Uralkali Steps Out on Lukashenko Regime

July 30, 2013 04:43 AM

Uralkali has seceded from the Former Soviet Union (FSU) joint venture, Belarusian Potash Company (BPC) and has plans to strike out on its own. BPC was made up of Belaruskali, Uralkali and the Belarus Railroad and the three companies had provided 43% of the world's potash.

Experts believe Belaruskali may not be able to compete with Uralkali because Uralkali is the only potash producer in the world that can access China via rail. This may leave Belarus' Lukashenko regime in the lurch as their ability to access key markets by rail is now very limited. Meanwhile, Belaruskali is taking heat from human rights watchers.

Protests --

Belarusian human rights organizations have staged protests in New York and London against major financial institutions providing banking services to Belarusian Potash Company (BPC), major currency earner for the State of Belarus.

The protesters urged the bank to stop providing services to BPC and other state-owned Belarusian companies. The letter to the bank's management said: "Standard Chartered might not be aware that Belarusian Potash Company is controlled by President Alexander Lukashenko, who appoints its general director, and that it is one of the main sources of revenue for the State of Belarus. Also, Belarusian Potash Company controlled by Belneftekhim. The U.S. government designated Belneftekhim, aka the Belarusian State Concert for Oil and Chemistry, as an SDN of Belarus. We ask you to review this information and consider freeze banking services to this company."

In their letter to Standard Chartered, "Belarusians in Exile" said: "Funds earned by Belarusian Potash Company finance the regime that systematically uses repression and kidnapping. Enabling such a regime is not socially responsible and we do not believe it fits with the corporate culture of Standard Chartered nor do we feel it is an activity that would be supported by its shareholders. We hope that Standard Chartered will support our efforts to stop the flow of money to the Lukashenko regime by breaking off its banking relations with Belarusian Potash Company."

North American K Pricing --

As Uralkali exits BPC, North American prices are somewhat insulated by Canpotex which is just now recovering from an oversupply carried over from last year when Chinese tenders were far less than expected -- thanks to increased sendouts from BPC. The current price point is set at China's $400.00/ton, but Uralkali is expected to provide product in the neighborhood of $350.00. This has potash stocks tumbling on the big board today, and the result of all of this may well be price cuts for potash here in the United States.

Perspective --

We have noted the importance of FSU nutrient, potash in particular, and a stable FSU means Chinese and other Asian markets along with South America and India will be well supplied, insulating our own supply here at home. This is a tangled story and news reports are just getting a handle on it. There is always more than meets the eye when it comes to big business in the Former Soviet Union, and Belorussian president Lukashenko is neck deep in this one. Without potash shipments funding his regime, Lukashenko will have to find a new cash cow to milk.

Meanwhile, rail shipments into the heart of China from Uralkali will help that company break away from Lukashenko and establish its own identity within global fertilizer trade. Uralkali appears to see the writing on the wall and as they break away from the dictatorial regime of Belarus, Russia has an opportunity to show it can do it better, leaving Lukashenko without a major stream of revenue.

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