Russia Tells Belarus Uralkali CEO Detention May Harm Ties

Russia pressured Belarus to free Vladislav Baumgertner, the head of OAO Uralkali, the world’s biggest potash producer, saying a refusal may harm relations as the smaller nation faces a funding crunch.

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

Belarus investigators detained Baumgertner, 41, at the Minsk airport after Belarusian Prime Minister Mikhail Myasnikovich invited him for talks yesterday. They are accusing Uralkali top managers of rolling out a criminal scheme to control potash exports after the Russian company said July 30 it was quitting their joint trading venture, Belarusian Potash Co. Revenue from the crop nutrient accounts for almost 20 percent of the country’s budget.

Baumgertner was shown on Belarusian television news with his head bowed and hands behind his back, being led to a cell by two uniformed guards. He will be under arrest for at least two months during the investigation, Interfax reported today, citing Pavel Traulko, a spokesman for Belarus’s Investigative Committee. He may face as long as 10 years if found guilty of abuse of office as chairman at BPC, as the venture is known, Traulko said yesterday.

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

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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.

‘Legal Issue’

Uralkali shares rose 0.6 percent in Moscow to 158.63 rubles, after falling 3.5 percent yesterday. The stock fell 3.5 percent in London, where markets were closed yesterday for a public holiday.

Baumgertner’s detention is a legal issue, which should not be approached “based on emotions or in connection with politics,” the Belarusian Foreign Ministry said in an e-mailed statement today.

Belarusian officials are seeking four more Uralkali executives, who worked at BPC or served as directors, accusing them of conspiring with Baumgertner and Uralkali shareholders to cut state-owned potash producer Belaruskali out of decision-making at the trading venture and manipulate the market, causing damages and losses of about $100 million.

Baumgertner forecast in July that global potash prices may plunge to less than $300 a metric ton after the breakup of the venture and Uralkali ramps up output. That compares with a price of $400 for China in the first half of the year.

President Lukashenko

A price decline threatens President Aleksander Lukashenko, who has ruled Belarus since 1994, with a drop in foreign currency needed to meet imports and international debt obligations. A final payment from a Russian-led $3 billion bailout loan is planned for this year. The cash is tied to policy measures, including some state asset sales that haven’t been carried out.

Baumgertner’s detention “crosses every line,” Russian First Deputy Prime Minister Igor Shuvalov told reporters yesterday. Russian Prime Minister Dmitry Medvedev ordered the government to resolve the situation with Belarus, Shuvalov said.

Russian billionaire Suleiman Kerimov who has a 22 percent stake in Uralkali visited Belarus in May to rescue the faltering relationship with Belarus. Both sides agreed to a commission created by Lukashenko that would discuss the future of BPC. The president announced the appointment of his son Viktor and local KGB chief Valeriy Vakulchik to ensure the impartiality of the new body.

“I am a supporter of one powerful trading channel, in which there will be a parity of interests,” Lukashenko said at the time.

‘Outrageous Act’

Russian Ambassador to Belarus Alexander Surikov visited the public prosecuor’s office in Minsk today with a petition to allow to release Baumgertner from prison until trial, Vladimir Marchukov, an embassy spokesman, said by phone. Deputy Prosecutor-General Nikolai Kuklis declined to say how long it will take to review the petition, Marchukov said. The Russian ambassador is still waiting for permission to visit Baumgertner, according to the embassy spokesman.

Uralkali Chairman Alexander Voloshin said Baumgertner’s detention in Minsk was “an outrageous act.” Economic disputes and differences that arise in business “should not be dealt with in such a manner,” he said in a statement today.

The BPC advisory board chaired by Baumgertner is an oversight body meeting only a few times a year and its chairman has no authority to abuse, Voloshin said. The effective head of BPC is its general director, who has always been appointed by the Belarusians. Accusations of abuse of power against Baumgertner “look simply absurd,” and the CEO should be released and the legal pursuit of his colleagues ended, he said.

“I know Vladislav Baumgertner to be an honest and very decent law-abiding citizen,” Voloshin said.

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

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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