|

Belarus arrest of potash tycoon angers top ally Russia

by Aliaksandr Kudrytski and Stepan Kravchenko

Bloomberg

As Belarus television showed the Russian head of OAO Uralkali, the world’s biggest potash producer, being led around the courtyard of an undisclosed prison, Anatoly Lebedko knew exactly where it was: Amerikanka.

Amerikanka, or American Lady, is the nickname of the Minsk prison operated by the nation’s successor to the KGB where President Aleksandr Lukashenko jailed Lebedko and other opposition leaders after his re-election in 2010. German Chancellor Angela Merkel last year said Belarus suffers “dictatorship and repression” under Lukashenko, who has ruled this former Soviet republic since 1994.

The 18-cell facility in the KGB’s headquarters has become the “hostage center of choice for politicians and executives who run afoul of Lukashenko,” Lebedko, 52, who runs the United Civil Party, said Tuesday. “Supper consists of either salted herring or milk soup,” said Lebedko, who spent 108 days in Amerikanka for leading a rally.

Lukashenko’s government arrested Uralkali chief Vladislav Baumgertner at the Minsk airport on Monday and charged him with abuse of office after inviting him for talks. Baumgertner, who is also chairman of Belarus Potash Co., Uralkali’s trading partnership with state-run Belaruskali, said July 30 that he was dissolving the venture because Lukashenko “violated” their agreement by authorizing Belaruskali to export some of its soil nutrient independent of Belarus Potash.

The venture had accounted for about 20 percent of revenue for the government of a country where the gross domestic product per capita is about half that of Russia, according to World Bank data. Interest rates and inflation are among the highest in Europe, at 30 percent and 18 percent, respectively.

Russia, which led a $3 billion bailout loan to Belarus in 2011, pressured Lukashenko, 58, to release Baumgertner, who faces 10 years in prison, saying his arrest and accompanying propaganda could harm relations between the countries.

“The fact of Baumgertner’s detention and the media campaign around it doesn’t correspond to the nature of our relations as allies,” the Foreign Ministry in Moscow said in an emailed statement Tuesday after summoning Belarusian Ambassador Igor Petrishenko.

Belarusian television showed a handcuffed Baumgertner, head bowed, being led to a cell by two uniformed guards. He will probably be held for at least two months as the investigation continues, the Interfax new service reported Tuesday, citing Belarus’ Investigative Committee.

Baumgertner is an honest, law-abiding citizen and his arrest is “an outrageous act,” Uralkali Chairman Alexander Voloshin said in a statement Tuesday, calling for his immediate release. Uralkali’s press service declined to identify Baumgertner’s lawyer, as did the Russian Embassy in Minsk.

Belarus officials also issued warrants for the arrests of four other Uralkali executives, accusing them along with Baumgertner of a scheme to cut Belaruskali out of decision-making in their venture and causing $100 million of damages. Uralkali’s London-listed shares fell 3.5 percent Tuesday to $23.80, valuing the company at about $14.1 billion and extending the decline since July 29 to 16 percent.

“It seems Baumgertner is being held hostage, but the real reason why isn’t clear,” said Alexei Pikulik, head of the Belarusian Institute for Strategic Studies, an independent research group based in Vilnius. Lukashenko’s motivation is probably financial, though it could be pure bravado — to show Russian President Vladimir Putin that he’s someone to be reckoned with, Pikulik said by phone from Minsk.

“Belarus may seek to use the conflict as an excuse for its looming economic problems by blaming them on Uralkali and the Kremlin,” Pikulik said.

Putin, 60, and Lukashenko have sparred over prices for exported Russian fuel, leading to a brief shut-off in oil supplies in January 2007. Lukashenko sold Belarus’ gas pipelines to OAO Gazprom after disputes over energy prices, leaving Belaruskali, which he’s said is worth $36 billion, as the nation’s most valuable asset. Belarus earned $2.7 billion exporting potash last year, or 5.9 percent of total exports.

Lukashenko made fun of Putin last month, responding to a Kremlin announcement that Putin had caught a 21-kg pike by claiming to have landed a 57-kg catfish himself.

Even so, Russia has provided Belarus, a transit route for its oil and gas shipments to Europe, with discounted fuel for years, seeing the nation of 9.5 million as a loyal ally. Belarus has also embraced a Russian-led customs union with Kazakhstan. The closer integration has boosted trade, while volumes between Russia and Ukraine, which opted against joining, dropped in the first quarter, Putin said July 27.

Still, Belarus swung to a trade deficit of $1.68 billion in the first half after posting a $1.92 billion surplus in the same period last year. Exports of petroleum products, its biggest foreign-currency earner, fell 22 percent, while exports of trucks and tractors tumbled 41 percent and 28 percent, respectively, according to the government’s statistics office.

“The only viable path to recovery, economic reform and privatization, has been resolutely rejected by Lukashenko as it would threaten his rule,” said Joerg Forbrig, a senior program officer at The German Marshall Fund in Berlin.

“The regime in Minsk has taken to blaming various internal and external enemies. Uralkali and Russia have now been added to this list, and Belarusian propaganda will certainly show them to be forces aiming to destroy the famed, if dead, ‘Belarusian model,’ ” Forbrig said.