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RSS By: Davis Michaelsen, Pro Farmer

Inputs Monitor Editor Davis Michaelsen adds his perspective into the happenings of the inputs markets.

The Syrian Solution & Putin's Potash Problem

Sep 13, 2013

When President Obama addressed the nation earlier this week, it was to update the public on his intentions in regards to the use of chemical weapons in Syria. Obama called the actions in Syria a violation of international law and a danger to the security of America. Estimates put the death toll over the last two years around 100,000 in Syria and even more have fled to neighboring countries in a region riddled with despotism and bitter religious conflict.franklin and eleanor fdr bio part 1 l

America has been positioned in the middle of conflicts like this before -- most recently in Iraq and Afganistan. Neither of those have gone according to plan. As troops withdrew from Iraq and benevolently put power in the hands of locally installed authorities, sinister elements who had been driven underground by military action reemerged, ready to pick up where they left off.

Obama quoted Franklin Roosevelt who said, "Our national determination to keep free of foreign wars and foreign entanglements cannot prevent us from feeling deep concern when ideals and principles that we have cherished are challenged."

Putin's Pen --

In response to Obama's speech, Russian President Vladimir Putin penned an op-ed piece to the New York Times that easily made as much sense as President Obama's glorified call for inaction. My generation was brought up to fear the Russians -- the Great Bear. Relations between the Soviet Union and the United States eroded quickly after the cooperative efforts to oust Hitler and the big three at yalta lhis Nazi regime in WW2, and the sociopolitical paths of the two superpowers diverged.

I remember President Reagan's famous plea to Mikhail Gorbachev, "Mr. Gorabchev, tear down this wall." Since then, the nations of the former Soviet Union have struggled to carve a national identity amid civil wars, nuclear disasters and political upheaval. However, in reading Putin's words, one might think he's been boating with Jimmy Carter or trading war stories and sipping brandy with Hanoi Jane or releasing doves with Maya Angelou.

But Putin has a diplomatic crisis of his own going on with Belarus. Noone has been gassed, but the CEO of Uralkali has been taken prisoner and faces charges at the hands of Europe's last dictator, Belorussian President Alexander Lukashenko. Prominent Uralkali investors have also been tagged for arrest, and if they are smart they are hiding out, doing a little boating of their own.

Lukashenko has one over on Putin at present. Belorussian officials have said they will pursue $100 million in assets from Uralkali to compensate Belarus for perceived misdealings by Uralkali while the two were part of joint venture Belarus Potash Company.

New Russo-diplomacy --

As Vladimir Putin asks the United States to follow a diplomatic course on Syria, one wonders if for his next trick, he will pull a potash executive out of a Belorussian prison -- watch me pull this bear out of my sable hat. The trouble is, the Lukashenko regime relies on potash revenues for a good portion of its national income and is anxious to save face. When Uralkali split from thewe will break you! Belorussian Potash Company, trade routes via rail to China and points west fell under Russia's control and into Uralkali's back pocket.

Not only is Lukashenko's revenue threatened, but also his reputation as one not to mess with. Faced with refusals from Minsk to release CEO Baumgertner, Putin has curtailed crude shipments to Belarus and is eyeing a cut to imports form Belarus of dairy and pork. Add dairy and pork to reduced sendouts of potash, and Lukashenko has a real revenue problem. The three combined tally roughly half of Belarus' export revenue.

Putin's response to Obama's speech revealed a Russian President who would condemn the use of force outside the allowances of international law and lean rather on diplomatic solutions. In his New York Times Piece, regarding Syria, Putin wrote, "We need to use the United Nations Security Council and believe that preserving law and order in today's complex and turbulent world is one of the few ways to keep international relations from sliding into chaos."

A long way from Nikita Khrushchev banging his shoe in the table, promising to break us. Stopping the United States from intervening in what Putin called, "...an armed conflict between government and opposition in a multireligious country," was as simple as reminding President Obama of his own treatise with the United Nations not to strike unless in self defense or by the decision of the U.N. Security Council -- many suspect Obama didn't really want to enter the Syrian conflict anyway, and Putin's words conveniently put the last nail in the coffin.

Pride, Potash and Grace --

pointingputinThe course of the potash war has so far been a draw. Both sides claim the other has wronged them, but only Belarus has taken prisoners. With Vladimir Putin penning a new outlook on Russian diplomacy, he may seem a little less scary to Lukashenko, but as exports from Belarus to number one customer Russia are increasingly turned away, Lukashenko may have to decide between tyrannical pride and staying within Putin's good graces to salvage the economy of Belarus.

If stopping U.S. strikes against Syria seemed easy for Putin, freeing his potash CEO will require surgical precision, and utmost diplomatic skill. As Russian President Putin criticizes Obama's remarks about American exceptionalism, Putin himself emerges as exceptional among war hawks. He may have stopped escalation in Syria for now, but the real trick will be to win the potash war, and return Baumgertner to Russia without breaking Belarus.

 

Watch President Obama's speech on youtube...

Read President Putin's op-ed piece from the New York Times...


FDR Photo credit: Tony Fischer Photography / Foter / CC BY

Yalta Photo credit: The National Archives UK / Foter

Putin Photo credit: World Economic Forum / Foter / CC BY-NC-SA

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