September 9, 2014 / 2:01 PM / 5 years ago

Islamic State advances in Iraq force Syria to cancel wheat deal

ABU DHABI (Reuters) - Syria has canceled a deal to sell 200,000 tonnes of wheat from its 2013 local crop to Iraqi private traders as conflict raging in both countries has paralyzed transport of the grain, a source at Syria’s state grain agency said on Tuesday.

The deal was agreed in a June tender, days before Islamic State fighters seized large swathes of Iraq in a lightning offensive.

The wheat is still being held in silos in the northeastern city of Hassaka, just 50 km (31 miles) from the border with Iraq’s northwest Nineveh Province which was overrun by the Islamic State in June.

“The security situation and Islamic State control of the area has made it impossible for the deal to be implemented and we have had to cancel it,” a source at Syria’s General Establishment for Cereal Processing and Trade (Hoboob) told Reuters.

The Sunni Islamist group, which also holds the Syrian city of Raqqa, to the southwest of Hassaka, has declared a mediaeval-style caliphate on the land it controls in Syria and now in northern and western Iraq.

Hoboob had given the traders a month to try and transport the wheat but they were unable to close the deal, the source said.

Hoboob had said it sold 100,000 tonnes of soft wheat and 100,000 tonnes of durum wheat to the Iraqi private traders from its 2013 crop in June.

The wheat was sold at 206 euros a tonne, on a free-on-truck basis. The grain was in the Hassaka region of Syria.

Despite the cancellation of the deal, there have been reports of Syrian wheat being smuggled by Islamic State fighters into Iraq.

Hassan Nusayif al-Tamimi, head of the independent nationwide union of Iraqi farmers’ cooperatives, said last month some of the local Syrian wheat crop was smuggled into Iraq by the fighters to sell to Iraq’s government at higher prices.

The move by Syria to sell some of its wheat was surprising as experts predict a fall in the war-ravaged country’s 2014 crop to around a third of pre-war levels.

The U.S. Department of Agriculture (USDA) has estimated imports for 2014/15 at 2 million tonnes.

Traders have said it may be easier for Syria to sell its old crop from Hassaka to Iraq rather than transport it back to Damascus across various rebel-held areas.

Syria has so far bought over 500,000 tonnes of local wheat from its 2014 season, the source said.

“The local buying campaign will continue until the end of this month and after we have all the figures we could open the door for imports,” he said.

Agricultural experts, traders and Syrian farmers who talked to Reuters in April gave crop estimates of between 1 million to 1.7 million tonnes.

The USDA put Syrian wheat consumption in 2014/15 (July/June) at 4.7 million tonnes.

Additional reporting by Nigel Hunt in London; Editing by Veronica Brown and Louise Heavens

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