MOSCOW: Russia has said it will from February apply a duty of at least 35 euros ($43) per tonne of wheat sent for export as it tries to lower prices on its domestic market, hit by the rouble’s fall.

The duty, announced in a government decree published late on Thursday, aims to narrow a price difference that has emerged as Russia’s rouble has slumped by 40 per cent against the dollar this year.

Despite a near-record wheat harvest this year, prices on the Russian market have been rising as growers prefer to export where prices, linked to foreign currencies, are now considerably higher.

Deputy Prime Minister Arkady Dvorkovich said on Thursday that farmers were getting around 225 euros ($275) per tonne if they export and 160 euros ($195) if they sold on the domestic market.

The duty in force from February 1 to June 30 will be 15pc of the price per tonne plus 7.5 euros, with a minimum rate of 35 euros per tonne.

At a price of 225 euros per tonne, the duty of 41.25 euros would still leave a price difference of over 20 euros.

Even before it announced plans to introduce the duty in order to protect the country’s “food security”, market participants said the government had taken other measures to slow exports as it suddenly became difficult to book rail transportation and obtain food safety export certificates.

Dvorkovich said on national television on Thursday that food safety inspections would remain “strict” as Russia “can’t afford any longer to close its eyes to violations”.

Russia has long been accused by its trade partners of using food safety inspections as a trade weapon, but usually to block imports.

Wheat prices have risen on international markets over the past week as traders were anxious that Russia, usually the world’s number 3 exporter, may ban exports as it did in 2010 when it had a poor harvest due to a drought.

A Russian wheat growers trade association said the duty was preferable to an outright export ban, but that any measure which reduced income to farmers would have an impact on the next harvest.

The Grain Farmers Union warned the duty could lead to a possible “loss of confidence in Russia as a reliable supplier of grain to the international market, in particular by key importers such as Turkey, Egypt or Iran”.

According to government data, Russia has already exported 21 million out of a potential annual total 28m tonnes since the export season began in July.

It exported 25.2m tonnes during the last export season that ended in June.—AFP

Published in Dawn, December 27th, 2014