Potash conflict increases as Russia cuts oil supply to Belarus

28 August 2013 22:18 Source:ICIS News

HOUSTON (ICIS)--Russian officials on Wednesday ordered their oil distributors to reduce supplies to Belarus by approximately 25%, escalating the dispute over the detention of Uralkali CEO Vladislav Baumgertner in Minsk earlier this week.

Russian pipeline monopoly Transneft said it is cutting deliveries to its neighbouring country in September by 400,000 tonnes, nearly a quarter of current supply estimates to Minsk.

The company said it was undertaking the reduction in order to facilitate repairs to older pipelines within the system - about 440 miles that had been flagged for maintenance.

While the Russian government has not said it directly, many observers expressed the sentiment that Russia is making moves to sanction Belarus, which relies solely on Russian oil to keep its two major refineries operating.

Expressing their displeasure of the 26 August arrest of the fertilizer executive and calling for his immediate release from charges of abusing his authority, officials in Russia had warned on Tuesday that the actions of Belarus could result in a fracturing of political and economic relationships.

Belarus authorities have said the charges are a result of Baumgertner’s role as chairman of Belarusian Potash Company (BPC) and that he is accused of making management decisions that favoured his company over the potash marketing partnership between Uralkali and Belaruskali.

The venture was broken apart when Uralkali announced in July that it was ending its relationship and would strike out on its own after accusing Belaruskali of selling product independently.

Oil is not the only commodity being subjected to increased restrictions, as the Russian Health Ministry announced on Wednesday that it was raising its scrutiny of Belarusian dairy products.

The agency said nearly a third of the products imported no longer meet Russian health standards, with officials stating that Belarus was “relaxing control over the quality and safety of its food products”.

Belarus police have said that Baumgertner has been ordered to be held in jail for two months. The country’s law limits the period of investigation into the criminal case to two months, but it also permits for that time period to be extended if deemed necessary.

“The lawyers have filed three applications, the central of which concerns changing of the measure of restraint," said a spokesperson with the Russian Embassy in Belarus, who added that a hearing is expected to be held next week.

Belarusian Foreign Ministry officials are maintaining the position that Baumgertner’s arrest was legitimate, but they declined to comment on the moves by Russian authorities against oil deliveries and dairy products.

“It should be kept in the legal sphere. We hope that the reactions of our Russian partners would be based on legal standards and not emotions,” said Andrei Savinykh, Belarusian Foreign Ministry spokesperson.

By Mark Milam