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Russia, Iran and Kazakhstan sign deal on wheat trade

03 April 20193 min reading

The ministries of agriculture of Iran, Russia and Kazakhstan have concluded a trilateral memorandum of understanding on long-planned wheat trade. In accordance with the memorandum, wheat from Russia and Kazakhstan will be supplied to Iran without customs duties and other fees equivalent to it.

The agriculture ministries of Kazakhstan, Russia and Iran have signed a memorandum of understanding on cooperation in wheat trade. The memorandum was signed by Deputy Agriculture Minister of Kazakhstan Gulmira Isayeva, Deputy Agriculture Minister of Iran Ali Akbar Mehrfard and Deputy Agriculture Minister of Russia Sergey Levin.

In accordance with the memorandum, wheat from Russia and Kazakhstan will be supplied to Iran without customs duties and other fees equivalent to it. In addition, Iran will allow the transit of wheat through its territory and support the import of wheat as part of the implementation of swap contracts. It will also ensure that existing or future bans, as well as other restrictions on the use, marketing, sale, supply and sale of wheat to Iran will not apply to wheat temporarily imported into Iranian territory for further processing and export. The Russian and Kazakh sides will support the development of a mechanism for providing credit lines to Iranian buyers for buying wheat from them while guaranteeing that the wheat delivered to Iran meets its sanitary and phytosanitary requirements.Parties to the agreement plan to create a tripartite working group that will address issues related to the supply of wheat in accordance with the memorandum. It is assumed that the group will meet at least once a year.The memorandum is valid for five years.

IRAN TO EXPORT FLOUR TO IRAQ AND AFGHANISTAN Talks betwen three countries started a year ago, but stalled due to a lack of financing. The deal involves Russia and Kazakhstan supplying wheat to Iranian millers, who in turn would supply flour to Iraq - a market dominated by Turkey. Iran itself meets its domestic demand for wheat, but the country is interested in importing Kazakh and Russian wheat for further processing and export to the neighboring countries.

“In the new agreement of the three sides, it is mentioned that the buyer can use a credit line opened by a bank, so funding (that was a main concern last year) will be settled. In this case, we will notice wheat transit and swaps will be increasing from Russia and Kazakhstan,” Kaveh Zargaran, the secretary general of Iran’s Federation of Food Industry Associations told Reuters.

Iran was one of the largest markets for Russian wheat until it slashed purchases in 2016 due to Tehran’s self-sufficiency drive. However, Iranian private millers, who are not allowed to use domestic wheat for flour exports, still need imported wheat. Iran can export flour produced from Russian wheat to neighbouring Iraq and Afghanistan, Zargaran said.“In this regard, wheat imports will double or triple to Iran,” he said. Russia supplied 137,500 tonnes of wheat to Iran in the previous 2017/18 marketing year, according to SovEcon consultancy. Iran, which needs 7.5 million tonnes of feed maize a year, also plans to import 3 million tons of it from Russia in next Iranian year which started in March, Zargaran said.

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