Belarus arrests CEO of Russian potash producer Uralkali during visit

By bne IntelliNews August 27, 2013

bne -

Now it is getting nasty. In a move that is tantamount to kidnap, Uralkali CEO Vladislav Baumgertner was in Minsk on August 26 at the invitation of Belarusian Prime Minister Mikhail Myasnikovich to discuss the crisis in the potash sector, only to be arrested as he tried to leave the same day.

In July, Russia's Uralkali broke off an eight-year sales joint venture with the Belarus state-owned Belaruskali, called the Belarus Potash Company (BPC). The end of BPC, it is estimated, will cost Belarus just under $1bn in lost revenue this year and could plunge the the cash-strapped republic into economic crisis.

Uralkali has made an about-face on its strategy. Abandoning BPC's cartel arrangement that gave it considerable pricing clout, the Russian company says it is going to go for a high-volume, low-price model that will effectively commoditise the potash business. BPC controlled just over 40% of the global potash business and the partners have been trying to keep prices above $400 per tonne. But now the partnership has broken down, potash prices are expected to fall to $300 this year, says UralKali, and could fall further.

The Belarusians are furious. Baumgertner has been charged with "abuse of power," a spokesman for the Belarusian Investigative Committee said August 26, and faces up to 10 years in jail if convicted. "The information at the prosecution's disposal sheds light on the hostile plans the management of Uralkali had for Israeli, German and Canadian potash producers," the Belarus Investigative Committee told Belarussian media, Itar-Tass reported.

Kremlin powerbroker Alexander Voloshin, Uralkali's board chairman, and Russian billionaire Suleiman Kerimov, an Uralkali shareholder, were also invited to the meeting, but failed to show up.

Uralkali spokesperson Alexander Babinsky said the company is "outraged by the detention," Itar-Tass reported. The arrest looks like an extremely heavy-handed attempt to force the company to backtrack on its decision and could cause a major rupture with Russia's longtime ally.

The Kremlin is also furious at the arrest of one of Russia's most senior businessmen and is demanding Baumgertner's immediate release. It is one thing for a country to arrest its own businessman during power struggles, but the Russians have not taken kindly to Belarus arresting one of its own in this dispute. "We believe this is a rather strange situation, bearing in mind the nature of our relationship," Russian First Deputy Prime Minister Igor Shuvalov said.

He said Russian Prime Minister Dmitry Medvedev had "given all the necessary orders" regarding the situation and called on the Russian Foreign Ministry to use "all the possible tools" to settle the dispute.

The Russian ambassador to Minsk has already requested a meeting with Baumgertner, but a spokesman for Belarus' Foreign Ministry said it is up to the Belarusian Investigative Committee to decide if the meeting can happen, reports RIA Novosti.

Belarus has also put four other Uralkali executives on the international wanted list, who have been accused of abuse of power "for lucrative purposes" that resulted in "large-scale damage" to Belaruskali and BPC.

Uralkali's share price dropped 2% on the news, following a fall of 20% in July after it announced the end of the BPC joint venture with Belaruskali.

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