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French Grain Traders Act Fast to Sell Iran Wheat

PARIS, Aug. 11 (Reuters) - French grain exporters have taken advantage of ideal circumstances, including crude oil prices at 22-month highs, to fill Iran's near-term wheat needs while at the same time ensuring U.S. traders do not muscle in on their huge market, grain sources said on Wednesday.

Iran has bought between 900,000 and one million tonnes of French wheat over the last six weeks, including at least 120,000 tonnes purchased on Tuesday for $103 a tonne plus shipping costs. At least one trader said this week's sale would not be the last.

"I think they'll be back for more. They certainly need it," the trader said, referring to the severe drought that has led to expectations that Iran's wheat imports this year will nearly double to around 5.5 million tonnes.

In many ways it is a perfect match: France has lots of attractively priced wheat that meets Iranian specifications and is readily available for export.

At the same time, drought-stricken Iran must find ways to feed an already restless population, as evidenced by the pro-democracy unrest that erupted in July, sources said.

But they noted that Iran now has the means to finance its purchases, thanks to a rally that has pushed crude prices to 22-month highs, making European banks more confident about lending money to Tehran.

"It (oil) is their only source of revenue so, of course, they're jumping in the market. The banks are much more willing to give them credit," a French trader said, shortly before benchmark Brent blend crude oil reached $20.67 a barrel by midafternoon in London, up 18 cents on the day.

"When oil was at $15 a barrel, nobody would have cared. Now that it's over $20, the banks are far more interested," he said.

Perhaps most importantly, relations between France and Iran are relatively stress-free -- allowing commerce to proceed with relatively little political interference.

A European Union official said French exporters, while aware of the tension between Washington and Tehran, have been especially keen to limit possible sales of U.S. wheat to Iran this year.

"Believe me, the French are shrewd enough to take advantage of the situation 100 percent," the EU official said.

The official criticised Washington's decision to partially lift its embargo and issue rules for the sales of food and medical goods to Iran, saying he did not understand how the Clinton administration could expect Iran to buy wheat from the United States after being shut out for several years.

In late July, the United States issued rules covering the sale of food, medicine and medical equipment to Iran.

"I'm extremely negative there," the EU official said. "I cannot imagine them buying U.S. wheat. It would be political suicide for an Iranian importer to even contemplate wheat from the United States."


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