* Uralkali breaks up export JV with Belarus on Tuesday
* Potash is around 8 percent of Belarus gross exports
* Belarus' trade deficit may widen, affect rouble
By Andrei Makhovsky
MINSK/MOSCOW, July 31 Belarus is under pressure
to find a new strategy to boost potash income as fears the loss
of Russian partner Uralkali could see the
country lose key export revenue that could lead to its currency
Belarus, led by President Alexander Lukashenko since 1994,
is Russia's staunchest ally among the former Soviet republics
but its economy is stagnating after a financial crisis in 2011.
Potash is one of the main export products for Minsk, which -
according to Moody's rating agency - has annual debt repayment
obligations of $2 billion until 2015. Belarus' foreign-currency
reserves are about $5.5 billion.
The country, which has kept in place a largely Soviet-style
economy with full employment and price controls, needs to react
quickly to a decision by Uralkali on Tuesday to break its
venture with the Belarusian Potash Company (BPC) and send potash
sales through Switzerland.
Belarusian state-owned potash producer Belaruskali said it
was not consulted by Uralkali before the Russian company quit
their joint venture but that it promised a new sales strategy to
address the expected impact of its partner's exit.
"We have not worked out a strategy yet so it is too early to
say what it will focus on," Anatoly Makhlai, deputy chief
executive with Belaruskali, told Reuters on Wednesday.
Belaruskali was a partner to Uralkali for eight years in
BPC, which once held 43 percent of the global potash export
market. Uralkali was at one point rumoured to be interested in
buying a stake in Belaruskali.
Uralkali predicted that breaking up BPC would cause the
global potash price to fall by 25 percent in the second half of
2013. The announcement heralds a price war for the key crop
nutrient which caused global potash makers to lose billions of
dollars in market value on Tuesday.
Belarus' rouble hit 8,880 per dollar on Tuesday, its
weakest in a month, reflecting worries about the loss of export
revenues to Minsk and concerns it may use devaluation to boost
Fertilisers accounted for around 8 percent of Belarus gross
exports in the first five months of the year, and was one of the
key generators of foreign currency, according to VTB Capital.
A fall in potash prices could lead to an increase in the
full-year trade deficit of nearly $1 billion to around $5.3
billion, VTB Capital said.
"(Lower export revenues) may negatively affect market
players' moods and the level of trust in the (Belarus) rouble,"
said Dmitry Kruk, a Minsk-based analyst at the Belarusian
Economic Research and Outreach Centre (BEROC).
"In this respect, in the medium term, it may support a
tendency towards rouble weakening."
In 2011, Belarus devalued its rouble by 65 percent trying to
stem a balance-of-payments crisis. But emerging from that
crisis, Lukashenko's government has doled out subsidised loans,
raised wages and drafted ambitious economic development plans.
While the breakup of the venture has raised some speculation
it could be due to a political fallout, Uralkali said on
Wednesday that there were no political motives behind the move.
Lukashenko, who has not yet made a public comment on the
issue, changed the head of BPC last week after his son carried
out an audit of the company.
Moscow has kept Minsk as an ally by supplying oil to the
country and traditionally charging it below market prices,
analysts say. However, while low energy prices
and financial help from Moscow are crucial for Lukashenko's
efforts to keep the economy afloat, both countries have had
repeated disputes over oil supplies.
Their rivalry also extends to more trivial matters -
Lukashenko on Wednesday hooked a catfish that was bigger than a
huge pike Russian leader Vladimir Putin caught in Siberia this