Lithuania, one of the staunchest opponents of Belarus's strongman Alexander Lukashenko, has been humiliated by the revelation that its own state-owned railways has been violating US sanctions against his regime by continuing to carry the forbidden exports of one of its main cash cows, potash producer Belaruskali.

On December 10 Lithuanian Foreign Minister Gabrielius Landsbergis sent his letter of resignation to Prime Minister Ingrida Simonyte over the scandal. In the letter, Landsbergis asks Simonyte to accept his resignation because of the situation "regarding the continued shipment of Belarusian cargo through Lithuania following the sanctions imposed by the US". The minister says he "understands what reputational challenges this poses…to the government of the Republic of Lithuania".

Transport Minister Marius Skuodis said later on the same day that he was ready to resign, too.

President Gitanas Nauseda has said that the ministers should resign without waiting for the prime minister's opinion.

Lithuania, usually the most hawkish Baltic state, has been urging the EU and the United States to harshly sanction Lukashenko's authoritarian regime after he blatantly fixed last year's general election. In revenge, Lukashenko has been encouraging Middle Eastern migrants to come to Belarus and to attempt to cross the border into Lithuania and claim asylum. This has prompted further sanctions.

From December 6, when new US sanctions took effect, these included a ban on one of Belarus' biggest exporters, potash producer Belaruskali.Yet state-owned Lietuvos Gelezinkeliai (Lithuanian Railways) has continued to honour a contract it signed with Belaruskali to transport its potash exports to the Lithuanian port of Klaipeda. 

Lietuvos Gelezinkeliai said the shipments would continue for another several months, as Belaruskali had paid in advance before the sanctions came into effect. It appears Lithuanian authorities assumed that Belaruskali's transit across the country would cease on December 6, since commercial banks stopped processing the company's transactions.

“This is very disgraceful, akin to a spit in face of our key ally, the United States. In fact, Lithuania was the staunchest and most vociferous demander of sanctions against Belarus, but with them in its hand, it did nothing to implement them,” Rimvydas Valatka, a celebrity Lithuanian analyst and TV host, told bne IntelliNews.

“In a small country like Lithuania, everybody knows everything. The explanations of the two [ministers] are ridiculously pathetic and ungrounded. Sadly, Lithuania showed itself to the United States as an unreliable partner,” the analyst said.

Transport minister Marius Skuodis said he had asked the government commission vetting strategic companies' deals to evaluate the existing contract between Lithuanian Railways and Belaruskali and see if the contract meets Lithuania's national security interests.

Two years ago the commission, and later the Lithuanian the government, considered a request by Biriu Kroviniu Terminalas (Bulk Cargo Terminal), a Klaipeda-based company owned by businessman Igor Udovickij and Belaruskali, to allow it to expand in the port of Klaipeda. BKT, based in Klaipeda, is in charge of Belarusian fertiliser exports to more than 150 destinations all over the world,

The final ruling was confidential but BKT itself announced in October 2019 that the commission ruled the company did not meet national security interests, and the government later ordered the commission to set preconditions for the company's investments which, BKT claimed, were supposed to stand at around €70 million.

The scandal is underlining how costly the sanctions on Belarus will be for Lithuania.

If Lietuvos Gelezinkeliai cancels the contract with Belaruskali, the state-owned company would need around €49 million in subsidies annually to compensate for the loss of the fertiliser shipments, according to its CEO Mantas Bartuska. He said that it had already been preliminarily estimated that the railway group would lose around €60 million in revenue a year.

But the damage goes much deeper that that. The Port of Klaipeda would see its annual cargo turnover fall by a third. According to Algis Latakas, CEO of the Port of Klaipeda, the economic activities of the Klaipeda seaport make up 6% of the national GDP and as many as 60,000 jobs depend on the port. BKT made up 22% of the port’s total annual cargo in 2020, and about 20% of LTG Cargo’s total annual turnover.

Belarus has been trying to move freight traffic away from the Lithuanian port for some time. Belarus oil exporter Belorusskaya Neftyanaya Kompaniya (Belarusian Oil Company, BNK) decided in January not to extend its long-term contract with Lithuania's LTG Cargo, the cargo branch of Lietuvos Gelezinkeliai, which transports its oil products to the Port of Klaipeda. LTG Cargo transported some 2 million tons of BNK cargoes of oil and oil products last year.

Earlier, in September 2020, Belarus and Russia announced that they were working on shipping Belarusian oil products through Russian Baltic ports, even though this option is $10-15/tonne more expensive than using ports in the Baltic states, according to market participants.

The new sanctions will merely accelerate this shift. Lukashenko has long been threatening to divert the export of Belarusian fertilisers from Klapeida to Russia’s Baltics ports, Ust Luga and Primorsk, even though they are some 600 kilometres further away.