After Uralkali's split with the Belorussian Potash Company (BPC), the CEO of Uralkali, Vladislav Baumgertner received an invitation to visit the Prime Minister of Belarus. Actually, the story holds that the true target of the invitation was controversial Uralkali investor, Sulieman Kerimov. But Buamgertner agreed to go in Kerimov's place.
Baumgertner was detained at the airport and taken to a Belorussian prison for questioning. Moscow was infuriated by the play and has demanded the return of Baumgertner. From there, Baumgertner was moved to house arrest in a Minsk apartment. Belarus has since added embezzlement to charges of abuse of power and Buamgertner now faces up to 12 years in prison in Belarus.
An extradition request is now in play and Russia has opened a criminal investigation of its own into CEO Baumgertner's dealings. Meanwhile, Kerimov, who holds the largest signal stake in Uralkali at 21.75 percent, remains at large.
Belarus has raked Baumgertner over the coals, reportedly interrogating him in what reports called a 'KGB-style prison'. The decision to move Baumgertner to house arrest may signal Belarus either came to the end of Baumgertner's answers or that they are willing to play ball on a possible return of the Russian citizen.
There is a lot of national pride at stake here, and the last thing Belarus needs is to make an enemy of Russia. The suspicion remains that Baumgertner was never a prime target to begin with, and that Kerimov is the man Belarus was after. Baumgertner's extradition would allow Belarus to return Buamgertner to the hands of Russian authorities, saving face for both Belorussian president Aleksandr Lukashenko, and for Vladimir Putin.
Sources in Moscow are certain the extradition request is merely an attempt on Putin's part to get his man back from behind Belorussian lines. The move is not expected to herald the restart of the potash joint venture at the center of the controversy, nor is it expected to yield the capture of Kerimov. This is largely thought to be a face-saving move on both sides.
Meanwhile, retail potash prices have leveled off in line with other nutrient that has fallen in response to pressure on deferred corn contracts. Uralkali has found new export avenues while Belarus struggles with E.U. sanctions based on accusations of human rights violations. The end of tension here signals the end of the bleeding for potash prices. I remain skeptical of this whole deal as anyone could have guestimated potash declines to current levels in relation to declines in December corn futures.
If Baumgertner is returned to Russia, it would remove a stigma between these Former Soviet Union members. But with Kerimov still on the run, Baumgertner's return to Russian authorities may be the closest thing we get to a resolution from the situation. So if Kerimov remains free, and Russia gets Baumgertner back, all the fuss will have been for nothing. Potash prices would have fallen to current levels had BPC still been a functioning joint venture, as dictated by corn.
It feels like there is an awful lot we do not know about this situation, and that nagging suspicion leaves the door wide open for speculation. Did Uralkali use falling corn prices as a front to an already planned exit from the BPC union and an excuse to produce at-or-near capacity in a down market? The lesson here is that, in a land all too familiar with tyrannical rule, corn remains the bear with the strongest influence.
Closing Market Commentary -- October 16, 2013
Livestock Analysis (VIP) -- October 16, 2013