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Libya rebels buy grains in first major deals

Eastern Libyans buy 100,000 tonnes of wheat and flour with Qatari and, possibly, UAE funds

Reuters, Monday 20 Jun 2011

Libya's rebels have bought close to 100,000 tonnes of wheat and flour in recent weeks, the first major commercial food deals done by those fighting to overthrow Muammar Gaddafi, trade sources said.

They said food consignments were being routed mainly by land through Egypt and Tunisia, with little coming in by sea as ship owners remained reluctant to risk their vessels.

Sources said Qatar and possibly the United Arab Emirates were providing the financing, enabling the rebels to do deals.

"It is very hard to say how much has been imported, I would guess something a little under 100,000 tonnes," one grain trader said. "I have booked a large number of contracts for Russian bagged wheat flour for June-August shipment."

Another trader said: "I think the rebels have taken about 50,000 tonnes of wheat and 50,000 tonnes of flour in recent weeks."

Libya was a big importer of food before fighting interrupted supply chains.

Traders said rebels in eastern Libya had bought flour from Russia and the European Union, and wheat had been purchased from producers including France, Serbia and Ukraine. They said the Transitional National Council (TNC), based in the eastern held city of Benghazi, was making the purchases.

"European banks are currently unwilling to confirm letters of credit for the government side but are willing to work with the rebel side," another European dealer said. "Often the word Libya does not appear on the bank documents."

"The rebels seem to have enough money to pay, with people speculating this comes from their oil sales or a supportive government."

Food buying by rebels had been hampered by the difficulty of trading and gaining payment from an unrecognised entity, coupled with uncertainty over sanctions on Gaddafi.

Traders said purchases were routed via private companies set up in Tunisia, Egypt, Italy and elsewhere. These firms had arranged finance with European banks for the deals.

A trade source said European food traders were also being encouraged to trade with the rebels.

"Some rebel-friendly governments have been suggesting to their domestic traders to engage," the source said.

Last week Germany recognised the TNC as Libya's sole legitimate representative, joining five other EU countries including Spain.

"The rebels aren't controlled by Gaddafi interests, so they can buy, sell and contract with whoever they want," said Philip Roche, a partner with law firm Norton Rose.

"Where a ship calls at an eastern rebel controlled port, these are not subject to any restrictions, presumably because the EU believes that all Gaddafi interest and control has been extinguished, even though technically the corporate ownership of the port may not have changed since pre-rebellion days."Commercial food deals with Gaddafi entities were tougher to carry out in contrast to aid, which was simply donated.

"It will be difficult to find a bank that will provide letters of credit or handle funds coming out of Libya," Roche said.

"One would have to get licenses in place and it could be quite tricky depending on who is behind the Libyan importer. Commercial contracts for foodstuffs [with Gaddafi entities] are going to be much more difficult."

Qatar has been at the forefront of assisting the rebels. The UAE this month became the only other Arab state after Qatar to recognise the rebels as Libya's sole legitimate representative.

Western states including the EU have offered to help. Washington, which took a leading role in securing a UN-backed no-fly zone over Libya, has promised more aid and offers of loans to keep the rebels afloat.

Libya's rebel oil chief has accused the West of failing to keep up its promises to deliver urgent financial aid, saying his authority had run out of cash completely. Earlier this month the former foreign minister said rebels needed $3 billion to cover food supplies and salaries for the next four months.

Libya's seaborne trade continues to remain virtually paralysed and vital oil exports have shut down.

"The security situation in Libya remains very volatile," said Jakob Larsen, maritime security officer with BIMCO, the world's largest private shipowners' association.

"For commercial shipping, the stakes are raised in that the total cost of trading on Libyan ports is heightened not least because of the war risk added premiums, and furthermore there is a heightened physical risk due to the ongoing fighting."

The World Food Programme (WFP) said it had sent over five ships with aid into Benghazi, which was fully operational.

"We are hoping that getting all of our food shipments through the port of Benghazi will encourage commercial liners to send their ships to the port," said WFP spokeswoman Abeer Etefa.

The UN agency, which has provided food assistance to over 500,000 people affected by conflict in Libya, said there were growing concerns about access to food inside the country especially in areas heavily affected by fighting where the price of many food commodities had more than doubled.

"The problem is the replenishment of food stocks especially basic items," said Etefa, who spent 10 days in east Libya earlier this month. "If hunger is looming in Libya, it will be first in the western parts of the country and then in the east."

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