MUMBAI (Reuters) – India plans to buy 1 million tonnes of potash from Belarus in the first such bilateral deal between the two countries after sanctions crippled Minsk’s ability to sell the crop nutrient, two Indian officials involved in the discussions told Reuters.
India has suggested that the state-run Belarus Potash Company (BPC) could open a rupee account with a state-run Indian bank for potash sales as sanctions imposed by the United States and European Union cut off the Minsk from dollar and euro trade, the officials said.
BPC is the export arm of Belaruskali, the world’s second-largest potash producer. The U.S. blacklisted Belaruskali and added BPC to its sanctions list as the West escalated punitive action against Belarus President Alexander Lukashenko.
BPC did not respond to a request for comment.
Potash exports are a key foreign currency earner for Minsk.
“We are not able to make payments in dollars or euros because of the sanctions. We need to import potash and we are finding options to make payments,” said a senior Indian official involved in the negotiations with Belarus.
India could buy 1 million tonnes of potash in 2022 from BPC by paying with rupees, said another official, who also declined to be named because of the sensitivity of the matter. Both said the deal could be sealed in February.
New Delhi has made rupee payments to Iran for crude oil after the U.S. imposed sanctions on Tehran, which used the rupees to buy rice and other goods from India.
The Indian government did not immediately respond to a request for comment.
India secures nearly all its potash through imports, and historically about one-fifth of the 4 million to 5 million tonnes it imports annually comes from Belarus.
Minsk could offer a discount over benchmark prices as India has proposed buying at least 1 million tonnes of potash, the first official said.
India’s exports to Belarus were $62.3 million in the 2020/21 financial year, while its imports stood at $107.4 million, government data showed.
India’s push to ink a deal comes, even as Belarus was this week forced to divert potash shipments from Lithuania’s Klaipeda port to Russian ports after Vilnius decided to halt the use of its railway for exports of the commodity from the sanctions-hit country.
It is unclear how that could affect or delay potential potash exports to India this year.
Potash imports from Belarus would help both the countries, industry officials said.
Belarus has been struggling to sell potash, while India has been trying hard to contain a price rise after potash prices jumped to their highest level in more than a decade, a Mumbai-based company official said, speaking on condition of anonymity because of the sensitivity of the matter.
India subsidizes purchases of potash imports to make it more affordable for its farmers. The Indian government in its annual budget on Tuesday allocated about 1.05 trillion rupees ($14 billion) to its fertilizer-subsidy program, which is largely used for potash and phosphate imports.
About 150,000 tonnes of potash shipments from Belarus have been stuck because of payment issues, two company officials said.
“These are contracts which were signed at lower prices last year. Shipments are stuck since we couldn’t make payments,” said another company official.
BPC agreed to supply potash to India at $247 a tonne in early 2021, but it later renegotiated the price to $280. The commodity is trading at about $650 a tonne in the spot market, although annual contract purchases made by India, China, Brazil and other big buyers are typically at lower prices.
India’s potash imports fell sharply in 2021 because of higher prices and stocks need to be replenished quickly, the Mumbai-based company official said.
India’s potash imports in the first eight months of 2021/22 financial year fell 47% from a year ago to 2 million tonnes, government data showed.
Canada, Belarus, Russia and Israel are key suppliers of potash to India.
BPC competes with Canada’s Nutrien (NYSE:NTR) Ltd, Russia’s Uralkali, Israel’s ICL and Mosaic from the United States.