* Country faces worst wheat harvest in decades
* Commercial deals still complex to conclude
By Jonathan Saul and Michael Hogan
LONDON/HAMBURG, Oct 11 Deliveries of wheat are
starting to reach Syria's ports as its bank accounts abroad are
gradually being freed from sanctions, with grain traders
detecting a greater willingness from European governments to
allow deals to go ahead on humanitarian grounds.
As civil war grinds on, Syria is facing its worst wheat
harvest in three decades. President Bashar al-Assad, who has
already escaped air strikes as punishment for chemical weapons
attacks, will now be able to bolster depleted food supplies.
Trade sources familiar with commercial deals said at least
500,000 tonnes of bread-making wheat that Syria had tried to
obtain months ago, but which could not be paid for because its
foreign bank accounts were frozen, were now starting to be
"What we are seeing at the moment is Syrian government
business that was done in the past -- between four to six months
ago -- that is only now being executed," a Middle East based
trade source involved in deals said. "It looks like the payment
issues are being resolved."
A source with Syria's state wheat buyer, the General
Establishment for Cereal Processing and Trade, (Hoboob),
confirmed deals were struck months ago for 500,000 tonnes of
wheat, adding that 150,000 tonnes had recently been delivered
using previously frozen funds.
"The willingness amongst governments that have frozen Syrian
assets to offer waivers allowing the regime to tap into these
funds in order to buy food staples is likely to increase in the
short term," said Torbjorn Soltvedt of risk consultancy
"Following the U.S. administration's decision to forgo air
strikes - at least in the short term - the conflict remains a
stalemate in which the humanitarian situation will continue to
Foodstuffs are not covered by international sanctions, but
banking sanctions and asset freezes imposed by Washington and
Brussels created a climate that had made it difficult for some
trading houses to do business with Damascus.
Syria has struggled for several months to conclude deals to
buy sugar, wheat and rice in international tenders using frozen
funds, partly because of difficulties in securing permission
from governments to free those funds.
Unlocking the bank accounts is up to member states in the
European Union and trade sources familiar with deals said the
moves were due to concerns over the worsening humanitarian
situation and attempts to free up funds were aimed at
alleviating it. An EU spokesman has confirmed that such trades
are not subject to restrictions, but it was up to authorities in
member states where the banks are located to authorise the
Banking sources pointed to several Middle Eastern banks with
operations in Europe that had frozen funds. One trade source
said Syria had paid for the wheat using funds in some of the
Arab owned banks.
Banking sources said banks had pooled previously blocked
funds to close some of the deals.
"We have always been very strong in doing business with
Syria. Of course under today's difficult circumstances, one
tries to do the doable," said a source at one of the Arab banks,
who declined to be identified due to the sensitivities of the
"The Syrian government continues to heavily restrict the
distribution of aid. This exposes any countries that unfreeze
Syrian assets to criticism that they are strengthening the
position of the regime, which relies on the distribution of food
in the areas it controls to boost support," Maplecroft's
Before the conflict, banks with large Syrian activities
included Germany's Commerzbank. Asked about humanitarian deals,
a Commerzbank spokesman said, "we are currently not doing any
France has cleared the use of frozen Syrian bank assets to
pay for exports of food as part of a European Union system that
allows such funds to be used for humanitarian ends, a trade
ministry spokeswoman said last month.
Trade sources said the wheat had been sourced from France
and Black Sea producers especially Ukraine and Romania.
Around 250,000 to 300,000 tonnes of French wheat is expected
to load for Syria, some of which shortly, sources said.
"We are not in a similar situation to Egypt, where sales are
well organised. This is a country at war with everything this
implies in terms of disruptions," a trader close to the matter
Deals had been concluded using private companies including
middle men in Syria.
The Middle East source said Syria was opting to conclude
some business outside of formal tenders. "Non-tender business
also allows them more channels including some involvement from
the private sector."
A separate trade source said there was talk of a further
purchase this week of up to 150,000 tonnes of grains comprising
wheat and corn, although others could not confirm details.
"Although Russia and Iran will remain the main lifeline for
the Syrian regime, the increasingly fragmented war economy
continues allow a wide range of local and international actors
to conclude ad-hoc commodity deals," Maplecroft's Soltvedt said.
Despite signs of business emerging, Syria is still behind on
purchases. The conflict has taken its toll on Syria's vital
sea-borne trade, which has dropped despite efforts to keep
commercial supply lines open.
Agribusiness group Cargill said it aimed to sell
agricultural commodities to places such as Iran and Syria as
food is specifically excluded from sanctions.
"Obviously this is not an easy thing because when we do this
business our thinking is first and foremost for the safety of
the people involved in making these deliveries," Roger Janson,
Cargill's head of ocean transportation, said in a recent
Commodity traders say it is impossible to accurately
estimate Syria's wheat needs.
Estimates collated by Reuters from over a dozen grain
officials and local traders in late July after the harvest
suggested Syria would need to import 2 million tonnes of wheat
in the coming year to meet normal needs after a crop of 1.5
million tonnes, under half the prewar norm.
Syria's peacetime import needs varied greatly according to
its harvest, with imports of about 400,000 tonnes needed in the
year before the war began in 2011.
"No one really has an accurate picture of Syria's actual
crop as the country is a war zone and independent crop analysts
cannot visit the grain areas and see for themselves how the crop
developed and how much was actually harvested," a European
"It must be assumed the fighting will have damaged peacetime