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Iraq buys flour from Iran in big policy shift

BEIRUT: Iraq has awarded a 250,000 tonne tender to buy flour mostly to Iran, marking a shift in import policy in favour of the former foe with which it fought an eight-year war, traders said on Monday.

Signalling a desire to diversify suppliers, Iraq is also negotiating to buy 850,000 tonnes of wheat from the United States and another 500,000 tonnes from Australia in what could be the country’s biggest deal since the US-led invasion of Iraq two years ago, the traders said.

“The wheat talks are facing hurdles and the quantities are not final. The Iraqis made a counter-offer of $216 a tonne that seems to have been rejected by both the Australians and the Americans,” an Arab trader familiar with the negotiations told Reuters.

“The Iran flour deal came out of the blue, demonstrating the extent of Iran’s post-war influence in Iraq, with Tehran not short of friends in the new government,” said another trader, adding that the deal was passed by a new cabinet-level committee appointed by Prime Minister Ibrahim al-Jaafari with the authority to approve major purchases.

In other buying, traders said the government has bought 200,000 tonnes of mostly South American sugar. Around 50,000 tonnes was sourced from US supplier Cargill and the rest from the Emirati Al-Ghurair conglomerate and Saudi Arabian company al-Safa.

Unlike the previous government that took over from the US-led occupation authority in July 2004, Jaafari’s government has expressed its desire to strengthen economic ties with Iran, which was named by US President George Bush as part of an “axis of evil” that had included Saddam Hussein’s Iraq.

Iraq and Iran recently declared their intention to increase trade with each other and revive an oil pipeline project linking Iraq to the Iranian refining centre of Abadan.

Both sides negotiated last year to use Iran’s Bandar Khomeini port to receive shipments of Australian wheat destined for Iraq, where congestion and a lack of security have been plaguing operations at the main port of Umm Qasr.

The ability of Umm Qasr to handle shipments has also been discussed in the talks to buy wheat, traders said.

The negotiations include the Australian Wheat Board and on the US side Cargill, ADM and trading firm Telwar.

Iraq awarded Cargill around 300,000 tonnes of US wheat last year. Another 150,000 tonnes went to Telwar and 200,000 tonnes to another small American company, which has not yet been delivered, traders said.

The volumes Iraq have awarded to US companies are still well below those bought from Australia, which dominated the Iraqi market before the US invasion and remains Iraq’s top supplier.

Australia’s position has been shaken by controversy after alleged contamination of Australian wheat shipments with iron ore dust sparked popular demonstrations in Iraq. Documents have also surfaced suggesting Australia may have been among the countries that paid kickbacks to Saddam to secure wheat deals under the UN oil for food programme. Australian Wheat Bard officials have denied paying any bribes.

Iraq has continued a rations system started more than a decade ago to help the population cope with the crushing 1990-2003 U.N. sanctions, which contributed to the economic ruin of the country.

The system has been plagued by shortages in the past two years. The Iraqi government has promised an overhaul of procurement procedures and the new cabinet that came to power after elections in January took direct authority to approve major deals. reuters

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