Topic: Uralkali Case
MOSCOW, September 24 (RIA Novosti) – A Chinese sovereign wealth fund has acquired a 12.5 percent stake in Uralkali, the Russian fertilizer giant currently embroiled in a highly politicized dispute with its Belarusian counterpart, according to a statement released by Uralkali on Tuesday.
The deal makes Chengdong Investment Corporation (CIC) the second largest shareholder in Uralkali, after Russian billionaire Suleiman Kerimov, who has a 21.75 percent holding.
It is not the first time that CIC has worked alongside Kerimov – the fund took a 5 percent stake last year in gold miner Polyus Gold, where Kerimov is a majority shareholder – but it is a relatively rare example of a Chinese fund entering the ownership structure of a Russian natural resources company.
Russia’s Uralkali, listed in both London and Moscow, is the world’s biggest producer of potash, and emerging markets with rapidly expanding populations – like China – are the largest consumers of potash-based fertilizers.
CIC received its stake by exercising its right to convert bonds, due to mature in 2014, into shares. The bonds were issued last year by Wadge Holdings, an investment vehicle partially controlled by Kerimov. CIC's 12.5 percent stake in Uralkali on Tuesday was worth about 63.4 billion rubles ($2 billion).
Uralkali has been in open conflict with Belarusian potash producer Belaruskali since July when Uralkali dissolved an international cartel within which the two companies were cooperating, a move that caused a sudden drop in the value of potash producers worldwide and sent fertilizer prices tumbling.
State-owned Belaruskali is a major taxpayer in Belarus, and the acrimonious end to the cartel has strained relations between Moscow and Minsk. In an apparent act of revenge, the CEO of Uralkali, Vladislav Baumgertner, was arrested in Belarus in August and remains in custody. Kerimov is also wanted in Belarus on criminal charges.
While Russian officials have condemned Baumgartner's arrest, they have avoided exerting too much public pressure on Belarus. Russian President Vladimir Putin and Belarusian President Alexander Lukashenko “briefly” discussed Uralkali on the sidelines of an international conference Monday, according to Putin’s press secretary.
Media reports in recent months have suggested that changes to the ownership structure of Uralkali, and the possible exit of Kerimov, may help resolve the company’s dispute with Belarus.
Potential buyers of Kerimov’s stake in the company include Vladimir Kogan, an ex-banker; Mikhail Gutseriyev, founder of oil company Russneft; Arkady Rotenberg, a construction billionaire with reportedly close ties to Putin; nickel producer Norilsk Nickel, Bank Rossiya and oil giant Rosneft, according to media reports.
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Any response would likely boomerang on Russia – the partnership between Rosneft and ExxonMobil is a case in point. The United States has hit Russia with a third round of sanctions. This time the Americans went with a higher caliber weapon, targeting Russia’s biggest energy companies (Rosneft and Novatek) and banks (VEB and Gazprombank).