Exclusive: Iran buys more wheat, firms talk to Russia

PARIS/HAMBURG/LONDON Thu Feb 16, 2012 11:32am EST

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PARIS/HAMBURG/LONDON (Reuters) - Iran bought almost half a million tonnes of wheat this week, traders said on Thursday, with private buyers also in talks to import further tonnage from Russia using roubles as payment, as the Islamic republic works around Western sanctions.

Tehran has dramatically widened its footprint on international grain markets, having bought a total 1.1 million tonnes in the past two weeks, deploying non-dollar currencies with dealers also reporting talk of barter deals involving oil and gold.

New financial sanctions imposed since the beginning of this year to punish Tehran over its nuclear program have ended up playing havoc with Iran's ability to buy imports and receive payment for key food items.

The sanctions have drastically impeded its ability to obtain euro and dollar denominated financing, forcing Tehran to find alternative ways to pay for its imports.

Iran's total purchases for February-April shipment include 420,000 tonnes of German origin wheat, 300,000 to 360,000 tonnes of Canadian origin, 240,000 tonnes of Brazilian origin and 200,000 tonnes of Australian origin wheat, the traders said.

Traders declined to give price ranges for the purchases.

Of the total, 600,000 tonnes purchased by Tehran was reported by Reuters last week. At least two giant U.S. trading houses were involved in the deals.

U.S. agribusiness giant Cargill said last week it planned to continue grain shipments to Iran despite signs the Islamic Republic was struggling to process payments as trade sanctions bite.

Grain trade sources said the purchases showed Iran had succeeded in finding a way to pay for the wheat which did not involve barter transactions offering gold bullion or tankerloads of oil.

"They have found a way (to pay) using credit letters," one trader said, adding that this had allowed Iran to address the line-up of ships waiting to deliver their products.

"They are now paying," the trader added.

Traders last week said they believed the Iranian government had used companies based in Switzerland capable of financing themselves in Asia, and used yen-based contracts to finance part of Iran's recent grain imports.

FRIENDLY SUPPLIERS

Private importers are also in talks with Russian sellers over the import of grain which will bypass the banking sanctions.

Sources said any deals were likely to be done in roubles avoiding European Union and U.S. currency restrictions which were covered by sanctions over Iran's disputed nuclear program.

"Iran is trying to use whatever means they can to get grains into the country, be it Russian or any other origin," one European trader said.

"They are asking friendly suppliers to provide them with cargoes and then the suppliers will turn to the international market on their behalf. We are talking about companies in Russia and China who will obviously charge a premium."

Iranian buyers are also in talks over importing corn via Iraq, avoiding payment restrictions by arranging supply to a third party for onward delivery, traders added.

But the impact of snags to corn trade have already translated into higher prices.

"The sanctions appear to have seriously disrupted the country's yellow corn imports and domestic Iranian corn prices have shot up by between 20-25 percent since the sanctions. This will hit farmers in the short term but could lead to higher meat prices within weeks," another trader said.

(Additional reporting by Michael Hogan in Hamburg; writing by Veronica Brown; editing by Keiron Henderson.)

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