China has eased limits on Russian wheat imports, potentially alleviating food security worries in the world’s second largest economy while also reducing the impact of Western sanctions on Russia.
The decision to allow wheat imports from all areas of Russia was taken earlier this month during Russian President Vladimir Putin’s visit to Beijing, but the specifics were only published this week by China’s customs office.
Russia is the world’s leading wheat producer. China has previously prohibited wheat imports from Russia owing to worries about the prevalence of dwarf bunt fungus — a disease that may severely reduce wheat and other crop yields — in some sections of the nation.
China has declined to denounce Russia’s invasion of Ukraine, instead calling for “restraint” from all sides and blaming the US of “stoking the fire” in the area.
The pact is the latest in a series of agreements between Russia and China, and analysts say it benefits both countries.
It aids Beijing’s food security at a time when global food prices are reaching 10-year highs. Wheat futures on the Chicago Board of Trade surged around 5% on Thursday after Russia attacked Ukraine, with the two nations accounting for about a third of world production. Futures dipped slightly on Friday, but are still up 12 per cent for the week.
For Chinese President Xi Jinping, Food security is a top issue and the president has advocated for increased agricultural production and more import diversification.
The pact also gives Russia a reliable buyer at a time when financial sanctions or other disruptions might make exports to other nations difficult.
“Uncertainty around potential sanctions is beginning to create a potential supply shock,” analysts from Goldman Sachs wrote Thursday in a research report.
“In our view, until the uncertainty around the rapidly escalating situation is resolved, commodity price risk remains skewed to the upside, with further escalation likely to send European natural gas, wheat, corn and oil prices higher from already-elevated levels,” they said.
They noted that if other nations cut back on Russian imports, China will likely be “the benefactor” of Russian exports.
Analysts predict that Russian goods and raw resources will be “redirected to China” if global demand falls dramatically as a result of rising geopolitical tensions.
Other countries have reacted negatively to China’s move.
Australian Prime Minister Scott Morrison chastised China for its “lack of a forceful reaction” on Friday.
“At a time when the world was seeking to put additional sanctions on Russia, they have eased restrictions on the trade of Russian wheat into China…and that is simply unacceptable,” he said at a press conference.
(Adapted from CNN.com)
Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability
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