Exclusive: Syria signs 3 million ton wheat contract with Russia

DAMASCUS (Reuters) - Syria has struck a deal to buy 3 million tons of wheat from its ally Russia over three years and is working to secure credit finance from Moscow for the grain, Syria’s internal trade minister told Reuters.

FILE PHOTO: Ears of wheat are seen during sunset in a field of the Intikulskoye farm outside the Siberian village of Tolsty Mys, in Krasnoyarsk region, Russia August 29, 2017. REUTERS/Ilya Naymushin

Beside providing Syrian President Bashar al-Assad with vital military support in the country’s six-year conflict, Moscow has also supplied some wheat, which is critical for the production of the country’s heavily subsidized staple flat bread.

“There are contracts being followed up with Russia,” Abdullah al-Gharbi, the minister of internal trade and consumer protection, said in an interview.

“Now, there is a three-year contract we signed, and we are trying to secure finances for it from the Russian side,” he said, adding the overall deal was for 3 million tons.

“We are importing around 1.7 million tons this year from Russia,” Gharbi said.

U.S. and EU banking sanctions and asset freezes against Syria have made it difficult for some commodity trading houses to do business with the Syrian government, though trade with Russia poses fewer problems.

Russia’s Agriculture Ministry declined to comment.

Syria has announced several large commercial deals for Russian wheat in the past twelve months, but none has so far been fulfilled, according to Russian customs data.

In September, a purchase of one million tons of Russian wheat was called off, a government source told Reuters.

Russian customs data show Russia supplied 125,200 tons of wheat to Syria in the 2016/17 marketing season, which ended on June 30.

Before the multi-sided conflict, Syria could produce 4 million tons of wheat in a good year and export 1.5 million tons. But the fighting has damaged and disrupted farms, seed distribution, mills and bakeries across the country, while the government also lost control of agricultural regions.

Last year, violence and a lack of rain brought the country’s total harvest down to a 27-year low of 1.3 million tons, according to U.N. estimates, and the government collected 400,000 tons from areas it controls.

This year, Damascus has gathered 350,000 tons of wheat from farmers so far, Gharbi said.

The Russian imports will account for the bulk of the 2 million tons of wheat consumed annually in Syrian government territory.

But recent military advances have restored state control over fertile lands in the provinces of Deir al-Zor, Raqqa and Aleppo, Gharbi said, and the government expects to double its collection of wheat and cotton next year.

“Every time a region is liberated, the farmers deliver the wheat to us again,” he said.

The government is also aiming to build its strategic wheat reserve to 1 million tons, Gharbi said. In August, he said Syria had more than six months’ worth of reserves, up from just 17 days last year.

Reporting by Kinda Makieh in Damascus; Additional reporting by Polina Devitt in Moscow; Writing by Ellen Francis in Beirut; Editing by Tom Perry, David Clarke and Mark Potter