Vladislav Baumgertner, the CEO of Russia’s potash producer Uralkali, was arrested in Belarus this week. The local authorities accuse him of causing “substantial harm” to Belarus’s public interest. He could face ten years in prison. Russia called the arrest an “outrageous provocation”. A month ago, Uralkali pulled out of Belarusian Potash Co (BPC), a joint venture it had run with its Belarussian counterpart. BPC was effectively a cartel that bolstered potash prices by agreeing to keep a lid on production.
What the commentators said
“One would… need a heart of stone” not to laugh at Russia’s fury, said Ian King in The Times. It would be taken more seriously if it hadn’t turned a blind eye to the harassment endured by BP’s Bob Dudley a few years ago. Dudley was forced into hiding overseas. Besides, it’s not unusual in the post-Soviet region for businesses to take hostages as a negotiating tool, as Moscow political scientist Stanislav Belkovsky told FT.com.
In which case, what does Belarus want? A slice of Uralkali’s sales after ending the cartel deal, perhaps. Uralkali is one of the lowest-cost producers and would therefore do fine if it ramped up production, making up in sales volumes what it will lose in margin by quitting the cartel.
For Belarus, a highly-indebted economic basket case, potash revenue comprises 20% of the national budget, and the propect of lower prices after the BPC cartel is thus worrying. “Belarus may be pushing Uralkali to split markets between them after the break-up of the venture,” reckoned Renaissance Capital’s Boris Krasnojenov. Baumgertner’s arrest, concluded David Marples of the University of Alberta, “reflects the desperation of a struggling government in Minsk”.
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