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UPDATE 1-Syria pondering options for funding Russian wheat purchase
October 5, 2016 / 4:10 PM / a year ago

UPDATE 1-Syria pondering options for funding Russian wheat purchase

* Syria seeking wheat after worst harvest in 27 years

* Damascus subsidises bread for areas it controls

* Russia says will provide only 100,000 tonnes as aid (Adds quotes, details, background)

By Maha El Dahan and Olga Popova

ABU DHABI/MOSCOW, Oct 5 (Reuters) - Syria is looking to finance a 1 million tonne wheat purchase from political ally Russia in an attempt to fill its supply gap after war and poor rainfall nearly halved its local crop.

The government of President Bashar al-Assad was forced to tender this summer for an unprecedented 1.35 million tonnes of imported wheat from Russia to ensure supply of the flat loaves that are a staple for the Syrian people.

Syria's state grain agency, the General Authority for Cereal Processing and Trade (Hoboob), has received "suitable prices" for the Russian wheat tender but several financing scenarios are still being considered, a government source said on Wednesday.

"We have received 16 offers and have presented several scenarios for funding and we are awaiting the approval of one of them in order to proceed," the Syrian government source said.

The financing of the deal could be through immediate payment or through various credit facility options, he said without elaborating.

It was not clear when a final decision would be made.

In Moscow, a source in Russia's Agriculture Ministry said his government would only provide 100,000 tonnes of wheat as humanitarian aid but the rest would have to be paid for.

Before its civil war erupted in 2011, Syria had been a wheat exporter, producing four million tonnes in a good year and able to export 1.5 million tonnes. Now the whole industry, including wheat farms, seed distribution, milling and bakeries have all been greatly affected by the conflict.

Syria's wheat harvest nearly halved to 1.3 million tonnes this year, the lowest in 27 years, as fighting and poor rainfall further degraded the farming sector and the nation's ability to feed itself.

Hoboob was only able to procure slightly more than 400,000 tonnes of the total amount of Syrian wheat, creating a large import need for Assad's government. Perilous transport routes have meant the Syrian state has struggled to buy from traditional "bread-basket" areas outside government control.

SHORTAGES

The Damascus government subsidises bread for the areas it controls and aid agencies offer supported prices in some areas, but Syrians in other parts of the country suffer bread shortages and high prices.

The Russian Agriculture Ministry source said the 100,000 tonnes provided as aid may include grade 5 wheat, with a protein content of less than 12.5 percent but any further amounts would have to be paid for in commercial deals.

"We are ready to supply even more from Siberia but if they pay. The 100,000 tonnes is humanitarian aid to be paid by us (Russia)," the source added.

The Russian Agriculture Ministry declined to comment on the issue when contacted by Reuters.

Two Russian agriculture sources said Syria might only be able to pay for a total of 250,000 tonnes of wheat and not the whole quantity of one million tonnes for which Hoboob is tendering.

Syria has previously tapped frozen funds in foreign bank accounts to step up purchases of food stocks including wheat. It has also relied on Iranian credit lines.

Syria's economy has been hurt by a depletion of foreign reserves that were estimated at around $16-18 billion before the conflict.

The Syrian war has killed more than 250,000 people, created the world's worst refugee crisis, allowed for the rise of the Islamic State group and drawn in regional and major powers. (Reporting by Maha El Dahan in Abu Dhabi, Olga Popova and Polina Devitt in Moscow; Editing by Adrian Croft and Gareth Jones)

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