MINSK/MOSCOW - Belarus detained the head of Russia's Uralkali, the world's top potash producer, and threatened to seize its assets in the country on Monday, drawing a fierce rebuke from Moscow in an escalating dispute over the collapse of a cartel.
Vladislav Baumgertner was detained on suspicion of abusing
his position and official powers over Uralkali’s decision to
quit the Belarusian Potash Co (BPC) joint trading venture,
according to investigators in Belarus.
It is the first time a top manager of a Russian firm has
been detained in Belarus, run since 1994 by President Alexander
Lukashenko, who styles himself as “Europe’s last dictator”.
“What happened today is way out of line,” Russian First
Deputy Prime Minister Igor Shuvalov told reporters in Moscow,
describing the situation as “odd, inappropriate and not fitting
to a partnership”.
Belarussian state television ONT showed footage of the
grey-haired Baumgartner, who only hours before met with the
country’s prime minister, in handcuffs and surrounded by police.
Belarussian investigators said later they intended to seize
Uralkali’s assets and property, claiming the company incurred
$100 million of damages in Belarus, according to a report by the
RIA agency.
“Evaluating the documents received by investigators, a
decision will be reached to seize the property and assets of
Uralkali,” a Belarussian Investigative Committee spokesman told
Russian news agency RIA.
Uralkali said it refuted any allegations of wrongdoing by
Baumgertner or any other of its managers. It declined to comment
on the seizure of assets or property in Belarus.
The company’s surprise decision to quit the joint venture
with Belarussian partner Belaruskali at the end of July caused
outrage in Minsk, which had long resisted Russian pressure to
sell its potash interests.
Belarus is Moscow’s staunchest ally among former Soviet
republics but its economy is stagnating after a financial crisis
in 2011.
The dissolution of the cartel, which could cause the global
potash price to plummet 25 percent in the second half of 2013,
is a major headache for Belarus where it is a major
foreign-currency earner. BPC had 31 percent of the world’s
potash market in 2012 and North American consortium Cantopex had
35 percent, according to Bank of America Merrill Lynch.
Analysts estimate the global potash market to be worth $23
billion based on 2012 traded volumes and average prices.
“The unexpected break was meant to strike a blow at
Belarussian producers that were seen as competitors … They
planned the collapse of the global potash market,” Belarussian
Investigative Committee representative Pavel Traulko said.
The news of the detention pushed Uralkali shares down 3.4
percent to be the biggest loser in Moscow’s MICEX blue chip
stock index, in one of its largest daily losses since it
stunned the global potash industry by walking out of BPC.
DYSFUNCTIONAL
Uralkali representative Alexander Babinski told Reuters that
Baumgertner, who is also a supervisory board member at the BPC,
had been in Minsk at the invitation of Prime Minister Mikhail
Myasnikovich. “He met with him, and after the meeting he was
detained at the airport,” he said.
If charged and found guilty, Baumgertner could face up to 10
years in prison.
Belarus is also investigating Uralkali’s top shareholder,
Russian tycoon Suleiman Kerimov, on suspicion of involvement in
illegal activity, the Belarussian Investigative Committee said
on Monday.
A representative for Kerimov, who has launched a fire sale
of players from his Russian Premier League soccer club Anzhi
Makhachkala to cut costs, declined to comment.
The intensification in tensions between Minsk and Moscow
comes as the centrally planned Belarussian economy faces a
widening of its external deficit that, economists say, risks a
repeat of a currency collapse suffered in 2011.
Potash accounts for about 10 percent of Belarus’s export
income and 12 percent of government revenue. BPC’s collapse will
raise pressure on Minsk as it eyes the release of a further
tranche from a $3 billion loan facility from a Moscow-led
bailout fund.
“It doesn’t look like a mortal blow but it complicates an
already difficult situation,” said Jacob Nell, an economist at
Morgan Stanley in Moscow who covers the region.
The clash is symptomatic of dysfunctional trading relations
that blight the former Soviet space – even though Russia,
Belarus and Kazakhstan have formed a joint customs union and are
the anchor economies in a broader regional economic partnership.
