LOWER-PRICED WHEAT FORCES CHANGES IN RUSSIA-EC DEAL

LOWER-PRICED WHEAT FORCES CHANGES IN RUSSIA-EC DEAL

Contracts between grain trading houses and Russia to supply 500,000 metric tons of soft wheat are being renegotiated because of price changes since commitments were made, European Commission sources said.

Since the contracts were signed in November under an EC-guaranteed package worth US$409 million (500 million European currency units), soft wheat prices have risen significantly from about US$100 a ton free on board for French wheat to about US$142 today."The traders want either more money, or to deliver less," one

commission official said.

The food credit guarantee, originally destined for the Soviet Union, was approved by the EC in December 1990. Its subsequent renegotiation, and problems involving guarantees given by Moscow to a consortium of Western banks providing the loan, delayed its release until late last month.

During the negotiations, seven contracts were signed for 500,000 tons of soft wheat, 50,000 of hard wheat and 75,000 of barley, commission sources said.

"The wheat, including the durum, will all have to be renegotiated, but maybe the barley will go through with deliveries starting quickly, as the price change is only $2 or $3," an official said. French barley can be bought at about US$97.00 a ton fob, compared with $94 in early November.

Russia will only have some 380 million to 400 million ECU of the loan to spend; the bank consortium, led by Deutsche Bank, will keep 20 percent to 25 percent of the loan in fees and front-loaded interest payments, commission sources said.

Russia must use the funds to buy food from the EC or, if it wishes, use up to 25 percent of the cash to buy from Baltic and East European countries.

Under the deal, Russia agreed the loan could be used to buy from the EC 1.0 million tons of soft wheat, 1.5 million of barley, 50,000 of durum wheat, 200,000 of beef, 25,000 of milk powder and smaller amounts of rice, vegetable oils and soybeans.