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By John Helmer in Moscow

The grain trade war between Moscow and Cairo took a fresh twist this week, following the announcement during President Dmitry Medvedev’s visit to Egypt on Tuesday that the two governments have agreed on terms for direct, large-volume shipments.

A Russian government briefer has claimed that Medvedev agreed with his counterpart, Egyptian President Hosni Mubarak, to the Egyptian proviso that Russian grain sales to Egypt would grow above the current annual 3-million tonne level, if quality issues are resolved.

In May, government officials at the Egyptian ports, Safaga and Damietta, seized and quarantined an estimated 137,000 tonners of grain which had been put on board ship at Novorossiysk. The seizures were reported in the Egyptian and Russian media to have been ordered by the Egyptian prosecutor, allegedly on claims of high weevil infestation. Subsequently, there are unconfirmed reports of the release of 56,000 tonnes, leaving an estimated 81,000 tonnes of Russian grain in Egyptian limbo. Medvedev’s one-day appearance in Cairo, and reference to the grain trade problem, appears not to have produced the release of this cargo, according to a source at the Russian Grain Union.

What then was Medvedev intending to do about the problem in Russia’s most important market for export wheat?

Russian traders have told Agriprods.com they blame the Egyptian authorities for attempting to delay landing of the Russian grain, in order to force Russian sellers to lower their price. The pressure on price has intensified as last season’s grain stocks must be cleared from silos, in order to make space for the new Russian harvest. Last year’s Russian crop was a bumper one at 108 million tonnes. This year’s is projected to be 10% less. But silo space, and port handling capacity, are limited. According to some Russian trade sources, the Egyptian importers have been trying to exploit the Russian logistical difficulties, and extract a bargain from sellers and shippers.

The new twist, according to commercial grain traders in Moscow, surfaced as Medvedev left Cairo.

The spokesman of the Russian Grain Union, Arkady Zlochevsky, told Agriprods.com there are no quality issues to be resolved, because the Egyptians have provided a visiting delegation of Russian food and standards experts with no evidence that the shipments arrested last month are contaminated beyond the inspection certificate norms. Liability for the cargoes, most of which remain under quarantine in Egypt, belongs to the international inspection company, which issued the export certificates at Novorossiysk port, says Zlochevsky.

Other Russian grain exporters say they suspect Medvedev has agreed on a deal to cut the commercial grain traders out of the business entirely, and sell to Egypt only wheat and corn from the United Grain Company (UGC — Russian acronym OZK). This 100% state-owned outfit was created by a Medvedev decree on March 20. Last year, the federal budget outlayed Rb46 billion (about $1.6 billion) to buy grain from farmers, and support their market price, while filling the silos with a buffer stock and strategic grain reserve.

It’s that grain which Moscow traders and exporters now suspect has been given the priority for export by Medvedev’s deal with Mubarak. The weevils are not expected to be a problem for the Egyptians, so long as the consignor is Medvedev’s OZK.

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