Saudi firm sets up Russian wheat supply JV

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A Saudi Arabian investment company has set up a joint venture with SAHO, a Siberian grain producer, to ship Russian wheat and barley to the Middle East and North Africa, the two companies have said.

The deal is a rare one between Russia and Saudi Arabia, which consumes about 15 million tonnes of grain per year.

It was agreed by Metropol, a Russian domestic investment bank, as part of a debt restructuring of SAHO. The bank has an option to buy SAHO in the future.

Russia, with abundant farmland and fresh water, is seen as a natural target for Saudi investments aimed at food security, but rivalry on oil and gas, a 2010 ban on Russian grain exports and, more recently, disagreements over Syria have stymied investment flows.

The venture with Saudi firm Najd Trading and General Contracting will provide a guaranteed sales channel for SAHO, which has 400,000 hectares of land in southern and central Russia as well as its home region of Novosibirsk, the companies said.

"We see a deficit of about 4 million tonnes of grain in Saudi Arabia, and we would like to cover as much of it as we could," Sergei Solousov, the head of Metropol corporate finance and SAHO's newly appointed chairman, told a briefing.

The kingdom, the largest foreign buyer of Russian barley, imported about 2.5 million tonnes of grain from Russia in the 2011/2012 crop year.

The joint venture will sell Russian wheat and barley produced by SAHO and other farmers.

Metropol said SAHO, which will own 51 percent of the venture, aims by 2020 to become one of the top three players on the Russian grain market, which is currently dominated by international players such as Glencore.

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