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Business Comment

Jim Armitage: Belarus has bitten off more than it can chew by reeling in this big fish


Global Outlook In most countries, you get arrested for operating a cartel. In Belarus, it seems, the opposite is the case. On Monday, the chief executive of Russia's fertiliser giant Uralkali, travelling to Minsk at the invitation of the prime minister, arrived only to find himself getting arrested at the airport. His detention came just weeks after he had pulled his company out of the potassium cartel it has operated with Belarus. A cartel that has artificially kept up prices of crop-boosting fertilisers for farmers the world over.

Now, a trade war looms large between the two countries.

Not that the Kremlin puts it in such terms, of course. Two days after the Russian's arrest, Moscow scientists coincidentally uncovered serious concerns about "falling quality standards" at Belarusian dairy farms. Then the Russian Transneft pipeline monopoly declared supplies of oil to Belarus would be cut next month due to essential "maintenance" work. Yesterday, Moscow banned Belarusian pork imports due to sudden concerns about African swine fever in its little neighbour's farms.

In the comical way that the Kremlin does so well, Moscow claims none of the events are connected to the arrest of Vladislav Baumgertner.

The Belarusian president Alexander Lukashenko has stood his ground. Instead of relenting and releasing the Russian executive as the pressure intensified, he upped the stakes, with his government hinting at a criminal investigation of Suleiman Kerimov, Uralkali's biggest shareholder.

It is highly unlikely Mr Kerimov will ever appear before a Minsk court. He is, after all, one of the richest men in the world and well connected internationally and in Russia.

While he hardly ever gives interviews, Mr Kerimov is no shrinking violet. You may remember him as the chap who nearly killed himself crashing his $650,000 (£419,000) Ferrari Enzo into a tree on Nice's Promenade des Anglais with a glamorous Russian TV presenter in the passenger seat. He has hosted parties starring Beyoncé and the late Amy Winehouse that make Sir Philip Green's soirées seem stingy affairs.

His typical Russian oligarch's love of football was such that he hired Brazilian legend Roberto Carlos to play for his Dagastani football team, Anzhi Makhachkala. He even bought Carlos a $3m Bugatti for his birthday. Cameroon striker Samuel Eto'o followed, on a reported €60m (£51m) three-year contract. He has just joined Roman Abramovich's Chelsea.

Another fact about Mr Kerimov will not have been lost on the Belarus government. He is extremely well connected in the Kremlin. There is widespread speculation, reported in the Financial Times last year, that he and his team invest on behalf of the Russian government. He denies this, but it is no secret his wealth has been largely built up thanks to investments he made with state bank loans. That includes his holding in Uralkali.

The FT reported he was particularly close to Igor Shuvalov, the powerful first deputy prime minister. Meanwhile, the wife of the deputy prime minister Arkady Dvorkovich has served on the boards of at least two of his companies. Little surprise then, that Mr Dvorkovich and Mr Shuvalov have been publicly critical on the Russian government's behalf this week of Belarus's behaviour.

To outsiders, it appears Belarus's eccentric president, dubbed by many as Europe's last dictator, is playing a game he cannot win. Belarus would collapse without Russian trade. Mr Kerimov's friends in the Kremlin seem to hold all the cards.

There are many observers who say Vladimir Putin's freedom to crush Belarus on this issue is constrained by his desire to woo another neighbour, Ukraine, to Russia's side. Ukraine is seeking an association agreement with the European Union including a free trade deal due to be signed in November. Mr Putin is desperate to stop that happening and wants instead to persuade Kiev to join his own customs bloc with Kazakhstan and Belarus. A major assault on trade with one of its so-called free trade partners is hardly likely to woo Ukraine to Moscow's side, goes the thinking.

Others suggest such concerns are wide of the mark. Stephen Blank, senior fellow for Russia at the American Foreign Policy Council in Washington says, as far as Ukraine goes, Mr Putin is not concerned about subtlety. He points out that, only a fortnight ago, Russia imposed intensive checks on all Ukrainian goods entering the country, effectively imposing a de facto ban. It was a clear threat against signing a deal with the EU. Moscow, says Mr Blank, will stop at nothing to keep former Soviet states under its yoke. "Russia is perfectly willing to start a conflict on this issue. Its fundamental objective is to undermine any effort by Belarus to conduct any form of independent foreign policy," he says.

If Mr Blank is right, Belarus, and its people, are in for a rough autumn.