India Seeks to Buy 20% Belaruskali Stake

September 17, 2013 09:57 AM

As the dust settles in the Former Soviet Union (FSU) from the breakup of potash cartel BPC, India's rupee continues to struggle. Currency devaluation has delayed phosphate and potash tenders to India which is currently relying on carryover stores of potash to fill domestic need.

As Belaruskali attempts to rebuild its business, India is now looking to acquire potash via a 20% stake in Belaruskali. President Aleksandr Lukashenko has reported talking with possible stakeholders in India, China, Europe and the Middle East, but India would benefit the most of the other three.

Lukashenko will look to recapture the national potash export revenue that helped prop up the Lukashenko regime. When shopping among Chinese, Middle Eastern and European potential buyers however, the currency slide in India may raise a red flag for Belaruskali. The point for Belaruskali is to reestablish its potash revenue stream while India's goal is to acquire potash at a price the government can afford.

It would seem the two have opposing goals. India would likely have much better luck with Uralkali who boasts the widest production margins of any potash producer, and a convenient rail service built in. This allows Uralkali to pull raw potash from the ground at roughly $60/tonne, and cheaply move that product to Northern China and ports in Ukraine, Latvia and Lithuania.

Belarus does not enjoy the same connectedness to its customers, nor is it able to produce potash at the same low margin as Uralkali. Given that, India's buy-in may be a tough sell for Belaruskali. However, relations between Lukashenko and the European Union have never been good, and a tender to China would require Belaruskali to either ship overland through Putin's Russia, or float product from Qatar where new partner Muntajat has access to the Persian Gulf. Add to the difficulty a host of world and E.U. sanctions on commodity movements coming out of Belarus that make it tough for Belorussian product to move at all, and Lukashenko will have a hard time making the kind of potash cash that accounted for 12% of the national revenue.

India desperately needs a potash source to help them over the hump. Reliance on carryover seed has spiraled yields lower year-on-year for Indian growers. Reliance on fertilizer carryover will only last so long and India will have to do something. The suicide rate for farmers in India has been record-setting since 1995 resulting from poor farm economics, the rise of unemployed urban first time farmers, and a crooked lending system that leaves wives of suicide victims with diminishing prospects, and no way to feed the children left behind.

If India is looking for cheap easy potash, Belaruskali is not the dance partner they need. While the two countries could forge a profitable alliance in a perfect world, Lukashenko's disdain in the European Union and India's failing economics would require an old school Soviet state to have a change of heart and India to wage a miraculous economic recovery. Short of both of these, India will have a hard time convincing Lukashenko they can keep his warchest filled the way Uralkali did.



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