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Tehran to exports more flour to Iraq via Russia wheat deal

12 April 20183 min reading

Iran has reached a deal to buy wheat from Russia, Kazakhstan over 5 years. Russian grain sale to Iran is expected to reach 1.5 million tons a year. That deal would allow Iran to increase flour exports to neighboring Iraq. Iranian flour millers are operating at 50 percent of capacity and were seeking the wheat to boost sales. 

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Iran has agreed to buy the grain from Russia and Kazakhstan, and total shipments may reach as much as 1 million metric tons a year over the next five years, according to the Tehran Chamber of Commerce. The wheat can only be used to make flour for exporting, and a ban imposed in 2016 on wheat imports for domestic consumption remains in place. Iranian private millers are not allowed to use domestic wheat for flour exports. Three countries will cooperate in the field of wheat trade upon a trilateral memorandum of understanding (MoU). The MoU was signed with the aim for self-sufficiency in wheat production and taking advantage of Iran’s geographical position to turn to become a hub for exporting wheat and flour in the region.

RUSSIA GETS ANOTHER MARKET There is unused capacity at Iran’s flour mills,” Kaveh Zargaran, chairman of the agriculture committee at the Iranian trade organization, said in an interview to Bloomberg. Shipments may start at the end of next month if Iran’s private millers can obtain loans to buy the grain, he said.That deal will provide Russia to get another market for its wheat. Russia has been shipping out wheat at a record pace this season as the world’s top exporter offloads its biggest ever harvest. Attractive prices for the grain have helped the country grab market share from places like the U.S. and Europe, while Moscow has also been eyeing up new destinations such as Iran and Saudi Arabia. Russian Energy Minister Alexander Novak, who oversees trade with Iran, on Tuesday, said he expects sales to Iran to reach 1.5 million tons a year.

Iran signed a memorandum of understanding with Russia and Kazakhstan on March 4 that laid out some details of the trade, Zargaran said. The agreement leaves in place a ban on imports of wheat for domestic use, which is designed to support local farmers, he said. Iran has been encouraging flour exports, with the government amending some market rules last year, and is targeting more sales to places like Iraq and Afghanistan. Turkey, the second-biggest buyer of Russian wheat, now dominates Iraq’s market, Zargaran said. Iraq imports about 3 million tons of flour a year, meeting almost half of its demand of 6.9 million tons a year.

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