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Saudi Arabia opens its door to Russian wheat

10 September 20193 min reading

Saudi Arabia will relax its bug-damage specifications for wheat imports from its next tender onwards, it told Reuters, opening the door to Black Sea imports and strengthening ties with Russia beyond energy cooperation.

Russia has long sought access to Saudi Arabia’s wheat market as Moscow tries to take further market share in Middle Eastern and North African wheat markets from the European Union and United States. Saudi Arabia had been one of the last Middle East markets not dominated by Black Sea wheat. Wheat from the Black Sea did not previously meet Saudi specifications for zero-pest damage, but the governor of state grain buyer SAGO, Ahmad al-Fares, told Reuters that the specifications will be relaxed to 0.5% from the next tender. It could be bad news for European Union nations such as Germany, which currently dominate sales to the kingdom. Saudi Arabia was the second-largest buyer of EU wheat last season. The change has wider implications as Riyadh, which regards the United States as its most important ally, moves closer to Moscow, with Russian President Vladimir Putin due to visit Saudi Arabia in October. Cooperation has been boosted by recent OPEC and non-OPEC oil output deals, which have become an additional stimulus for wheat talks, a Russian official, who asked not to be identified, told Reuters. Russia, which has lobbied heavily for the wheat specifications to be relaxed, is interpreting the change as a green light to go ahead and start supplies, he added. “It’s a breakthrough,” said Dmitry Rylko, director general at the Institute for Agricultural Market Studies, or IKAR, in Moscow. “We may achieve serious success.” Russia could ship 500,000 tons of wheat a year to Saudi Arabia, according to Rylko. It may be able to take market share away from nations such Germany, Poland and Baltic states because of the close proximity of Black Sea ports to the kingdom, Rylko said. Bigger supplies and competitive prices have helped Russia expand exports across the Middle East and North Africa in recent years, and the country is a key supplier to No. 1 importer Egypt. It aims to gain access to Algeria, a crucial market for France, where Russian grain also doesn’t typically meet quality standards. Algeria effectively precludes wheat of Black Sea origins due to a low bug-damage requirement, while Iraq mainly sources its wheat from Australia, the United States and Canada. Analysts said the move was a further sign of warming ties between Saudi Arabia and Russia since King Salman visited Moscow in 2017, the first Saudi monarch to do so, although the two countries stand on opposite sides on Syria and Iran.

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