* Syrian food suppliers face complex payment hurdles
* Shipping firms scale back port calls
* Larger suppliers backing off, replaced by lower-volume
* Import needs higher as war hits domestic harvest
By Jonathan Saul
LONDON, May 6 War-torn Syria is struggling to
buy food commodities in the quantities it needs, despite
repeatedly issuing tenders for hundreds of thousands of tonnes
of sugar, rice and wheat, trade sources say.
The sources, who have knowledge of the country's commercial
food deals, said the country's three-year civil war, which has
claimed more than 150,000 lives and forced millions from their
homes, is taking its toll, with large suppliers increasingly
unwilling or unable to provide cargoes for the Syrian market.
"What we are seeing is a fragmentation of the business now.
Smaller, fly-by-night outfits and new companies connected with
the Syrian government are more active. This is not enough in
terms of what the country needs to buy, and they cannot do the
high-volume business to meet the demand," a Middle East-based
trade source said.
On top of the risks of trading with a country wracked by
violence, suppliers to Syria require licences from U.S. and
European Union authorities, even for unrestricted humanitarian
goods, which creates extra red tape.
U.S. headquartered agribusiness company Archer Daniels
Midland Co said it had been a major supplier of
agricultural commodities to Syria in the past.
"We are open to doing business with Syria today, but there
are complexities associated with commodity trading in Syria," an
ADM spokeswoman said.
"All exports to Syria are subject to general or specific
licences, which require businesses to implement various
processes and controls to ensure full compliance with the terms
and conditions of those licences."
There are also extra complications for large consignments,
which require more sophisticated financing and greater
associated risk, which is driving down the size of trades.
"We are seeing much smaller trades being done now. There is
too much risk in transporting bigger consignments to Syria at
the moment," a European trade source said.
Before the war, larger consignments of, say, 60,000 tonnes
of grain were typical, but the biggest cargoes in a recent
sample of freight orders seen by Reuters for corn, bread-making
wheat, white sugar and barley and feed wheat were for no more
than 25,000 tonnes.
There is also a greater risk of non-payment, given the
complex mechanisms needed to get round sanctions on Syria's
"Access to funds is constrained. Suppliers are wary of
getting into contracts because they fear they won't get paid,"
said a source familiar with food security inside Syria.
Trade sources say efforts by Damascus to secure credit lines
to buy food from its close ally Iran have also been hit as
Tehran itself faces financing constraints due to sanctions over
its nuclear programme.
"A lot of banks are nervous about any trade involving Iran
or Syria and have huge compliance programmes in place. So you
can find yourself having to satisfy multiple compliance teams
that it is legitimate just to get paid," said Chris Hill of law
firm Clyde & Co.
Tarek al Taweel, director general of Syria's state-run
General Foreign Trade Organisation, which imports foodstuffs,
acknowledged the problems, though it did recently manage to take
two small shipments totalling 20,000 tonnes of sugar from Iran.
"The organisation is working toward activating the Iranian
credit line after it faced several difficulties at the beginning
of the year," Taweel told a Syrian state newspaper last week.
But Syria's needs are greater than ever, as civil strife
damages its own food production.
The International Grains Council last week forecast Syria
would need to import a record 1.9 million tonnes of wheat during
the 2014/15 season (July/June) based on a domestic crop of 2.5
million tonnes. "With recent reports of the crop being even
worse than we think, then that number will have to be revised
higher potentially," IGC senior economist Amy Reynolds said.
The International Sugar Organization estimated Syria's sugar
consumption at 800,000 tonnes in 2013/14, unchanged from
2012/13, and trade sources said Syria would need to import
nearly all of that, as the war hit its domestic crop.
"Small sugar business is being done, especially in
containers. It's a trickle," said another European trade source.
Shipping companies have also scaled back activities.
Leading global container shipping firm Maersk Line
said it only offered a weekly call to Syria's
largest cargo port Latakia via a third-party service provider
and stopped calling at Tartous, the second-largest, in 2012.
France's CMA CGM, the world's third-biggest
container group, said it still called at both Latakia and
Tartous, but volumes were substantially lower.
That is partly down to the regulatory tape, but also the
cost of and difficulty of finding insurance, said Doug Maag of
law firm Clyde & Co.
In late 2011, London's marine insurance market added Syria
to a list of areas deemed high risk for merchant vessels.
(Additional reporting by Maha El Dahan in Abu Dhabi, Gus
Trompiz in Paris and Nigel Hunt in London; Editing by Veronica
Brown and Will Waterman)