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By John Helmer in Moscow

The Russian government and the association representing Russian grain exporters in Moscow appear to have backed down from claims that Egypt wrongfully seized several cargoes of Russian wheat last month.

Until now, the public position, according to Arkady Zlochevsky, spokesman for the Russian Grain Union, was that Egyptian claims to have found weevil infestation in 137,000 tonnes of grain arrested at the ports of Safaga and Damietta, were false. He told Fairplay the affair was an attempt “at internal political manipulation in Egyptian government circles.” He added that Russian grain traders believed the seizures were a form of pressure to lower the Russian price at state grain tenders; and a bid by the Egyptian industry to reallocate shares in their market in favour of domestic or foreign rivals.

Russia provides about one-quarter of Egypt’s annual grain imports, more than double the next largest exporter, India. This year, Moscow has been planning to ship 3 million tonnes of grain to Egypt. But there is acute pressure on the Russian state stocking agency to move the grain out of silos and into the export trade, because this year’s new harvest is expected to be another bumper one.

Last year’s crop totaled 108 million tonnes, a 15-year record. And unless room is quickly cleared in the silos this month, there will be no room to store the incoming crop. Forced and discounted selling is inevitable. This dynamic has convinced some importing countries to defer their purchases until the exporters cut their prices.

If this is what has been motivating the Egyptians to quarantine the Russian cargoes, they have been too polite to say so. Foreign Minister Ahmed Aboul Gheit, in Moscow a fortnight ago to meet President Dmitry Medvedev and Foreign Minister Sergei Lavrov, announced that Egypt “will continue to import grain from Russia”. But he omitted to say how much, when, or at what discount to the May asking price. Noone asked him for the record, and the Egyptian Embassy in Moscow has been keeping mum on the subject.

Foreign Minister Lavrov said only that the Kremlin was paying the matter “very close attention”, and that what was happening was “a normal working situation.”

The speculative ups and downs of commodity pricing are normal enough, but when buyers force sellers into discounting, tempers can flare, and unreasonable things can be said.

On June 3, however, the two sides appear to have agreed that Egypt will continue importing Russian wheat, and the Russians have promised to be more careful with the quality of the cargoes they despatch.

Zlochevsky declined to confirm that 56,000 tonnes of the arrested grain have already been released to their consignees. The Egyptian Trade Minister, Rachid Mohammed Rachid, meeting his counterpart, Victor Khristenko, in Moscow yesterday, confirmed the release, but said nothing about the fate of the tonnage still being held. Rachid was reported in Moscow as saying the two governments have agreed on long-term volume targets for the grain trade, while Khristenko said this will encourage investment in port handling of grain at both ends.

The Kremlin has bigger ticket goods for sale to Egypt, including civilian aircraft, trucks, and cars. To try selling them, Medvedev will be taking a delegation of officials and businessmen to Cairo later this month. So not a word is likely to be said to disturb these arrangements about the weevil discount.

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