In case you didn’t notice, the world’s potash markets went haywire last week, after the announcement that Russia's OAO Uralkali, the world’s largest producer of this crucial ingredient in fertilizer, suspended its participation in an alleged cartel with its long-time Belarus partner Belaruskali. Their joint marketing venture, the Belarusian Potash Co., produced at its peak 40 percent of the world’s potash, with much of the balance coming from Canpotex Ltd., another syndicate based in North America. Together these two set production quotas and divided global markets, ensuring stable prices and steady profits.Readers may also be interested in how the Guano Islands Act of 1856 arguably laid the legal groundwork for American imperialism:
Uralkali’s motives for pulling out remain murky: It’s possible the company wants to coax Belaruskali into stricter compliance with their agreement's terms. More likely, by letting potash prices bottom out, Russia hopes to gain influence over Belarus and its autocratic leader, Aleksandr Lukashenko. Belaruskali is the most profitable company in Belarus, accounting for almost 6 percent of total exports. Should potash prices plummet, Belaruskali will become susceptible to a Russian takeover bid. That Uralkali’s majority shareholder, billionaire Suleiman Kerimov, is a reputed front man for the Kremlin increases the likelihood of this scenario.
Potash has long gone hand in hand with geopolitical power plays, even if its early history is rather humble. Potash got its name from the fact that it was originally manufactured by mixing wood ashes with lye and boiling them in a pot. The resulting water-soluble potassium salts (potassium takes its name from “pot ash”) proved indispensable for making glass, soap and gunpowder as well as for bleaching and dying fabrics. No single country controlled potash production; anyone with fire and wood could make it.
Nonetheless, it took a lot of wood to make a little potash, and so periodic shortages plagued the global economy, encouraging constant refinements in potash manufacture. The first patent granted in the U.S. was for an improvement “in the making of Pot-ash.”
Many substitutes for burning wood were tried (incinerating kelp was a big business for some time in various places) before natural deposits of potassium salts were discovered in Germany in the mid-19th century. Potash became divorced from its modest origins as “pot ash” and was transformed into a product of industry. It simultaneously became a top ingredient in new, chemical fertilizers that facilitated a global boom in agricultural production. As potash grew more important, German producers formed a cartel that fixed prices and managed production. Each time a new mine opened in Germany, threatening stability by undercutting prices, it was brought into the cartel and given a percentage of the total production quota. The world had to pay a price for potash determined by the cartel rather than market forces.
In 1909, three Germany potash producers refused to continue playing by those rules, instead brokering deals with U.S. fertilizer companies that undercut the cartel. In response, the German government imposed a prohibitive tax on export contracts set up outside the cartel. A diplomatic row ensued, with the U.S. government taking up the cause of the fertilizer companies, to no avail. The export tax forced the dissenting Germany companies to rejoin the cartel and nullify the contracts....MORE
New York Guano
.... But that’s not the interesting part, really—although it’s curious enough, and there are some great stories about what goes down on these islands: shanghaiing Polynesian laborers, piracy (of course), mutiny, etc. Some of the islands are still claimed by various shady types. Indeed, a rather mysterious gentleman contacted me some years ago in connection with his alleged title to an uninhabited guano island in the Caribbean.That's Columbia law professor Christina Duffy Burnet.
A James Bond villain-type?
I don’t think I can speak any further on that matter over an unsecure line...MORE
