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27 Aug 2013

Potash wars

Uralkali CEO under arrest

Vladislav Baumgartner, CEO of Uralkali in prison
A top manager of Uralkali has been arrested in Minsk under allegation of insider trading and damaging national interests of the Republic of Belarus. He may face up to 10 years in prison but he is just a little figure in chess game between Russia and Belarus. The stakes are high – it is control of world potash market.

Vladislav Baumgartner, CEO of Uralkali, the biggest producer of potash fertilisers in the world, has been arrested in Minsk, Belarus.  He was detained in Minks airport after his meeting with a Belarusian prime minister Mikhail Myasnikovich. The details of their conversation are not yet known but it is easy to suggest that they talked about fate of Belarusian Potash Company, a trader for both Belkali and Uralkali and situation on potash market. Probably, Baumgartner who lately took responsibility for huge drop of Urakali share prices and putting world potash market on verge of collapse was not able to explain his position and position of Suleyman Kerimov, a major shareholder of Uralkali,  to his Belarusian counterparts. And paid the price for it.

Vladislav Baumgartner, CEO of Uralkali
Vladislav Baumgartner, CEO of Uralkali

For those who are unfamiliar with situation there is a brief story. “Belkali” which is the third producer of potash fertilisers in the world in 2005 combined efforts with world N 3 Uralkali to dictate price on the market. They established a joint trader BKK (“Belarusian Kali Company”) based in Minsk. Initially, the business went on well but after the previous owner of Uralkali, Dmitry Rybolovlev, sold his assets to Suleyman Kerimov situation begun to change. The latter bought another Russian producer of potash fertilisers, “Silvinit” and Uralkali became world N1. Then Kerimov announced his desire to move the trader to Swiss but the Belarusians disagreed. Meanwhile, crisis caused significant price drop on potash fertilisers and amount of money to share has decreased.  Word by word and now the former close business partners are fighting enemies.

BKK office in Minsk
BKK office in Minsk

But arrest of the top CEO for many is a step too far. Baumgartner was invited in Minsk by Mikhail Myasnikovich, a Belarusian prime minister. To arrest your guest whoever he is an inappropriate behaviour to say the least while being polite as possible. “Surprise and shock” were the very first words which Igor Shuvalov, the Russian deputy prime minister, told the journalists commenting detention of Vladislav Baumgartner. But it seems that Belarusian authorities just do not care.
It is easy to understand them. Belarusian economy is in crisis and trade balance is negative. The most important source of foreign currency is Belkali which brings around 20-25 percent of foreign cash to Belarus. Any attempts to harm this “milking cow” will face unpredictable reaction from Lukashenka. The Russians had to know it.

Vladislav Baumgartner, CEO of Uralkali under arrest
Vladislav Baumgartner, CEO of Uralkali under arrest

So far, most analytics think that the event is a huge blow to Russian Prime Minister Dmitry Medvedev who is supposedly in close relations with Suleyman Kerimov.  His reaction is still unknown though.

Meanwhile among ordinary Russians joy prevails. At least, among those who are actively commenting the news on Internet sites and forums. Any true leftist should join them. Baumgartner, 41, was an alumnus of Kingston Business School in the UK and got an MBA from there. The situation he is now in will definitely delight all the Western lefties who would suggest that it should be done for all bankers, top managers and other MBA holders.

It is always fascinating to watch Eastern European politics. A famous Churchill’s remark about “bulldogs fighting under carpet” is still true it looks like. The situation is very intriguing as no one can predict what will be the next move from Vladimir Putin or Alexander Lukashenka who, without doubts, are the real ones who are playing the game now.

Yuri Drazdow

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