‘Big Politics’ crashed in potash exports

April 22, 2016 18:35

On July 29th, Uralkali announced split from Belarusian Potash Company. The statement said that Russian exports of potassium chloride would be redirected via own trader - Uralkali Trading.

Potentially, Uralkali’s split from BPC was coordinated at the Russia’s top political level and will be used as an additional pressure lever on Belarus. Russia aims at convincing Belarus to implement integration and privatization agreements unconditionally.

Uralkali explained its decision by Belarus’ violating its cartel agreements. In particular, they referred to President’s Decree No 566 of December 22nd, 2012 on the abolition of the BPC exclusive rights to export Belarusian potash. Belarus seemed to have decided to use Brazilian market to test new alternative sales channels, which particularly annoyed Russian partners.

On July 25th, President Lukashenko appointed new BPC Head, Elena Kudryavets and said that the appointment was important for potash sales policy.We should not in any way lose the Russian company, because together we are the most powerful potash exporter if we cooperate with Russians. But we need to remember about our own interests, because Russian partner is a private company. State and private owners’ objectives do not always match”, the President said.

The conflict between BPC and Uralkali developed in 2012, when potash market started shrinking and prices dropped. Private company Uralkali insisted on business optimization, proposing to cut supplies to stabilize prices. Belarus, acting in "public interest" sought to prevent significant reduction in currency proceeds and was ready to increase exports volumes to compensate price cuts.

Negotiations between the two partners were carried out at the highest level: President Lukashenko at least twice discussed the issue with Uralkali’s owner Kerimov. A special bilateral commission was set up but apparently was a failure.

Potash exports are crucially important for Belarus and current situation may seriously harm Belarus’ international trade. Belaruskali and Uralkali not only lose the opportunity to coordinate price policy, but actually become competitors in Chinese, Indian and Brazilian markets. That is, Belarus’ currency proceeds will drop duet to the projected price drop in Q3 and Q4 2013 from USD 400 to USD 300 per ton and due to the likely reduction in sales volumes. Moreover, on July 30th, Uralkali announced a new marketing strategy - increased supply volume. They want to stimulate the world demand by reducing potassium chloride prices. For example, in 2013, Uralkali plans to increase sales up to 10.5 million tons, in 2014 - up to 13 million tons and in 2015 - up to 14 million tons.

In the meanwhile, for Uralkali, divorce with the BPC also had a negative impact (BPC is the largest global potash trader, accounting for 43% of the market). On July 30th, Uralkali’s stocks and GPR prices crashed on the Moscow and London stock exchanges (up to 24%).

Uralkali’s divorce from BPC could be coordinated at the Russia’s highest political level and might be used to pressure Belarus’ authorities in order to convince them to implement privatization and integration agreements unconditionally. Russia may succeed against the background of overall incidence of Belarusian exports, due public debt payments and the lack of resources or new loans, threatening to destabilize the domestic forex market.

Uralkali is unlikely to return to the BPC, even if Belarus promises to abandon alternative distribution channels using price dumping. However, the cooperation may be resumed within joint Swiss trader Soyuzkali on the condition that Russia takes part in Belaruskali privatization.

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The Belarusian authorities have launched a discussion on the moratorium or abolition of the death penalty under the pressure of Belarusian human rights activists and international community. Apparently, the authorities are interested in monitoring public sentiments and response to the possible abolition of the capital punishment. The introduction of a moratorium on the death penalty would depend on the dynamics in Belarusian-European relations, efforts of the civil society organisations and Western capitals.

In Grodno last week, the possibility of abolishing the death penalty in Belarus or introducing a moratorium was discussed.

The Belarusian authorities are likely to continue to support the death penalty in Belarus. During his rule, President Lukashenka pardoned only one person, and courts sentenced to death more than 400 people since the early 1990s. Over the past year, Belarusian courts sentenced to death several persons and one person was executed.

There are no recent independent polls about people’s attitude about the death penalty in Belarus. Apparently, this issue is not a priority for the population. In many ways, public opinion about the abolition of the death penalty would depend on the tone of the state-owned media reports.

That said, the Belarusian Orthodox Church and the Roman-Catholic Church stand for the abolition of the capital punishment, however their efforts in this regard only limit to public statements about their stance. Simultaneously, the authorities could have influenced public opinion about the death penalty through a focused media campaign in the state media. As they did, for example, with the nuclear power plant construction in Astravets. Initially unpopular project of the NPP construction was broadly promoted in the state media, and eventually, according to independent pollsters, was accepted by most population.