Minsk loses its position vis-à-vis Moscow

Vladislav Baumgertner, Uralkali’s CEO is in a Moscow jail after he was extradited from Belarus where he spent almost three months under arrest.

The resolution of the ‘potash’ conflict’ did not strengthen Belarus’ position in relations with the Kremlin. While Belarus has scored some publicity benefits, it has also suffered heavy economic losses. President Lukashenko has not only reduced his leverage on the Kremlin, but has ramped up Belarus’ dependence on Russia.

Russian President Vladimir Putin pointedly was not publicly involved in the ‘potash’ conflict resolution. Nevertheless, the Belarusian authorities have considered the recommendations of Russian President Assistant Yury Ushakov and have extradited Uralkali’s CEO “before November-end”.

The ‘potash’ conflict culminated in compromises by both parties. Kerimov has sold his stake in Uralkali (or pretend to sell), and Belarus has extradited Baumgertner to Russia without official compensation, on which it had previously insisted.

Belarus won some political and publicity benefits from the conflict, but lost out in Russo-Belarusian relations. For example, Russia has reduced oil supplies to Belarusian refineries, and the next EurAsEC Anti-Crisis Fund tranche has been delayed. In addition, Belarusian industry exports to Russia have collapsed, and sales of potassium – one of the main budgetary proceeds in Belarus – will not recover soon. All this approximates the devaluation of the Belarusian ruble.

Baumgertner’s extradition has not affected Russo-Belarusian economic relations. In 2014 Belarus will continue paying Russia export duties on petrochemicals produced from Russian oil.

In addition, Belarus’ role in Russia’s foreign policy will reduce due to the suspension of Ukraine’s Euro-integration process. The Kremlin has successfully blocked the signing of the Association Agreement with the EU by Ukraine, which means Russia will redistribute resources from Belarus to a partner currently more important for Russia – Ukraine. Russian presidential advisor Sergei Glazyev said, that “we will reduce gas prices for you [Ukraine] to our domestic level, will supply duty-free oil”.

If Russia fulfills its promises, Belarus will permanently lose its influence on the Kremlin’s policy, and the possibility to receive preferences within the Eurasian integration in the planned volumes will be jeopardized. All in all, Belarus will have to allow Russia to increase its presence in the Belarusian economy.