Belarus, Russia feud after CEO's bizarre arrest

As he sat for talks in the office of Belarussian Prime Minister Mikhail Myasnikovich, the chief executive of Russia's largest potash producer Uralkali, Vladislav Baumgertner, could hardly have imagined what lay in store for him. Just hours after leaving the talks with the Belarussian government chief on Monday, Baumgertner was arrested at Minsk airport, searched by security agents who made him stand against the wall with his legs apart and put in custody. Russia reacted with anger to the businessman's arrest, summoning the Belarussian ambassador to the foreign ministry and warning it could affect high-level contacts between the two states. Meanwhile, the dispute risks escalating into a full- scale trade row with Russia already saying it will reduce oil supplies to its much poorer ex-Soviet neighbour and beginning to grumble about the quality of its milk imports. "We are demanding his immediate release and we are hoping Belarus will do this as soon as possible," President Vladimir Putin's top foreign policy aide Yury Ushakov said Friday. Baumgertner was in Minsk at the personal invitation of the Belarussian prime minister, leading Moscow analysts to conclude that his arrest was fully sanctioned by President Alexander Lukashenko who has ruled the country for almost 18 years. The grounds for his arrest date back to a shock decision in July by Uralkali to pull out of a joint venture with the Belarus state-owned potash producer Belaruskali that put an end to a cartel which had kept up prices in the global potash industry. Shares in all the world's potash firms crashed and Uralkali, which accounts for 20 percent of global production of the fertiliser, defiantly said it would ramp up production to compensate for the shortfall in prices. Uralkali accused Lukashenko of being responsible for the break-up of the partnership with Belaruskali by authorising the Belarussian firm to export potash outside the framework of the joint venture. Belarussian investigators claim to have uncovered an illegal scheme by Baumgertner and other Uralkali managers to enrich themselves at a cost of $100 million to Belarus. "The allegations contradict common sense and would not stand up to scrutiny," said the chairman of Uralkali's board of directors, Alexander Voloshin. In another twist to an already extraordinary tale, the Belarussian Investigative Committee also said that it considered opening a criminal probe against Suleiman Kerimov, the billionaire owner of Russian premier league team Anzhi Makhachkala and a major Uralkali shareholder. The arrest of Baumgertner shocked observers, given Lukashenko's regime is hugely dependent on cheap energy imports from Russia and Russian loans to keep its economy afloat. The mercurial Lukashenko has needled Russia on occasion with his sometimes maverick behaviour but observers believe the Kremlin prefers him to a pro-Western figure who could steer Minsk toward the European Union. Nevertheless, Russia has made clear it is not amused and has already given Minsk a warning about the damage the Kremlin could wreak on the Belarussian regime. In a time-honoured tactic, Russian state-owned pipeline monopoly Transneft said it was going to have to reduce oil deliveries to Belarus by 20 percent due to maintenance work. Pork imports from Belarus would also be banned due to an outbreak of African swine flu in the country. In another warning of pending import bans, Russia's consumer protection watchdog said 30 percent of tested Belarussian milk and dairy products did not meet safety standards. "It seems that Lukashenko thinks that he is Russia's only loyal friend and therefore he will be forgiven for everything," said Vladimir Zharikhin, deputy director of the pro-Kremlin CIS Institute think tank. "I fear that he is mistaken. Their milk and our oil -- these are Russia's levers -- stupid, yes -- but effective." But the potash sector itself is also crucial for Belarus, with Belaruskali wholly owned by the state and accounting for 10 percent of the national budget. Meanwhile, Baumgertner is still languishing in a detention centre in Minsk run by the Belarussian security services which are still known by their Soviet acronym KGB.