* Russian wheat deal covers government areas for the year
* Market sees price at 150 euros a tonne c&f as "too cheap"
* Syria's harvest worst in 27 years
(Adds Russian agriculture ministry declined to comment)
By Maha El Dahan
ABU DHABI, Oct 13 Syria's state grain buying
agency Hoboob struck a deal to purchase one million tonnes of
Russian wheat from political ally Russia, covering the needs of
government-controlled areas for a year.
The Damascus government subsidises bread for the areas it
controls ensuring the supply of flat loaves that are a staple
for Syrian people.
Syria often buys wheat from Russia but this was an unusually
large amount for a cheap price. The source said it should cover
the government's needs for this year until the next local wheat
buying season in 2017.
A Syrian government source close to the matter told Reuters
Hoboob purchased the wheat at 150 euros ($168) a tonne, on a
cost and freight basis, and shipment would be for a year after
opening up the letter of credit.
The Russian Agriculture Ministry declined to comment on the
purchase but a source at the ministry told Reuters Russia is
still considering a shipment of around 100,000 tonnes of wheat
to Syria as humanitarian aid, separate from the Hoboob deal.
Syria's local wheat harvest nearly halved to 1.3 million
tonnes this year, the lowest in 27 years, as fighting and poor
rainfall further eroded the nation's ability to feed itself.
The government of President Bashar al-Assad was forced to
tender for wheat this summer, at a time when it rarely holds
international purchase tenders as it is busy buying up wheat
from local farmers.
Hoboob procured a little over 400,000 tonnes of local wheat
this year. The government needs around 1.5 million tonnes a year
for the areas it controls.
It bought 350,000 tonnes of Russian wheat in two separate
tenders in July and August before announcing its tender for one
Wheat market traders said they were puzzled because the
price was too cheap for a commercial deal.
"This will be almost impossible to fulfil as a commercial
deal as it is too cheap," one European trader said.
"I think this must be regarded as food aid as the price is
too low," he said.
The Syrian government source said the lower price could have
been agreed due to the large quantity purchased in one deal.
In neighbouring Egypt's wheat tender on Thursday, Russian
wheat was being offered at $177.94 a tonne free-on-board and
$187.03 a tonne cost and freight -- almost $20 a tonne higher
than the Syrian deal.
Before the five-year-old civil war, Syria was a wheat
exporter producing four million tonnes in a good year and able
to export 1.5 million tonnes.
But wheat farms, seed distribution, milling and bakeries
have all been damaged and disrupted by the war.
While the government ensures cheap prices for bread in the
areas under its control and aid agencies offer supported prices
in some areas, Syrians elsewhere complain of bread shortages and
($1 = 0.8928 euros)
(Reporting by Maha El Dahan; Additional reporting by Michael
Hogan in Hamburg, Sybille de La Hamaide in Paris and Olga Popova
in Moscow; Editing by Susan Fenton/Ruth Pitchford)