RUSSIA – A proposal put forth by Russia, backed by President Vladimir Putin, for the establishment of a BRICS grain exchange is gaining momentum in the lead-up to the group’s summit scheduled for October. 

This initiative, aimed at enabling buyers to purchase directly from producers, has garnered support from various quarters and could potentially reshape the dynamics of the global grain market.

Eduard Zernin, the head of the Russian Union of Grain Exporters (Rusgrain), expressed optimism regarding the progress of the proposal, stating that organizational issues pertaining to the exchange are expected to be resolved by the time of the upcoming BRICS summit in Kazan, Russia.

Highlighting the significance of the BRICS nations – Brazil, Russia, India, China, and South Africa – along with Egypt, Ethiopia, Iran, and the United Arab Emirates, Zernin emphasized the global clout that such an exchange would wield, particularly considering the substantial wheat production of China and India, coupled with Russia’s position as a leading exporter of the grain.

BRICS countries are the largest exporters of wheat, rice, and corn,” he said. “Equally important is our contribution to the supply of pulses to the world market.

One of the key motivations behind the proposal, as outlined by Zernin, is to address the challenges posed by traditional commodity exchanges, which are often susceptible to speculation and volatility driven by hedge funds and derivative trading. 

By establishing a more transparent and predictable marketplace, the aim is to foster stability and fairness in grain trading.

While the rationale behind why major buyers such as Egypt and China would opt for a BRICS exchange remains to be fully elucidated, Zernin asserted that the initiative has received widespread interest and support from various countries and businesses.

Contrary to concerns about the exclusion of the dollar from grain settlements, Zernin clarified that the proposed exchange is not against the dollar. 

However, the free conversion of the exchange’s clearing currency into Russian rubles is deemed critical, reflecting Russia’s stance on the matter.

Russia’s role in the global grain market continues to expand, with projected grain exports expected to reach 65 million metric tons in the 2023/24 season, compared with 60 million tons in the previous marketing season.

Despite challenges related to settlements, insurance, and trade financing, grain exports are progressing at a robust pace, with significant volumes already exported.

Zernin emphasized Russia’s efforts to diversify its grain markets, forging direct relationships with major importers such as Turkey, Egypt, and Iran. 

This strategic shift, described as “grain diplomacy,” has enabled Russia to navigate geopolitical challenges and strengthen its position in the global grain trade.

As discussions surrounding the BRICS grain exchange gather momentum, stakeholders await further developments leading up to the anticipated summit in October, which could mark a significant milestone in reshaping the dynamics of the international grain market.

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