Iran, Russia and Kazakhstan are making progress on organising finance for a long-planned wheat deal that could double or triple supplies to Iran, the secretary general of Iran's Federation of Food Industry Associations said. Talks started a year ago, but stalled due to a lack of financing. The deal involves Russia and Kazakhstan supplying wheat to Iranian millers, who in turn would supply flour to Iraq - a market dominated by Turkey and other countries.

On Tuesday, Russia, Kazakhstan and Iran signed a memorandum outlining cooperation in wheat trading. It was part of wider negotiations on setting up a free trade zone between Iran, Russia, Kazakhstan and other neighbours. "In the new agreement of the three sides, it is mentioned that the buyer can use a credit line opened by a bank, so funding (that was a main concern last year) will be settled," Kaveh Zargaran told Reuters. He did not specify the banks that can open such credit lines.

"In this case, we will notice wheat transit and swaps will be increasing from Russia and Kazakhstan," he added. Iran was one of the largest markets for Russian wheat until it slashed purchases in 2016 due to Tehran's self-sufficiency drive. However, Iranian private millers, who are not allowed to use domestic wheat for flour exports, still need imported wheat. Iran can export flour produced from Russian wheat to neighbouring Iraq and Afghanistan, Zargaran said.

"In this regard, wheat imports will double or triple to Iran," he said. Russia supplied 137,500 tonnes of wheat to Iran in the previous 2017/18 marketing year, according to SovEcon consultancy.

Copyright Reuters, 2019