Risks and Restrictions in the Freight Market Resulting from the Political Crisis in Belarus

The Republic of Belarus will suffer negative economic consequences arising from the political crisis. This will affect both the republic and most probably the freight market between the European Union and the Russian Federation. At least, we should expect redistribution of transit cargo flows if Minsk carries out its threats in response to the restrictions introduced by Poland and the Baltic states.

Aleksandr Lukashenko, the President of the Republic of Belarus, has made two statements – about the redistribution of Belarusian cargo traffic from Lithuanian ports to Russian ports and about closing borders with Poland (in Brest and Hrodna areas) thus shutting off cargo transit from Western Europe.

Andrey Abragimovich, Director of Transport Business at TELS Group of Companies, shares his ideas on the possible consequences and how they might affect the participants of the freight market if these plans are impended.

Andrey, what should carriers and cargo owners prepare for considering the recent statements made by the President of the Republic of Belarus?

The redistribution of Belarusian cargo transit from Lithuanian ports to Kaliningrad and St. Petersburg is very likely. At the same, the Baltic states may also shut off the cargo transit from Kaliningrad via their territories. In this case, we will have only St. Petersburg.

Even if such decisions are not economically advantageous for Belarus, the Belarusian leaders are being more and more motivated politically, which is, of course, beneficial for the Russian Federation.

Why is it advantageous for Russia?

The benefits are evident:

  1. growth of cargo transshipment in Russian ports;
  2. growth of transit capacity via the Russian territories (a great gift for the Leningrad and Pskov regions);
  3. improved competitiveness of certain Russian goods due to increased costs of Belarusian exports (Uralkali will be most happy).

Belarusian leaders have been discussing the possible shift from the Baltic ports to Russia for a long time already, but words have not been brought to life, as it was not economically advantageous. Now that serious pre-conditions to move from words to action have been created, Russia will not miss the chance, the opportunity to influence Belarus in the current conditions.

It is not yet clear how this will affect private business - whether they will be restricted to use the EU ports or these restrictions will only apply to state-owned enterprises.

What about the closed borders with Poland? It seems like a very tough action creating problems for all market participants.

We hope that all the threats expressed by the Belarusian president will not be carried out as neither Belarus nor Russia will benefit much from the consequences. This will be very beneficial for Lithuania, Latvia and Ukraine as their transit capacity will increase. Belarus will lose transit profits, Russian and Belarusian carriers will face additional losses, while the imported goods, raw materials and spare parts will become more expensive.

But let's imagine the following situation when the border between Belarus and Poland is closed. How will this affect the participants of the logistics market?

The cargo will go via Ukraine and Lithuania bypassing Belarus. This will

  • increase delivery time and costs as the routes will be longer;
  • create shortage of transport resulting from the lack of Ukrainian and Lithuanian transit permits. And although Lithuanian and Ukrainian permits are not limited for Russian carriers, they might end quickly due to a sharp increase in cargo traffic.

In general, it means that the transit of European goods will not be shut off but the deliveries will be longer and more expensive. Who will suffer most? The Russians and Belarusians. That is why I think Russia will persuade the Belarusian leaders from taking such measures. However, it is very difficult to claim anything, as we may not understand the entire motivation of our political and economic leaders.

Besides all this, are there any other negative risks arising from the Belarusian political crisis?

Due to a sharp deterioration in interstate relations with the Republic of Belarus, the European countries (primarily Poland) may significantly reduce the permit quotas for international road transport for Belarusian carriers. They have been decreasing yearly with little chance to negotiate additional permits. Now the quotas may be reduced even more without the possibility to negotiate additional permits. This will greatly decrease the possibilities of Belarusian carriers in the transportation market to / from Europe. For cargo owners, this means an increase in logistics costs as the transportation capacity in the required destination will reduce.