Vladislav Baumgerner, the CEO of Russian potash producer Uralkali, was jailed late August following  the  decision of Uralkali to  end  the  potash  cartel formed with state-owned Belarusian potash producer Belariskali. Baumgerner was later moved from jail to house arrest in Belarus, supposedly following a diplomatic deal. Potash is an important source of current account receipts for Belarus but the end of the potash cartel in July 2013 has put potash prices under pressure, which has a negative impact on Belarusian exports. Moreover, the potash dispute not only undermines potash trade but also risks provoking Russian retaliatory actions, particularly regarding oil and supplies which the Belarusian economy relies heavily on.

Impact on country risk

Following the 2011 balance of payment crisis, the Belarusian economy stabilised in 2012. The current account balance improved significantly from a deficit of 15% of GDP in 2010 to a deficit of nearly 3% in 2012 owing to improved competitiveness, lower gas prices and temporary large-scale trade in solvents and related products. Since then, the lack of coherent macroeconomic policies, the peak in external debt service obligations, lower potash exports and the end of the solvent trade have widened the current account deficit and have caused new pressure on foreign exchange reserves. ONDD’s short-term political risk, which represents a country’s liquidity, is in category 6 due to the low and declining level of foreign exchange reserves that covers only 1.5 months of imports in August 2013 and less than half of the high short-term debt.

Analyst: Pascaline della Faille, p.dellafaille@credendogroup.com