I write in the Business Standard today about the demise of the Russian-Belarusian Potash cartel.
The world witnessed a shake-up of the global potash industry last month, with the Russian-Belarusian cartel Belarusian Potash Company(BPC) disintegrating. Russia‘s Uralkali decided to break away from BPC and sell potash independent of its counterpart Belaruskali at higher volumes for lower prices.
If the Eurasian cartel had remained stable, potash prices would have stayed up and all suppliers would have benefited. Cartels ensure that by fixing prices, by coming to an agreement over market shares and the total industrial output. With collusion trumping competition, cartels are considered illegal within most domestic economies but national or international cartels are quite commonplace globally. The most prominent of these is the Organisation of Petroleum Exporting Countries (OPEC), which has successfully controlled the global oil market for over 40 years.
Potash is but one commodity on the international market where supply has been cartelised. India is on the wrong side of international cartels most of the time, and it is in our strong economic interest to champion the cause of free global trade. In the meantime, we can do our best to reap the dividends of lower potash prices. To ensure India’s economic growth in the long run, the nation will have to do its best to destabilise global cartels, or at least secure favourable terms.
[Full Article: Potash – From Russia With Love, September 13, 2013]
Over the next few months I will be studying how cartels work, with a special emphasis on OPEC. Expect more posts on cartels on this blog in the coming weeks and months.