Collapse of Belarusian Potash Company throws Lukashenkos family a political challenge 

On July 29^th, Uralkali’s Board decided to stop potash export sales through the Belarusian Potash Company.

The ultimate split between Uralkali and the Belarusian Potash Company (BPC) raises reputational and political risks for Lukashenko’s family as well as power elites around Lukashenko’s eldest son Viktor. Official response from Belarus did not follow, which implies that the ruling group had problems with making tactical and strategic choices.

The actual BPC collapse has political implications, i.e. casts a shadow on the Russo-Belarusian Commission’s negotiating capacity. The Commission was formed in May 2013 to settle potash export disputes. From Belarusian side, the negotiation process was supervised by Assistant to the President for National Security Affairs Viktor Lukashenko and KGB Chairman Valery Vakulchik. Formally, from Belarus’ side the Commission is led by “Development Bank” Chairman Sergey Rumas.

President Lukashenko specifically emphasized that his close affiliates were introduced in the Commission to raise its status following a request from Russian businessman Suleiman Kerimov. Informally, Viktor Lukashenko was responsible for the negotiations’ success while the KGB could engage in new scope of activities (there is reason to believe that since 2008 Viktor Lukashenko has largely controlled the KGB personnel policy, in particular, the new KGB Chairman Vakulchik is Viktor’s protégé).

In this context, the scandalous collapse of potash syndicate, two months after the negotiating group was appointed, appears as negotiations’ failure. Belaruskali’s public policy has not yet been identified, regardless of the falling world prices for potash fertilizers and Uralkali’s divorce from BPC. Moreover, Uralkali’s Board decision was unilateral, without consultations with the BPC. The work of the bilateral Commission and its members has been discredited.

Nevertheless, the ruling group and Belarusian potash exports supervisors need to figure out how to retain potash markets and fertilizer sales. The situation is complicated by the fact that pressure on Belarus to sell its Belaruskali shares and / or to delegate control over Belarusian export flows will increase. For instance, Uralkali’s Director General Vladislav Baumgertner said that cooperation between the two companies could resume only if Belarusian sales were made through Russian Soyuzkali.

If Belarus fails to resist this pressure, Viktor Lukahsenko’s business and political reputation will be undermined, which in turn will hurt his father’s reputation. Simultaneously, global potash prices’ fall will reduce Belaruskali’s export proceeds and will increase economic stability risks in the country, which in turn might have a negative impact on President Lukashenko’s electoral rating.