Sanctions Hit Belarusian Base Oils

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Sanctions Hit Belarusian Base Oils
The European Union has imposed sanctions on Belarus petroleum products. © J_UK

Belarus’ base oils effectively stopped flowing to the West last week after the European Union imposed sanctions against the country. The EU was retaliating for the country’s ongoing crackdown on protesters and critics, as well as the forced landing of a Ryanair flight in Minsk in May.

The new targeted economic sanctions include prohibition of trade in petroleum products and such exports as potassium chloride. The EU also restricted the country’s access to European capital markets, according to the European Council’s June 24 news release. 

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Similar sanctions imposed by the United States took effect on June 3, after the Department of the Treasury’s Office of Foreign Assets Control reactivated on April 19 longstanding sanctions against nine Belarus companies and their subsidiaries. OFAC provided a 45-day wind-down period for activities with those entities that expired on June 3.

The companies impacted by the U.S. sanctions include Belarusian Oil Trade House, Belneftekhim and Naftan. State-owned Naftan operates a refinery in Novopolotsk, with capacity to produce 198,000 tons per year of API Group I base oils and 6,000 t/y of Group III base oil. Because of the EU sanctions, the refinery cannot ship its finished products to European consumers.

LLK-Naftan, a 50-50 joint venture between the refinery and Russian oil major Lukoil that produces lubricant additives, failed to respond to a Lube Report request for comment.

Denis Varaksin, a base oil trader of DYM Resources, a Berlin-based petrochemical product trading company, said sales of Belarusian base oils into the EU have already ceased.

“The country’s base oil exports have significantly slumped in May, while in June they virtually stopped,” Varaksin told Lube Report last week.

Even before the sanctions took effect, in May and in early June, Western banks refused to make payment transactions with the country. “One of the reasons is that Naftan was already under sanctions,” he said of the U.S. penalties.

The only possible outlets for the Belarusian base oils are the domestic market, affected by a financial crisis, or Russia and other former Soviet states, like Kazakhstan or Azerbaijan, that do not abide by the Western sanctions, Varaksin said.

The administration of President Alexander Lukashenko has arrested tens of thousands of protesters and critics during widespread protests that have rocked the country since an August 2020 presidential election. Lukashenko won the election, which many have said was rigged. In May his government forced a Ryanair flight passing over the country to land so that it could arrest journalist Roman Protasevich, who has criticized the government.

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