US Wheat Exports to Iran: Just Commercial or Carrot in the Sanctions Game?

Iran is continuing its wheat import spree against the backdrop of sanctions and the nuclear stand-off.

It has already purchased  or tried to purchase 3 million tons this year. In good years Iran is self-sufficient in wheat and has production subsidies in place to encourage such self-sufficiency. Yet it imported 7 million tons in 2008 after a drought and a bad harvest. Due to inclement weather this year’s harvest is not expected to be a good one either.

1.8 million tons of the 7 million tons came from the US. The US has never included food in its sanctions against Iran. It contemplated such measures in the wake of the hostage crisis in 1979, as declassified documents in the Carter Library reveal, that I have seen. Yet, food was never included in sanctions because it was assumed that “Iran’s oil is a powerful tool in finding alternative sources of supply for agricultural goods.”

Such trade diversion indeed happened in the wake of the grain embargo against Russia in 1980. It failed to achieve its foreign policy objectives and just angered the US agro-lobby.

Wheat sales to Iran just require the approval of the US Treasury and sales of more than 100,000 tons of any commodity to any country need to be reported to the USDA by law.

Apart form the commercial interest of the agro-lobby and the negative track record of food embargoes as a foreign policy tool the US might be tempted to use the carrot of food exports as a show of good will in negotiations around the nuclear program.

Recently US food aid delivery to North Korea coincided with a suspension of enrichment activity and a moratorium on nuclear and missile tests by North Korea. Marcus Noland and Stephen Haggard of the Peterson Institute have showed a historic coincidence of American aid offers and North Korean diplomatic concessions.

This year the US has already exported 180,000 tons of US wheat, enough to fill two large cargo ships. Another 200,000 are rumored to be contracted.

Iran has also purchased 120,000 tons of soy meal from India and asked to import a million tons of wheat from Pakistan in a barter deal against iron ore and urea.

It would be interesting to know how the Iranians pay for the US wheat imports given the financial sanctions which make dollar transaction all but impossible. Maybe a big commodity trader like Cargill or Glencore is accepting barter deals as well or takes not freely convertible Indian Rupees from Iran’s still vibrant oil trade with India.

Saudi Arabia Aims at Fish Self-Sufficiency

As Saudi Arabia has given up its subsidized wheat program and the dream of cereal self-sufficiency, it tries to attain it in fish. The initiative is led by the Saudi Agricultural Development Fund (SADF).

Currently Saudi Arabia produces 40 percent of its local fish needs and imports the remaining 60 percent.

The initiative will focus on the Red Sea. Like the Gulf coast it is already overfished by all intents and purposes. Not only by Saudi fishermen, but also by international fishing fleets.

Hence, the initiative will need to concentrate on giant fish cultivation projects. One such project already exists with the National Prawn Company (NPC) in Al-Leith, south of Jeddah.

NPC produces shrimps mainly for export, as shrimp is not as popular in the local diet, even though the Hanbali School of law, which is prevalent in Saudi Arabia, allows their consumption, contrary to the Hanafi School of law

NPC also intends to expand abroad in Mauritania, and -possibly- in East African countries.

While fish farms may alleviate the problem of overfishing, there are potential conflicts with competing land uses (the shrimp projects are in the sabkha salt marshes, not in the open sea) and there are some misgivings about land allocation to such projects among local people as I found out during a consultancy project in 2009.

On the other hand such projects can provide an economic impetus to poor and underdeveloped rural areas along the Red Sea coast of Saudi Arabia.

Like the extensive livestock industry of Saudi Arabia, it imports about 40 percent of globally traded barley, the fish farms rely on imported feedstock and need to import fish meal. Hence, any increase in self-sufficiency in fish will increase import dependence elsewhere.

Saudi Consumption of Desalinated Water Grows by 14.5% p.a.

Globally, 2-3 percent of energy consumption is used for the pumping and treatment of water for urban residents and industries. With close to 90 percent urbanization rate  and one of the highest per capita water consumptions globally Saudi Arabia is at the top of this trend.

Reuters reports on March 17 that the Saudi utility Saline Water Conversion Corp. (SWCC) plans to almost double its  desalinated water production to 6 million cubic meters per day by the end of 2015 from currently 3.3 million cubic meters.

About half of Saudi Arabia’s residential water consumption comes from desalinated water. water and average household consumption 250 liters per capita.

Most importantly desalinated water consumption rises much faster with 14.5 percent than water consumption as a whole, which still grows by a huge 7 percent per year.

Fossil water consumption still plays a large role in overall water consumption, which is dominated by agriculture with about 80 percent. The phase out of wheat production is supposed to reduce that. But there is strong lobbying for a phase-out of the phase-out and many farmers have switched to alfalfa consumption, which is even more water intensive.

Less water consumption remains the order of the day, but an increases in water tariffs is still far from realization as low water is regarded as important for political legitimacy, especially in the wake of the Arab Spring.

Chinese Pulling Out of Sudanese Agro-Project, Qatar to the Rescue….

After the oil in South Sudan has been lost, Chinese funding for a large agri-project in Nile state has been withdrawn and Sudan now hopes for Qatar money:

March 10, 2012 (KHARTOUM) – An agricultural project in Sudan’s Nile River state has been put on hold because China cancelled a loan that was needed to extend electricity in the area, president Omer Hassan al-Bashir revealed.

…..

“And so China stopped the financing [the project]” he added.

Bashir said the Qataris decided to step in and provide the loan after Beijing backtracked.

“The ball is now in the court of our Qatari brothers”.

The comment section to the article reveals a lot about the prejudices and bitterness between the North and the South. It also contains some inflated hopes about the Gulf countries as white knights with deep pockets. My personal favorite is this one:

1 March 06:10, by Jalaby

“Not a problem at all, Chinese are making billions of dollars as profit from investing in Sudan, China will loss,our Arabs brothers will take over as all the infrastructures projects in Sudan are financed by Arabs and implemented by China,our Arabs brothers are making excellent profit from their successufull investments in Sudan,Kenana Sugar Factory will always stay solid example”

Well the Kuwaitis are the largest shareholder of Kenana and would beg to differ. According to a WikiLeaks cable a Kuwaiti official opined that Kuwait did not get its money out of Kenana for 30 years…