Vladislav Baumgertner, the chief executive officer of Uralkali OAO (LON:URALL) (OTCMKTS:URALL), was arrested on criminal charges in Belarus after his meeting with the country’s Prime Minister Mikhail Myasnikovich regarding the trading of potash.
Vladislav Baumgertner facing legal charges
According to a report from Bloomberg, Baumgertner is facing legal charges for allegedly abusing his position as chairman of the supervisory board of Belarusian Potash Co. for private gain. He will stay in prison for a maximum of 10 years if found guilty.
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In 2005, Uralkali OAO (LON:URALL) (OTCMKTS:URALL) and Belarusian Potash Co. signed a trade partnership agreement to sell potash worldwide. However, the Russian potash producer ended its trade partnership agreement with the Belarusian potash miner, which drove the crash of the potash industry.
Pavel Traulko, spokesperson for Belarus’s Investigative Committee, said they will also arrest four other executives from Uralkali OAO (LON:URALL) (OTCMKTS:URALL). He said Baumgertner caused “substantial harm to the state and the public interests of Belarus.”
In addition, he said, “They were double-dealing, or rather triple-dealing and cheating in the self interest…of the Russian shareholders.” The committee will also investigate the involvement of Suleiman Kerinov, the largest shareholder of Uralkali OAO (LON:URALL) (OTCMKTS:URALL).
Uralkali seeking help from Foreign Ministry of Russia
Alexander Babinsky, spokesperson for Uralkali OAO (LON:URALL) (OTCMKTS:URALL), said the company is seeking help from the Foreign Ministry of Russia regarding the accusations against Baumgertner, and demanded his immediate release. He called the Belarus move an “outrageous provocation.”
Igor, Shuvalov, first deputy Prime Minister of Russia, commented that the action of the Belarusian government was unacceptable. “What happened today is all out of proportion. We think this is a very strange situation, bearing in mind the nature of our mutual relations.”
Boris Krasnojenov, an analyst at Renaissance Capital opined that the current situation will hinder any future trading partnership between Uralkali OAO (LON:URALL) (OTCMKTS:URALL) and Belarusian Potash Co. He said, “This will make it difficult for the two to get back together in any kind of trading venture. Belarus may be pushing Uralkali to split markets between them after the breakup of the venture.”
Belarus might be pressuring Uralkali
On the other hand, Elena Sakhnova, an analyst with VTB Capital in Moscow, speculated that Belarus might be pressuring Uralkali OAO (LON:URALL) (OTCMKTS:URALL) to provide an option for it to sell potash in China.
Meanwhile, Denis Vorchik of Uralsib Capital said the issue between the two potash companies escalated politically. According to him, “It is a clear escalation of this story from a corporate conflict to a political level. This conflict will now have to be solved through political pressure brought by both the Belarusian and Russian governments.”
The stock price of Uralkali OAO (LON:URALL) (OTCMKTS:URALL) declined by 3.3% to 157.87 rubles around 6:14 P.M. in Moscow.