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. Last Updated: 07/27/2016

Officials Mull New Wheat Tax

The government plans to slap a prohibitive tariff on wheat exports in a move analysts say could cause an abrupt rise in world prices.

A source in the Economic Development and Trade Ministry said Friday that the ministry was considering recommending a tariff of 30 percent, or no less than 70 euros ($100) per ton of wheat.

There is currently no tariff on wheat exports but a tariff of 10 percent, or no lower than 22 euros per ton, is due to be imposed from mid-November.

The hike would be designed to keep grain at home while the government sells intervention stocks to combat record high grain prices that have threatened to push inflation above last year's level of 9 percent. The ministry declined to comment on the report, but analysts said they expected the move to go ahead.

"The setting of a prohibitive tariff is very likely," said Andrei Sizov, chief executive of agricultural analyst group SovEcon. "Otherwise government grain sales to the market would appear to be stimulating exports."

Sizov said that such a sharp increase in the tariff could have a dramatic impact on the world wheat market, pushing prices up. "A closure of Russian exports even for one month will keep 1.2 million to 2 million tons of wheat out of the world market," he said. "If this happens in November or December, when new crop wheat from Argentina and Australia has not yet reached the market, we can predict an explosive rise of world wheat prices."

The 10 percent tariff will be effective until April 30. The government has also set for the same period a tariff of 30 percent, but no less than 70 euros per ton, on barley. Analysts have said the barley tariff will effectively keep the cereal inside the country, but the wheat tariff at this level is too low to stop exports.

The Russian Grain Union said Friday that it would oppose setting the new tariff, because it could hurt domestic grain growers. "The 10 percent tariff takes into account the difference between world and domestic prices, so it will only stop the domestic price rise. The 30 percent tariff will stop exports," union head Arkady Zlochevsky said.