Exclusive: Syria buys grain via Lebanon to beat sanctions

HAMBURG (Reuters) - Syria is importing significant volumes of grain via Lebanon to work around western sanctions and secure vital supplies, European traders told Reuters.

The trade is not illegal because food imports are not included in sanctions imposed by the European Union, the United States and other Western countries on President Bashar al-Assad's government over his crackdown on a revolt.

But the measures have blocked access to trade finance for Syria in the same way as similar penalties imposed on Iran over its nuclear program.

Growing numbers of Syrians are struggling to obtain food, with prices of staples more than doubling after more than a year of conflict that has cost more than 10,000 lives.

Some people in the capital Damascus, long spared the violence but now shaken by explosions overnight, say they are stocking up with at least a month's supplies.

"Syrian grain imports are being transacted in large volumes using offices in Lebanon to handle the paperwork and act as initial buyer," one trader said.

"The deal is then re-booked in Lebanon, and ships are then later diverted to Syrian ports."

Some trade sources said hundreds of thousands of tonnes were involved, while deals in smaller volumes are also being booked via dealers based in Dubai.

"Food imports themselves are not stopped by the sanctions, but it is the impact of the banking sanctions which is disrupting imports," a second trader said.

Syrian imports booked in the past two months include wheat for food as well as barley and corn for animal feed.

The Black Sea region, including Ukraine and Russia, has been the main grain source, dealers said.

CLOSE TIES

Lebanon has close trade and business ties with neighboring Syria but is politically divided between allies of Damascus and his opponents, who pushed Assad to end nearly three decades of Syrian military presence in Lebanon seven years ago.

Lebanese Prime Minister Najib Mikati, whose government includes ministers from Hezbollah and pro-Syrian Christian parties, says he is seeking to prevent Syria's crisis from spilling over into his country.

Mikati and the central bank have pledged to fully implement international sanctions related to Syria, but his foreign minister last year rejected an Arab League decision to impose sanctions on Damascus, saying Lebanon would not implement them.

Some Lebanese trading firms seem ready to take the risk of being cut off from Western finance to do business with Syria, the second trader said.

"For the Lebanese, Syria is their traditional market," he added. "Major wheat supplies to Syria seem to be arriving under state-to-state deals."

Ukraine said in March it would supply Syria with 300,000 tonnes of food wheat under the terms of an inter-government agreement.

DEADLOCK

Dealers said normal direct grain trade with Syria is no longer possible because of sanctions.

"I had requests for 10,000 tonnes of barley and 10,000 tonnes of corn from Syrian buyers last week, but I cannot deal with Syria as my banks in Germany and Switzerland will not provide finance," a trader said.

"Regular grain trading with Syria has stopped. It is another Iran."

The Iranian government was compelled to step in and purchase millions of tonnes of wheat in February and March after western sanctions disrupted normal grain imports.

"Whether the Syrians have imported enough for their needs is another question which is difficult to answer, but a large volume has been booked via Lebanon," another dealer said.

The United Nations' Food and Agriculture Organisation (FAO) in March estimated that Syria would need to import about 4 million tonnes of grain in the July 2011/June 2012 season, up by 1 million tonnes on the previous year-ago period after a poor harvest in summer 2011.

The United Nations bought Turkish sunflower oil for Syria, traders said on Monday.

Syria's own 2012 wheat and barley harvest is due to start in May, which will reduce the country's import needs at least temporarily in the coming months, traders said.

The FAO has warned that the outlook for Syria's 2012 harvest is uncertain because of the impact of the unrest.

Syria's state grains agency issued an international tender on April 30 to buy 150,000 tonnes of animal feed barley.

(Additional reporting by Dominic Evans in Beruit; editing by Veronica Brown and Philippa Fletcher)

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