Doing Business in Belarus: Beware of Hostage-takers
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BERLIN - Just back from their summer break, European policy-makers are rubbing their eyes with disbelief over the astonishing trade war between the once, and officially still, fraternal states of Belarus and Russia.
A long-simmering dispute over potash exports, a key ingredient for fertilisers worldwide, took a dramatic turn last week when Belarusian authorities arrested the head of Uralkali, one of Russia’s largest companies.
This has heightened tensions far beyond the many disagreements over oil and gas, milk and meat which have erupted between the two countries over the last years. The responsibility for this latest escalation falls squarely on Belarus President Alexander Lukashenko, a.k.a. "Europe’s last dictator."
Potash is effectively Belarus’ only natural resource. In order to market it globally, its state-owned producer Belaruskali and Russian private firm Uralkali formed a cartel in 2005 that controls over two-fifths of world supply and guarantees that prices remain far above market rates.
The resulting revenues represent some 10 percent of export income and 12 percent of the budget of Belarus’ chronically cash-strapped regime. This makes potash Belarus’ third-largest export commodity, after oil products and agricultural produce.
Late last year, Lukashenko decreed that Belarus would pursue potash sales independently, in addition to those pursued through the cartel.
This move was prompted by the loss of lucrative oil product exports, in an effort to compensate for some of the foregone revenues. Effectively, this broke the potash cartel with the Russians, and it was only a matter of time until Uralkali would formally leave the arrangement. It did so in late July 2013, taking with it all major contracts and customer contacts of the joint operation.
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Joerg Forbrig directs the Fund for Belarus Democracy at the German Marshall Fund of the United States.