Uralkali CEO’s ‘bizarre’ arrest in Belarus will heighten potash tensions, analysts say – by Peter Koven (August 27, 2013)

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TORONTO – The potash industry has become engulfed in political intrigue, as a Russian executive at the centre of a cartel-busting plan has been detained by the autocratic government he used to do business with.

OAO Uralkali confirmed on Monday that CEO Vladislav Baumgertner was detained by authorities in Belarus. He is accused of abuse of power, according to reports. The timing is not coincidental.

Just three weeks ago, Uralkali threw the potash market into chaos by dismantling Belarusian Potash Co. (BPC), a cartel-like marketing company controlled by Uralkali and Belaruskali, its state-owned Belarusian counterpart. Uralkali vowed to end its practice of withholding production to prop up prices, prompting speculation that potash prices will fall dramatically. They are already under pressure.

Belarus is very unhappy with this development, but industry experts suggested that this arrest will only push the two sides further apart. It is the most dramatic political intervention in the potash business since Canada rejected the takeover bid for Potash Corp. of Saskatchewan Inc. in 2010. “It is certainly a bizarre development. You’ve got to think Russia and [President] Vladimir Putin will respond,” said Joel Jackson, an analyst at BMO Capital Markets.

The break-up of BPC could have serious consequences for Belarus, which is often referred to as Europe’s last dictatorship. Potash made up more than 7% of its exports last year, and industry experts have speculated that an anticipated drop in prices could cost the country upwards of US$1-billion a year.

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