KIEV - Ukraine, apparently fearing China’s economic problems might impact a $1.5 billion bilateral loan-for-grains deal, wants conditions eased to give it greater flexibility in trading with Beijing under the contract.
Ukraine’s state-run grain company GPZKU is to supply 5 million tonnes of grain to Chinese trading firm CCEC each year. But there is no clear-cut obligation by Beijing under the 15-year contract to take this volume.
The Ukrainian side, which has exported 800,000 tonnes of grain to China so far this year, is now proposing amendments to the 2012 deal to give it the right to sell grain to third parties if Beijing declines to buy.
It also wants to revise the system under which China can receive a commission for acting as a broker and selling on Ukrainian grain to a third country, Ukraine’s farm ministry said on Thursday.
GPZKU is proposing 1.0 percent of contract value as commission instead of the present fixed rate of $5 per tonne.
Last year GPZKU exported about 2 million tonnes of maize to China under the 2012 deal and plans to sell at least the same volume in 2015.
Ukraine encountered problems in the agreement in late 2014 when it was on the verge of defaulting in agreed shipments to China because financial problems at home due to political upheaval which disrupted the domestic market.
The ministry said GPZKU wanted to review the current exclusive partnership with CCEC which commits the company to supply agricultural products only to CCEC.
“If it (CCEC) does not accept our (trade) offer, we believe that GPZKU has the right to sell the products to another company. We also believe that no penalties should stem from this,” the ministry quoted GPZKU Chief Executive Borys Pryhodko as saying.
Ukraine, a leading grain producer and top three maize exporter, expects to harvest 60 million tonnes of grain this year and export at least 36 million tonnes in the 2015/16 July-June season.
Ukraine has exported about 6 million tonnes of grain so far this season.
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