaruskalij could continue the transport of its products through Lithuania, given that other carriers will express their interest and apply for the transport of fertilisers through the country. In this case, the LTG group could still have some financial benefits despite not transporting the products themselves.

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Author: Nikos Papatolios

Editor at RailFreight.com

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