Saudi Arabia will relax its bug-damage specifications for wheat imports from its next tender onwards, it told Reuters on Thursday, opening the door to Black Sea imports and strengthening ties with Russia beyond energy cooperation, reports Reuters.
Russia has long sought access to Saudi Arabia’s wheat market as Moscow tries to take further market share in Middle Eastern and North African wheat markets from the European Union and the United States.
Wheat from the Black Sea did not previously meet Saudi specifications for zero-pest damage, but the governor of state grain buyer SAGO, Ahmad al-Fares, told Reuters that the specifications will be relaxed to 0.5% from the next tender.
Saudi Arabia had been one of the last Middle East markets not dominated by Black Sea wheat and Euronext wheat futures fell in opening trade after the news, but later steadied as Chicago prices turned higher.
The change has wider implications as Riyadh, which regards the United States as its most important ally, moves closer to Moscow, with Russian President Vladimir Putin due to visit Saudi Arabia in October.
Cooperation has been boosted by recent OPEC and non-OPEC oil output deals, which have become an additional stimulus for wheat talks, a Russian official, who asked not to be identified, told Reuters.
Russia, which has lobbied heavily for the wheat specifications to be relaxed, is interpreting the change as a green light to go ahead and start supplies, he added.
“This could be a game-changer and is moving the goalposts for German and Baltic States wheat markets. Without this exclusivity, German and Baltics wheat will have to price themselves into other markets, probably targeting Algeria,” one European trader said of the development.
Algeria effectively precludes wheat of Black Sea origins due to a low bug-damage requirement, while Iraq mainly sources its wheat from Australia, the United States, and Canada.