Iran’s state procurement agency, the Government Trading Corporation, reportedly purchased several hundred thousand tons of Russian milling wheat last week for April and May shipment.
The tender caught most of the market by surprise, especially with Iran’s wheat harvest expected to commence in May, UkrAgroConsult reported.
News of the deal came as vessels carrying more than 650,000 tons of Russian wheat remain stranded at the major Iranian ports of Bandar Imam Khomeini and Bandar Abbas, unable to discharge due to documentation issues and foreign exchange payment delays.
Some of the vessels have been anchored in the Persian Gulf since September last year, as the Central Bank of Iran’s lack of foreign currency reserves severely hampers the flow of essential goods, such as wheat and sugar, into the country.
With the demurrage bills growing daily, Russia sent a trade delegation to Iran on Jan. 25 in an effort to resolve the issue. The negotiations resulted in an Iranian government agreement to pay for all agricultural products caught up by the payment delays. However, virtually nothing has been discharged and released by shippers since the meeting.
The quality of the food cargoes after they are finally discharged is a rapidly escalating challenge due to the extraordinarily long delay in the vessel holds.
Western sanctions on Iran over its nuclear program exclude food imports, but the restrictions have severely affected the country’s financial system, necessitating complex and unreliable payment arrangements with its international suppliers. The value of the Iranian rial has dropped by almost 50% against the US dollar since the failure of nuclear talks with the West in September, exacerbating the dire situation.
In November last year, a report released by Iran’s Ports and Maritime Organization put the discharge backlog due to the payment delays at the port of Bandar Imam Khomeini alone at 37 vessels carrying 2.2 million tons of goods, including commodities such as wheat and sugar. The value of those distressed cargoes was put at more than $1 billion.