Russia has become one of the most significant suppliers of wheat to the Middle East during the past period. It has increased its wheat exports to traditional markets, such as Turkey, and gained access to new markets including Morocco and Algeria. This comes amid growing Russian trade and economic presence in the region since its military intervention in Syria, beginning of September 2015. Meanwhile, Russia aspires to boost its wheat exports to world markets in a bid to offset falling oil revenues since 2014.   

Nevertheless, Russian wheat exports to the Middle East may face some obstacles, namely the unstable political relations between Russia and some countries in the region, and fluctuations of Russian domestic production policies, as well as the moves by some states to replace imports with domestic production.

Favorable Conditions 

Recently, Russia has asserted its position as the biggest wheat exporter to the Middle East, a trend supported by several factors, which could be detailed as follows: 

1- Grain Superpower: Russian wheat production has witnessed significant growth during the past three years, like the rest of the other agricultural crops, thanks to the Russian government’s decision to ban the import of food from Western countries in the wake of the recent broad economic sanctions imposed on it, after the annexation of Crimea. According to the USDA Foreign Agricultural Service "Global Agricultural Information Network Report," this ban encouraged the farmers to increase domestic production to a forecasted average of 72.5 million metric tons of wheat in 2016/2017, an increase of 5 percent annually since 2014.

In conjunction with previous surges in production, Russia augmented its wheat export capabilities tremendously in the last period, in compensation for declining oil revenues, to become the largest exporter of wheat and flour globally, exporting about 27.8 million metric tons in 2016/2017, according to Bloomberg. Russia took advantage also of the support of international commodity trading companies such as Glencore and Cargill, which were instrumental in the management of their production surplus abroad.

2- A regional shift: Local wheat production in many Middle East countries is still unable to meet the requirements of domestic needs, forcing these countries to rely on wheat suppliers around the world to bridge the gap between domestic production and consumption. According to the US Department of Agriculture "Grain: World Markets and Trade Report," the MENA region imported about 51 million metric tons during 2016/2017, while it consumed about 105 million metric tons in the same period, becoming the largest importer of wheat in the world. 

Meanwhile, some states have recently moved towards greater reliance on importing this strategic crop from Russia and countries of the Black Sea region, due to the rising cost of shipping from the US compared to Russia. This makes Russian wheat prices more attractive to buyers from the region, as the cost of its export without shipping is USD 100 per ton, according to some estimates, compared with about USD 146 for Australian wheat for example.

3- Economic presence: Russia’s intervention in Syria, beginning of September 2015, helped it to play a greater military and political role in the Middle East, and thereby growing its economic presence in the region. In the energy sector, for example, many Russian companies in oil prospecting and marketing, such as Rosneft and Gazprom have now extensive interests in different countries such as Iraq, Libya and Iran. Moreover, Russian businesses play a major role in the development of peaceful nuclear energy in the region, as ROSATOM State Atomic Energy Corporation will build the first nuclear power plant in Jordan, which is expected to begin operation by 2023.   

Various Indicators

There are many indicators revealing Russia’s growing role in securing wheat supplies to the Middle Eastern markets, notably the following: 

1- Attractive traditional markets: Russia recognizes that local production surpluses, which are increasing annually, need large foreign markets to absorb them, such as the Turkish market, to which Russia has become the main supplier. In this respect, Russia welcomed in last June resolving its differences with Turkey over wheat exports, and the two countries signed new wheat export contracts without any price premiums, like those introduced in the first months of 2017 after Turkey imposed large tariffs on importing Russian wheat.

* Different periods: Turkey and Morocco (June 2016-January 2017), Jordan (2016), Algeria (July – October 2016), Syria (2014-2016).

* Percentages are calculated based on the annual reports of the U.S. Department of Agriculture for grain in a number of Middle East countries.

2- Access to new markets: Unlike traditional markets, Russia is also eying new markets in the region, which are dominated by its competitors such as Ukraine, France and US. In this regard, Russia provided Morocco with about 700 thousand metric tons of wheat, due to increased domestic consumption of wheat in Morocco. 

With such amount of wheat exports, Russia joins the list of top wheat exporters for the traditional market, which includes the EU, Ukraine, Canada and the US. Three years ago, Russia succeeded in exporting the first shipment of wheat to the Algerian market, about 60 thousand metric tons.  

Russia seeks also to reinforce its presence in other markets in the region like Jordan, as Russian Agriculture Minister Alexander Tkachev announced in March 2016, that his country was ready to increase its supply of wheat to Jordan. In this regard, he said: “We may also raise supplies of our grains to Jordan and welcome expansion of exports of Jordanian production to Russia," 

3- Geopolitical markets: Considering Russia’s support for the Syrian regime during the past years, it was only natural that the latter depends on Russian grain imports to secure food for the regime-held territories. This comes at a time where Syria and Russia are bound together by long-term economic agreements that enhance the Russian economic presence in Syria during the next stage.  

In this vein, Russia played a key role in securing wheat supplies for the Syrian regime, whether through providing food aid or opening credit lines to finance imports. According to the Syrian Internal Trade Minister Abdullah al-Gharbi, Syria imported about 1.7 million metric tons of Russian wheat, while consumption in the regime- held areas reached about 2 million metric tons of wheat annually, and the domestic production meets only 15 percent of previous quantities. To address any risks that may affect wheat supplies, the Syrian government concluded last September, three-year agreement to buy 3 million metric tons of Russian wheat, a move that boosts the economic interests of Russia in the Syrian market.

Potential Obstacles

It can be argued that the domestic conditions in Russian and regional conditions in the Middle East played a key role in the growth of Russian wheat exports to the region during the past period. However, there are various potential obstacles, which may hinder the Russian wheat supplies to the Middle East in the future. The first is the instability of political relations between Russia and some countries in the region, such as the tension between Russia and Turkey in late 2015, impeding wheat trade between both countries for several months. Besides, there are several trends, which suggest that economic interests between Russia and some countries in the region are temporary and governed by intermediate conditions; hence, their impact may diminish in the future.

Secondly, the fluctuation of Russia’s domestic production policies, as indicated, for example, by the Russian government tariffs, imposed in 2014 until last year, worth USD 41 per ton to stabilize domestic grain market after a wave of rising prices at home, making the Russian wheat prices less attractive than before. In addition, the Russian wheat quality may not be sufficient to attract some buyers from the Middle East region.

Thirdly, many countries in the region seek to replace imports with domestic production such as Iran — a traditional buyer of Russian wheat-which banned wheat imports for a year as of March 2016, after its success in achieving a significant proportion of self-sufficiency of the crop for years to come. Morocco is also expected to reduce its imports from Russian wheat in the current season, amid projections of increased domestic production, after the drought is over, to 6.25 million metric tons compared to 2.7 million metric tons in 2016.

In conclusion, although Russian wheat supplies constitute an important figure in Russian exports to the Middle East countries, there are major variables, which may impact their level during the next period. These variables are not confined only to the fluctuation of political relations between Russia and some countries in the region, but extend also to the continued internal political transformation in Moscow.