UPDATE 2-Russian escalates dispute with Belarus after CEO's arrest
* Russia bans pork imports after cutting oil supplies
CEO's arrest after collapse of potash cartel angers Moscow
* Putin also faces dispute with Ukraine
By Timothy Heritage
MOSCOW, Aug 30 (Reuters) - Russia banned pork imports from Belarus on Friday, stepping up a diplomatic and trade war over the arrest of a Russian businessman and threatening to deepen the isolation of its former Soviet ally.
Russia is one of Belarus' few diplomatic backers after 19 years of authoritarian rule by President Alexander Lukashenko but has responded furiously to the arrest this week of Vladislav Baumgertner, head of Russian potash company Uralkali.
Baumgertner was seized on Monday at the airport outside the Belarussian capital Minsk after being invited to talks with the prime minister, and then humiliated by television footage showing him being searched in his prison cell.
Since then, Russian officials have announced a 25 percent drop in oil supplies to Belarus in September, threatened to extend the cuts for several months and hinted at possible restrictions on imports of Belarussian dairy products.
Russia's veterinary regulator said the restrictions on hog and pork product imports had been imposed over concerns about African swine fever in Belarus and would not be lifted until the virus was wiped out or brought under control.
The moves could deal a significant blow to Belarus, a transit country for Russian oil and natural gas to Europe. Its economy, already in danger of collapse, is heavily reliant on agriculture and Russian oil supplies.
"Relations between Russia and Belarus seem to be delving to new lows and the expectation is that Russia will further ratchet up pressure on its neighbour via the trade channel," said Timothy Ash, an analyst at Standard Bank in London.
"All this comes as the economy in Belarus looks precariously fragile," he said.
The dispute followed the collapse this month of a Russia-Belarus sales cartel that controlled two-fifths of the $20-billion global market for potash, an ingredient used in mineral fertilisers.
In a sign that the breakup of the joint venture with Uralkali is causing problems for Belarus, a senior official at state potash producer Belaruskali said it had suspended two of its four potash mine complexes for maintenance.
Any significant fall in output at Belaruskali, which was Uralkali's partner in the potash cartel, would have a severe impact on the finances of Belarus, where the soil nutrient accounts for 12 percent of state revenue and about 10 percent of export income.
Russia has denied any of the economic or trade moves this week were connected with Baumgertner's arrest, but the timing of the measures undermines those statements.
Lukashenko, who turned 59 on Friday, has enjoyed good relations with Russian President Vladimir Putin, a fellow ice hockey and judo fan, although his behaviour has been unpredictable and the relationship between Belarus and Russia has become bumpy.
Lukashenko appears to have taken Uralkali's pullout as a personal affront. Baumgertner has been charged with abuse of his authority and Belarus has threatened charges against Suleiman Kerimov, Uralkali's top shareholder and a Kremlin ally.
But Lukashenko has taken a risk. Belarus, a country of less than 10 million, needs Russia for energy and economic handouts and as a counterweight to the European Union and the United States, which shun him because of his treatment of opponents and lack of tolerance for dissent.
The timing of the row is also unfortunate for Putin because Russia is locked in a trade and diplomatic dispute with Ukraine, another former Soviet republic which Moscow wants to dissuade from closer integration with the West.
Western European countries are following the disputes closely because oil supply cuts in the past to Ukraine and Belarus have caused knock-on disruptions to pipeline flows to countries such as Poland and Germany.
Talks this week failed to end Russia's dispute with Ukraine over Kiev's plans to sign agreements with the European Union in November, including on free trade, which would deepen its integration with Western Europe.
Moscow says Kiev must choose between the EU and membership of a customs union with Russia, Belarus and Kazakhstan. But Ukraine has ignored the warnings and the threat of unspecified retaliatory measures by Putin.
Such moves by Belarus or Ukraine are particularly sensitive for Moscow because it considers the two countries part of its "near abroad", an area where it considers Western diplomatic or economic interference as a threat.
Losing influence in either country would be a blow to Putin at any time, but particularly as relations with his Western partners are deteriorating over the conflict in Syria and his own record on democracy and human rights.