Putin leads "wheat diplomacy" through the new Kremlin oil

Russia is slowly making its way across Eurasia, Africa and Latin America as an agricultural export power as it looks to reduce its dependence on oil and expand its global diplomatic reach.

The master of spikes in the world

When Russia ranked first in the world in 2017, as the first source of wheat supply, President Vladimir Putin used his famous phrase at the time, “We are number one.” Today, the President turns this rank into an effective diplomacy in his country’s relationship with the countries of the world, no less important than closed-room diplomacy in Ministry of Foreign Affairs.

MOSCOW - Those close to Russian President Vladimir Putin are still able to draw a frown on his face, as soon as he heard from senior Russian officials in his first economic meeting after assuming the presidency in 2000 that "Russia imports more than 50 percent of its food."

Today, Russian officials draw cheerful features of the same president as he leads what we might call the country's wheat policy or economy, which restores the country's economy to strength.

Russia, according to Putin, is not just a factory whose gears do not stop rotating for a Kalashnikov rifle, and an oil exporter that compromises, agrees and disagrees with the OPEC countries. Russia is a country that is able to ensure its food security first, and the strength of the economy second, in terms of exports.

It suffices to admit that Russia ranks first in wheat production in the world, and is a source for a large number of countries, which made Putin practice his political plans with “wheat diplomacy”, considering that diplomacy is fruitful and influential with the power of the arms economy.

Putin launched a state-led program to develop agriculture through national projects aimed at stimulating investment and developing production in 2004. This program included goals to ensure 80-95 percent of self-sufficiency in major products, including grain.

A decade later, the Grain Charter was established to enhance market transparency. The major producers agreed with the state to make this market not only positive, but also influential in the country's policy with other countries of the world to increase the amount of exports.

This was helped by the sharp depreciation of the ruble, which made exports cheaper, after the imposition of US and European Union sanctions on Moscow following the 2014 annexation of Crimea and the confrontation with neighboring Ukraine. In 2017, Russia became the world's largest wheat exporter, overtaking the United States and Canada.

“We are number one, we have beaten the United States and Canada,” Putin announced at a press conference after his famous sentence. Of course he meant wheat. But this meaning is no less important than oil and weapons.

United Nations figures estimate that the world will need to produce 40 percent more food by 2050 just to keep up with a global population that is expected to rise by two billion people over the next 30 years.

Agricultural power

Today, Russia is slowly making its way across Eurasia, Africa and Latin America as a powerful agricultural export power as it looks to reduce its dependence on oil, locate new markets, and expand its global diplomatic reach.

Most economic analysts expect that Russian grain will become the new Kremlin's oil, as a commodity through which some countries can remain dependent on Russia for imports, or at least open political doors with other countries.

In a statement to the Financial Times, Madina Khrustaleva, a regional analyst at TS Lombard, attributed the Russian-Saudi agreement to reduce oil production in 2016, which gave birth to the OPEC Plus gathering, to wheat diplomacy, when Moscow made oil concessions in exchange for the opening of Riyadh. its markets for Russian grain.

Experts unanimously agree that grain exports have deepened Russia's presence in developing countries, especially those nearby or close enough that logistics are no longer a problem.

The Financial Times quoted Oleg Rogachev, a member of the board of directors of Russia Grotrans, as confirming that Russia's profits are due to its geopolitical position in exports.

“Most of our customers who are undernourished, are practically next to us, they are very close, they are all from Africa, the Middle East, Asia Pacific countries and the Far East,” he said. The shortest and easiest way to meet their needs is with supplies from Russia.”

But wheat is not a competitor to oil in Russia’s policy, as much as it is supportive and beneficial, as Moscow produces enough crude oil to meet 10 percent of global demand, and previously used oil money to import most of its food after the collapse of the Soviet Union in the early 1990s.

Today, the new Tsar Putin has made Russia almost self-sufficient from grain to cheese. Russia's wheat imports represent a third of the needs of the Middle East and Africa, and ten percent of those in Asia. It also provides about a fifth of the total demand for wheat on the planet.

Russian Agriculture Minister Dmitry Patrushev has drawn up a plan to add another 50 percent to the value of agricultural exports by 2024. He is also under pressure to increase grain production to 140 million tons by 2025 to meet the needs of export markets.

Food is a tool of diplomacy

1/5 of the total demand for wheat in the world is supplied by Russia today from the Middle East to Africa

Food has long been a diplomatic tool in Russia's relations with its neighbors before. Only some Turkish agricultural imports were banned as part of a package of measures after a Russian fighter jet was shot down by Turkish forces in 2015.

Imports resumed two years later and Turkey became the largest importer of Russian wheat in 2019 after agreeing to transit Russian gas to Europe after Bulgaria refused.

In exchange for wheat sales to Iran, Russia agreed to take Iranian oil and sell it as part of an oil-for-goods swap before the reimposition of US sanctions on Tehran in late 2018.

What has changed since these unique events is the size and ambition of the wheat economy, where Russia considers its great economic future, the British Financial Times newspaper said in an extensive report. Wheat has been pivotal since its relations with the West deteriorated and it launched a major gas pipeline.

With Russia gaining leadership in the global wheat market, it is trying to find a balance between securing future markets and driving foreign policy. However, Khrustaleva says that Russia's wheat diplomacy is superior to political diplomacy, at least for the time being. In the current economic situation, it is important to access foreign markets rather than trying to achieve something in international politics.

The Russian agricultural consultancy Ikar raised its forecast for the Russian wheat crop for 2021 from 500,000 tons to 79.5 million tons. The company attributed the increase in estimates to the improvement in weather in the south of Russia and the expansion of the area planted with spring wheat in the center of the country.

Russia's wheat imports represent a third of the needs of the Middle East and Africa, and ten percent of those in Asia. It also provides about a fifth of the total demand for wheat on the planet.

The economy grew during the second quarter of this year at its highest rate since 2000 thanks to the recovery from the repercussions of the closure measures imposed by the emerging Corona Virus pandemic last year.

The Russian Statistics Authority stated that the growth rate during the second quarter of this year amounted to 10.3 percent, annually, which exceeds analysts' expectations and exceeds the growth rates before the Corona pandemic, as the sectors of retail trade, passenger transport and manufacturing recorded strong growth.

And the “Bloomberg” news agency indicated that the average forecast of the analysts who polled them is 10 percent of the gross domestic product. “Bloomberg” added that these numbers put Russia on the same line as other emerging markets, which recorded growth of more than 10 percent of GDP during the second quarter, including Poland and the Philippines.