A potash miner walks past a giant pile of mischief. Photographer: Andrey Rudakov/Bloomberg.
A potash miner walks past a giant pile of mischief. Photographer: Andrey Rudakov/Bloomberg.

Globalization has its ironies. Consider, for example, how the fortunes of companies in the U.S., Germany, Israel and Canada have become as unpredictable as the actions of a former collective-farm director turned dictator of an obscure country in Eastern Europe.

At issue is potash, a potassium-rich salt widely used in fertilizer. It is produced by companies such as Mosaic Co. in the United States, K+S in Germany, Potash Corp. in Canada and Israel Chemicals. Since 2005, the price has largely been set by the Belarus Potash Company, or BPC, a cartel consisting of two companies, Uralkali of Russia and state-owned Belaruskali of Belarus, that together account for about two fifths of global supply.

The acrimonious state of that cartel became abundantly apparent this week, when police in the Belarussian capital of Minsk handcuffed Vladislav Baumgertner, chief executive of Uralkali, and took him to a KGB jail. Baumgertner, who had traveled to Belarus on the invitation of the country's prime minister, was charged with "abuse of power," an offense carrying a maximum prison sentence of 10 years.

The move appears to be part of an effort by Aleksandr Lukashenko, president of Belarus, to reverse the cartel's dissolution -- a process that he set in motion last year when he signed a decree allowing Belaruskali to sell potash outside the BPC. Perpetually in need of hard currency to prop up a quasi-Soviet regime complete with price controls and five-year plans, Lukashenko hoped for an increase in potash revenue. As a result, Baumgertner announced in July that his company was quitting the BPC. Soon after, all the Russian managers who had worked at BPC defected to Uralkali. The ensuing price war tanked the market values of potash producers everywhere.

According to a report on Belarus' state-owned TV station, ONT, the Russian managers at BPC had persuaded clients to buy directly from Uralkali and destroyed logistical documentation so that Belaruskali would not be able to use the joint infrastructure. "They even stooped to the theft of computers containing important information," the ONT report said. The Belarussian investigators who arrested Baumgertner called this "a criminal conspiracy," which they claimed had cost the country's economy $100 million -- a tiny amount compared to the losses sustained by shareholders of potash companies in the wake of BPC's dissolution.

Of all the world's producers, Uralkali is probably best placed to survive a period of depressed potash prices, which Baumgertner has said could fall below $300 a ton. Its production costs, at about $62 per ton, are the industry's lowest, and it has plenty of excess capacity. U.S. producers and Belaruskali, with costs of about $100 per ton, would be harder hit. K+S, with costs of about $240 per ton, might become unprofitable.

All the same, Suleiman Kerimov, the Russian billionaire who owns a 21.75 percent stake in Uralkali, is preparing for leaner times. He has curtailed the financing of his soccer club, Anji, which had harbored championship ambitions in the Russian Premier League. Instead of $200 million a year, he plans to spend only $50 million to $70 million, not enough to sign international stars like Cameroonian Samuel Eto'o, who commands $27 million after tax per season.

Having unleashed market forces on the potash industry by undermining a dominant cartel, Lukashenko is now trying to restore the cosy monopolistic setup the only way he knows how: by taking a hostage.

Will the gambit work? Russian Prime Minister Dmitri Medvedev has ordered his government to work out a solution to the Baumgertner situation. Deputy Prime Minister Igor Shuvalov called the CEO's arrest "strange, abnormal and unpartnerlike." Rather than start a trade war with Belarus, with which it maintains a customs union, Russia could make concessions to Lukashenko that would revive the BPC in some shape or form. The market seems to think it will: Investors have been driving up the share prices of potash producers -- other than Uralkali -- since Baumgertner's arrest.

In the world of potash, Lukashenko's gangster tactics might pay.

(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. Follow him on Twitter.)