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Potash cartel won’t be reconstituted

Excellence’s nalyst Gilad Alper: If until a few days ago there was a chance that BPC would revert to what it used to be, the chances of that happening are now lower, not higher.

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/ By Kobi Yeshayahou /

“The arrest of Uralkali (LSE: URKA) CEO Vladislav Baumgertner by the Belarus authorities on corruption charges sent shares in the sector higher (except for Uralkali itself), apparently on the idea that this development could revive Belarusian Potash Company (BPC), or possibly because Uralkali’s CEO is really guilty of something. We think otherwise. This is apparently an act of desperation by Belarus, nothing more. The idea that Belarus has suddenly become a warrior against corruption is ridiculous, ” says Excellence Brokerage analyst Gilad Alper.

“The political battle is more important, and we think that the bad blood developing here spells the end of BPC. Ultimately, this is a political fight between [Russian President Vladimir] Putin and [Belarus President Alexander Lukashenko, and in this fight, like in every other battle in the past, Putin will win, partly because it is Belarus’s energy supplier.”

“Globes”: Don’t the Russians have an interest in keeping the potash cartel intact?
Alper: “The Russians do a lot of business with China, and it is quite possible that the break-up of the Russian potash cartel is part of big contracts between Russia and China, especially for energy. Uralkali would not have ended the cartel without Putin’s permission. This is a classic political fight between Russia and Belarus, and that’s not good.”

Is there any chance of a compromise?
“It seems that there will be no compromise. Putin isn’t going to lose a fight against a weak psychopath. This is a battle of egos. If until a few days ago there was a chance that BPC would revert to what it used to be, the chances of that happening are now lower, not higher. Uralkali has the lowest production costs in the world, so its act makes financial sense, as it has an interest in selling a lot of potash at a low price.”

So the consequences are not good.
“Israel Chemicals Ltd. (TASE: ICL) is a more complex story. But in general, this fight is not good for the potash market.”
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