Russia-Turkey tensions stymie new wheat deals

Reuters — Political tension between Russia and Turkey has put a brake on new wheat deals between the two countries and created uncertainty about existing agreements, traders said Thursday.

Relations between Russia, one of the world’s largest wheat exporters, and Turkey, the largest buyer of Russian wheat, have quickly deteriorated after Turkey shot down a Russian air force jet during an operation in Syria earlier this week.

“Everyone has stopped new sales (to Turkey) until the situation is solved. There is no clarity over the current supplies,” a Moscow-based wheat trader said.

Moscow, in the wake of the incident, has strengthened control over food and agriculture imports from Turkey, which are mainly fruit and vegetables.

Russia, which supplies wheat to Turkey mostly by the Azov Sea, exported 1.4 million tonnes of wheat to Turkey in July-October, out of 10.1 million tonnes of its total shipping of this type of grain for the period.

“Exporters in Russia do not want to give any firm commitments to Turkey under these conditions,” another trader said, adding that any action to stop exports to Turkey would hurt Russia.

“There is no official ban from the Russian side but… buyers in Turkey… have started looking at alternative origins to prepare themselves in case of any ban from Russia,” he added.

Before the political row, some Turkish buyers preferred Russian wheat as it was offered at cheaper prices than wheat from Ukraine, other parts of Europe and the U.S.

Some traders expect Russia to curb wheat exports to Turkey with informal limits — similar to its reaction last December when the rouble collapse caused a jump in wheat exports, triggering a state food safety watchdog to significantly slow the issue of export certificates.

“There will be retaliatory measures,” the third trader said. “The aim is to make supplies to Turkey unattractive for exporters,” he said.

Russia could find new demand for its grains in the Middle East and Africa “if needed,” Russian Agriculture Minister Alexander Tkachev said Thursday. His comment was passed to Reuters by the ministry. He did not say in which circumstances the need could occur.

Prime Minister Dmitry Medvedev, in a further reaction to the jet downing, on Thursday ordered the Russian government to draw up measures that would include freezing some joint investment projects with Turkey.

— Reporting for Reuters by Sarah McFarlane in London and Polina Devitt in Moscow.