Potash King Becomes KGB Hostage as Lukashenko Pokes Putin

As Belarus television showed the Russian head of OAO Uralkali (URKA), the world’s biggest potash producer, being led around the courtyard of an undisclosed prison, Anatoly Lebedko knew exactly where it was: Amerikanka.

Amerikanka, or American Lady, is the nickname of the KGB prison in Minsk where President Aleksandr Lukashenko jailed Lebedko and other opposition leaders after his re-election in 2010. German Chancellor Angela Merkel last year said Belarus suffers “dictatorship and repression” under Lukashenko, who has ruled this former Soviet republic since 1994.

The 18-cell facility in the KGB’s headquarters has become the “hostage center of choice for politicians and executives who run afoul of Lukashenko,” Lebedko, 52, who runs the United Civil Party, said by phone from Belarus’s capital yesterday. “Supper consists of either salted herring or milk soup,” said Lebedko, who spent 108 days in Amerikanka for leading a rally.

Lukashenko’s government detained Uralkali chief Vladislav Baumgertner at the Minsk airport on Aug. 26 and charged him with abuse of office after inviting him for talks. Baumgertner, who is also chairman of Belarus Potash Co., Uralkali’s trading partnership with state-run Belaruskali, said July 30 that he was dissolving the venture because Lukashenko “violated” their agreement by authorizing Belaruskali to export some of its soil nutrient independent of Belarus Potash.

Photographer: Andrey Rudakov/Bloomberg

OAO Uralkali Chief Executive Officer Vladislav Baumgertner pauses during a conference session on day two of the St. Petersburg International Economic Forum in St. Petersburg, on June 21, 2013. Close

OAO Uralkali Chief Executive Officer Vladislav Baumgertner pauses during a conference... Read More

Close
Open
Photographer: Andrey Rudakov/Bloomberg

OAO Uralkali Chief Executive Officer Vladislav Baumgertner pauses during a conference session on day two of the St. Petersburg International Economic Forum in St. Petersburg, on June 21, 2013.

Propaganda

The venture had accounted for about 20 percent of revenue for the government of a country where the gross domestic product per capita is about half that of Russia, according to World Bank data. Interest rates and inflation are among the highest in Europe, at 30 percent and 18 percent, respectively.

Russia, which led a $3 billion bailout loan to Belarus in 2011, pressured Lukashenko, 58, to release Baumgertner, who faces 10 years in prison, saying his arrest and accompanying propaganda could harm ties between the countries. The last $440 million of the funding is scheduled to be released this year.

“The fact of Baumgertner’s detention and the media campaign around it doesn’t correspond to the nature of our relations as allies,” the Foreign Ministry in Moscow said in an e-mailed statement yesterday after summoning Belarusian Ambassador Igor Petrishenko.

Belarusian television showed a handcuffed Baumgertner, head bowed, being led to a cell by two uniformed guards. He will probably be held for at least two months as the investigation continues, the Interfax new service reported yesterday, citing Belarus’s Investigative Committee.

Photographer: Sasha Mordovets/Getty Images

Vladimir Putin, Russia's president, left, and Alexander Lukashenko, Belarus' president, attend a meeting at Konstantinovsky Palace in St. Petersburg on March 15, 2013. Close

Vladimir Putin, Russia's president, left, and Alexander Lukashenko, Belarus' president,... Read More

Close
Open
Photographer: Sasha Mordovets/Getty Images

Vladimir Putin, Russia's president, left, and Alexander Lukashenko, Belarus' president, attend a meeting at Konstantinovsky Palace in St. Petersburg on March 15, 2013.

‘Outrageous Act’

Baumgertner is an honest, law-abiding citizen and his arrest is “an outrageous act,” Uralkali Chairman Alexander Voloshin said in a statement yesterday, calling for his immediate release. Uralkali’s press service declined to identify Baumgertner’s lawyer, as did Russia’s embassy in Minsk.

Belarusian authorities have discredited themselves by inviting Baumgertner and then detaining him, Interfax reported yesterday, citing Russian Ambassador to Belarus Alexander Surikov. The Foreign Ministry in Minsk summoned Surikov today and warned him that “incorrect interpretations and fabrications” about Baumgertner’s arrest are unacceptable.

Belarus officials also issued warrants for four other Uralkali executives, accusing them along with Baumgertner of a scheme to cut Belaruskali out of decision-making at their venture and causing $100 million of damages.

‘Held Hostage’

Uralkali’s shares fell 0.3 percent today in London to $23.73, valuing the company at about $14 billion and extending the decline since July 29 to 16 percent.

“It seems Baumgertner is being held hostage, but the real reason why isn’t clear,” said Alexei Pikulik, head of the Belarusian Institute for Strategic Studies, an independent research group based in Vilnius, Lithuania. Lukashenko’s motivation is probably financial, though it could be pure bravado -- to show Russian President Vladimir Putin that’s he’s someone to be reckoned with, Pikulik said by phone from Minsk.

“Belarus may seek to use the conflict as an excuse for its looming economic problems by blaming them on Uralkali and the Kremlin,” Pikulik said.

Putin, 60, and Lukashenko have sparred over prices for Russian fuel, leading to a brief shut-off of oil supplies in January 2007. OAO Transneft, Russia’s oil pipeline operator, told producers it may cut flows to Belarus, a transit route for energy supplies to Europe, in September to carry out maintenance work, Moscow-based OAO Lukoil said today.

Putin’s Pike

Lukashenko sold Belarusian pipelines to Russia’s natural gas export monopoly, OAO Gazprom (OGZD), after disputes over fuel prices, leaving Belaruskali, which he’s valued at $36 billion, as the nation’s most valuable asset. Belarus earned $2.7 billion on potash sales abroad in 2012, or 5.9 percent of total exports.

Making fun of Putin last month, Lukashenko responded to a Kremlin announcement that the leader had caught a 21-kilogram pike by claiming to have recently landed a 57-kilogram catfish in a river contaminated in the 1986 Chernobyl nuclear disaster.

Even so, Russia has provided Belarus with discounted fuel for years, seeing the nation of 9.5 million as a loyal ally. Belarus has also embraced a Russian-led customs union with Kazakhstan. The closer integration has boosted trade, while volumes between Russia and Ukraine, which opted against joining, dropped in the first quarter, Putin said July 27.

Still, Belarus swung to a trade deficit of $1.68 billion in the first half after posting a $1.92 billion surplus in the same period last year. Exports of petroleum products, its biggest foreign-currency earner, fell 22 percent, while exports of trucks and tractors tumbled 41 percent and 28 percent, respectively, according to the government’s statistics office.

Dark Forces

“The only viable path to recovery, economic reform and privatization, has been resolutely rejected by Lukashenko as it would threaten his rule,” Joerg Forbrig, a senior program officer at The German Marshall Fund in Berlin, said by e-mail.

“The regime in Minsk has taken to blaming various internal and external enemies,” Forbrig said. “Uralkali and Russia have now been added to this list, and Belarusian propaganda will certainly show them to be forces aiming to destroy the famed, if dead, ‘Belarusian model.’”

To contact the reporters on this story: Aliaksandr Kudrytski in Minsk, Belarus at akudrytski@bloomberg.net; Stepan Kravchenko in Moscow at skravchenko@bloomberg.net

To contact the editor responsible for this story: Hellmuth Tromm at htromm@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.