MOSCOW (Reuters) - Russia will supply around 600,000 tonnes of wheat to Venezuela in the current marketing year ending next June, Russia’s agriculture minister told Reuters, deepening the Kremlin’s support for Venezuela’s troubled economy.
Russian President Vladimir Putin and his Venezuelan counterpart Nicolas Maduro agreed a grain supply deal in May, providing a lifeline to the South American country which has faced soaring bread prices in recent years and queuing at bakeries has become common.
Russia, which last season did not ship any wheat to Venezuela, had not previously confirmed how much wheat it planned to supply under the deal.
The supplies to Venezuela will be carried out as part of commercial contracts between Russian and Venezuelan state companies, Russian Agriculture Minister Alexander Tkachev said in an interview for the Reuters Russia Investment Summit.
Pilot batches have already been sent to Venezuela, he said in written answers to Reuters’ questions. Tkachev did not provide further details.
Venezuela’s unraveling socialist government is increasingly turning to ally Russia for the cash and credit it needs to survive, according to a Reuters report published last month.
Russian state-controlled grain trader United Grain Company previously said that it would supply 300,000 tonnes of grain to Venezuela in 2017/18.
Agriculture is not the only sector with which Moscow has been cooperating with Caracas. Venezuela borrowed from Russia in 2011 but failed to keep up with payments on the debt in 2016. Russia wants to find a solution on how Venezuela will fulfill its debt obligations to Moscow by the end of this year, a senior Russian official said in September.
Russia is widely expected to harvest a record grain crop and become the world’s largest wheat exporter in the 2017/18 season which started on July 1.
The bumper harvest has led to bottlenecks at some points in Russia’s transport infrastructure, prompting a search for ways to diversify transport routes.
The agriculture ministry has recently proposed providing state subsidies for grain supplies by rail to Russia’s Black Sea ports.
Tkachev said these subsidies will cost the budget about 3 billion roubles ($52 million) and will make exports of up to 1.7 million tonnes of grain attractive for suppliers from Siberia, Urals, Volga and Central regions of Russia.
“This will allow us to balance domestic prices and ease pressure in those regions which have a long transport leg,” he added.
The ministry currently sees Russia’s 2017/18 total grain exports at 44 million tonnes, up 4 million tonnes from the previous estimate, he added.
He said there were some bottlenecks in Russia but in general the infrastructure was coping with the current crop.
Russia is currently building two grain terminals near the border with China which will add 3 million tonnes and 8 million tonnes, respectively, to total grain export capacity toward 2020, he said.
Investors are also considering construction of a grain terminal in the Baltic Sea port of Ust-Luga, according to the minister.
The ministry has been considering exporting 500,000 tonnes of grain from its stockpile to free up storage space in case it needs to accommodate a part of the currently arriving crop, and to reduce budget spending on servicing the stock.
“We are waiting for a window when commercial suppliers make a pause and we’re not jostling with each other,” Tkachev said about the timing for the sale.
He added that the ministry was keeping its forecast for Russia’s 2017 grain crop unchanged at 110 million tonnes, lower than unofficial analysts’ estimates of around 133 million tonnes.
Asked about the reason for this difference, he said there was a risk that Russia’s Volga, North-Western and Urals regions, which had delayed the harvest by 2-3 weeks, would not be able to harvest their grain before the cold weather sets in.
Farmers have already harvested 110 million tonnes of grain, before drying and cleaning, from 73 percent of the total area.
Follow Reuters Summits on Twitter @Reuters_Summits
Reporting by Polina Devitt; Editing by Susan Fenton