Alexander Lukashenko for the first time in a few years made a new Declaration on cooperation of Belarus and Russia on the world market of potash fertilizers. Conflict Belaruskali and Uralkali was one of the loudest between business structures of two countries. Now the President of Belarus, seemingly, does the new proposal of the Russian company – and this time from a position of strength.
President of Belarus Alexander Lukashenko says that to him almost every month are turning the new shareholders of Uralkali, the Russian with the request to accept them. “I said suggestions – ready to meet you,” – says Lukashenko. “Today they are ready to unite with us. We are not against – unite, but on our terms,” continued the President.
“Now things have Belaruskali are much better than BRIC, which allows Lukashenko to talk about a possible resumption of the partnership from a position of strength”
“Please, let’s resume (with BRIC). Let’s agree, how will you produce, how much we will produce. Divide the markets and won’t compete with each other”, – said Lukashenko.
The Belarusian leader did not fail to praise the position of Minsk on the world market of potash fertilizers. According to him, Belarus first came out of the dive after the breakup of BPC and Uralkali. “In the world we simply have to pray and bow”, – said the President. High demand for the products of BKK, I noticed Lukashenko, due to the fact that the state “guarantees the integrity of this company.” Currently Belarus is building two new potash plants on the basis of Petrikov and Luban deposits, input of which “we will be complete masters in the potash market”.
In a press-service of URALCHEM, managing shareholder of Uralkali, Interfax reported that “communication and business contacts with the Belarusian government and Belaruskali executives we did not stop in recent years and they are as necessary to each of the parties.”
The rupture of relations
Belaruskali is one of the largest fertilizer producers, Belarusian potash company (BPC) engaged in their sale. Since 2005, prior to the conflict, 2013, the BPC was a joint venture of Uralkali and Belaruskali on a parity basis. Via was in Minsk the company they sold potash fertilizers equally.
In the early 2000s, both producers were equivalent, and together they were easier to establish export prices and to sell the product on their own terms. The strategy was correct – BPC in 2012 took 42% of the world market of potash fertilizers.
However, the following year the outbreak of the conflict of shareholders. It provoked Lukashenka’s decree on the abolition of the monopoly of the export of products of Belaruskali. That is, the Minsk has received the right to trade on their own, apart from Moscow and Belaruskali began to ship the product to bypass the BPC. The Russian side said that the cooperation with our Belarusian partners within BPC has reached a deadlock, and left the cartel. It was a shock to the market, the news has fallen off not only the actions of the Russian company, and its competitors, prices for fertilizers on the world market went down.
The story is not over. In August 2013, Minsk arrested the General Director of Uralkali Vladislav Baumgertner. Revealing the time and place of the arrest of Russian top Manager arrived in Minsk at the invitation of the then Belarusian Prime Minister Mikhail Myasnikovich, and upon departure he was arrested on suspicion of abuse of power and official powers. The guilt he was charged with damage to Belaruskali and Belarusian potash company” as a result of termination of joint sales. After a couple of months with the arrest of Baumgertner transferred to Russia, where he was put in jail, then under house arrest, then released on bail. In February 2016 the Russian law enforcement bodies have stopped criminal case against him in connection with absence in its actions of structure of a crime.
A little later, the arrest of Baumgertner by the Belarusian authorities declared wanted also the main shareholder of Uralkali, the Russian billionaire Suleiman Kerimov.
All this has led to the change of ownership of Uralkali. Kerimov sold his stake to ONEXIM group Mikhail Prokhorov, and the company “URALCHEM” Dmitry Mazepin bought up shares of small shareholders.
It should be noted that Lukashenko accused Kerimov and Baumgertner in the desire to become owners of Belaruskali, they allegedly offered him a bribe for the selling price of Belarusian assets. But, according to him, it is, of course, disagreed. The company had become more powerful company than Belarus, including the merger with Silvinit.
However, the gap with the BPC, criminal history, change of shareholders and the accident in November 2014, near Solikamsk at an underground mine pulled the rug from under the feet of the BRIC.
New shareholders of Uralkali in the summer of 2014 for the first time talking about renewal of the partnership with Belaruskali. It is economically justified: together the partners can affect potash prices and not to risk the weather over large volumes in the struggle for markets and profits.
Then unofficially it was reported that the company wanted to obtain a controlling stake (about 65%) in the share capital of the new joint trader and offered to register it in Moscow. From the point of view of the scale of the Russian’s capacity was larger.
However, Lukashenko was not satisfied with the role of the younger brother. “If we lose, let them come and say we lost. And from this we will proceed”, – said the head of Belarus.
The chances of cooperation
Today Lukashenka for the first time in several years, explicitly said that he is ready to resume cooperation. But again, he’s not going to give the leadership of the Russian company. Apparently, he is not doing it, even parity partnership, as it was until 2013. And Belarus can afford such a tone.
“Now things have Belaruskali are much better than BRIC, which allows Lukashenko to talk about a possible resumption of the partnership from a position of strength. Rather, it’s about working with BCC in the context of the redistribution shares in favor of the Belarusian company, or under the terms of the distribution of markets, suggesting that Uralkali will not be able to obtain a larger or equal share of the markets”, – says Director of investment banking at QBF Dmitry Kipa.
Belaruskali’s net profit in 2015 amounted to 572 million dollars compared to 184 million dollars from the company. The revenue of the company for the first quarter of 2016 decreased by 28%, growing debts, profitability fell. The Russian company lost to competitors in the global market, primarily Belarus.
Belaruskali is the most promising and financially profitable enterprise of Belarus, the loss of Russian company in financial terms is obvious, says Kirill Yakovenko from “ALOR Broker”.
“So far, the Eastern vector of development of exports from the BRIC frankly lame, what can be said about Belaruskali. Lukashenka has already announced the signing of long-term contracts for the supply of potash fertilizers to India are actively developing relations with Chinese importers in the future with a high probability of Belarus can become the largest supplier to the Brazilian market,” notes Bale. And the company is only trying to sign contracts with China and India.
The conditions of Minsk from a position of strength is unlikely to suit the company, but it’s a double-edged sword. The Russian company would help the merger with the Belarusian powers. “The merger of two major players will create the force with which the market would have to be considered that in the current environment, would not the company experiencing difficulty finding long-term contracts after a break-up with BPC” – says Dmitry Kipa.
Both companies could dictate terms to the market, including on prices. In addition, together they could influence the volumes and negotiations with one of the key buyers – China, which now requests the price per tonne of potassium chloride in two and a half times less than it is traded in the market, said Kirill Yakovenko from “ALOR Broker”. “This position makes the production unprofitable to both parties, but this is a very promising market and guarantee a long relationship,” he adds.
“While the company managed to keep their own market share to 20% and successfully compete with Belaruskali, but, of course, in a potential Alliance with the Western rival its capabilities would have been much more. But such cooperation, given the conditions of Belarus and their condescending competitor to the tone, suggests that the autonomy of both sides in this issue is a big question and it is possible the recurrence of arrests of the leadership of the company in case of any misunderstandings” – does not preclude Yakovenko.
In his opinion, to a real merger of the two companies is still very far away. “Belarus can make such statements for their own reasons, pursuing a goal such as “cheer up” a competitor or something to tip him off, or at least that it seems to be true is to emphasize its high value in the market” – summarizes the expert.Related posts: