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This isn’t comparable to the departure of Big Oil from Russia in 2022 — the result of Western political pressure on companies including Exxon Mobil Corp. and BP Plc. The exit of Big Grain is largely the product of pressure from within Russia. As one industry executive put it, Putin showed them the door.What changes? Not much. The Kremlin will carry on collecting grain export taxes to finance its war against Ukraine. Moscow will also keep using its food exports as a diplomatic lever in the Global South. Russian grain ends up in countries like Egypt, Bangladesh and Turkey, all sympathetic to Putin — or, at least, uncritical.The only adjustments will be to the names on the brass plaques indicating the ownership of the logistical assets that move grain from the farms along the Volga to the ports of the Black Sea. The western traders will be forced to part ways with those silos and export terminals, in the process taking write-downs worth a few hundred million dollars each.The new owners will be Russian — a cadre of grain oligarchs keen to use the war to strengthen their grip over the local farming sector. They will buy chunks of the supply chain on the cheap. The Russian trading teams who worked for the foreign companies will receive business cards reflecting their new bosses. And Russian traders will set up offices in cities in the Middle East and Asia, ready to connect the new owners with the old ones. I’d be surprised if someone doesn’t register a company with the name of Exportkhelb — the old Soviet grain trading body — in Dubai or Hong Kong.Local farmers are the likely losers: They’ll have fewer options to sell their crops. Already, Russian-owned agriculture commodity trading houses such as RIF, Grain Gates and United Grain Company control a large chunk of the country’s wheat export, taking the fat margins available from moving wheat from farm-to-port.Cargill Inc., the American company that’s the world’s largest grain trader, was very careful explaining its departure. In a statement this week, it said that by July, it would end its Russian grain “elevation” activities — trading jargon for the business of buying crops from local farmers, storing them in silos and using an export terminal to “elevate” the grain from the ground into a ship. But Cargill said it “intends to continue shipping grain from Russia to destination markets in line with our purpose to nourish the world.”
Viterra, a grain trader backed by commodities giant Glencore Plc, plans similar moves. Another big trader, Bunge Ltd., already left Russia last year. Others in the industry, like Louis Dreyfus Co., Archer-Daniels-Midland Co., and Olam International Ltd., would surely have to follow Putin’s bidding.As in the oil trade, Russian grain will move into the shadows. Without Western traders buying and selling crops in the Russian heartland, Washington and Brussels will lose a key source of intelligence. If anything, the Kremlin will have a stronger say about where — and at what price — its grain goes, a potent economic weapon. Obscurity, money and political influence is what Putin will get. Lenin would be proud.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former reporter for Bloomberg News and commodities editor at the Financial Times, he is coauthor of “The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.”
More stories like this are available on bloomberg.com/opinion
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