Australia's embattled monopoly wheat exporter, AWB Ltd has refused to supply wheat to potential rival Wheat Australia for export to Iraq in a move which could cost sales to the group's once-biggest market.
Wheat Australia told Reuters on Wednesday that it was refused when it asked AWB to supply it with wheat so that it could bid on a tender by Iraq in June.
"We're disappointed. What AWB's motives are I'm not in a position to comment," said Wheat Australia spokesman Rhys Ainsworth.
A growing dispute between AWB and Wheat Australia came to the surface on Wednesday when the new group accused the monopoly of refusing to supply it with wheat for bidding.
AWB has said it will decide its options on the terms of new tenders. But industry analysts say the former Australian Wheat Board has always been reluctant to supply wheat to Wheat Australia, which is entering a market worth hundreds of millions of dollars a year, and once dominated by AWB.
Even at sales of 1-1.5 million tonnes - well down on the 2.5 million tonnes which the former Australian Wheat Board was selling to Iraq before the toppling of Saddam Hussein in 2003 - exclusion of Iraq would cost AWB $200-$300 million in annual sales.
Wheat Australia was formed in March to export Australian wheat to Iraq after the new government in Baghdad suspended dealings with AWB during an Australian inquiry into the company.
The Australian government-appointed inquiry, now due to report by September 29 after two extensions, is investigating whether AWB broke Australian laws in allegedly providing kickbacks to the former Iraqi regime of Saddam Hussein.
A United Nations report last October alleged that AWB paid $222 million to interests of Saddam in the years before the former dictator was toppled by a US-led invasion in 2003. Wheat Australia's formation was brokered by the Australian government, with an agreement by AWB in March that it would make wheat available for export to Iraq from its export pool.
The group is a co-operative between GrainCorp, ABB Grain Ltd and Co-operative Bulk handling. AWB is providing Wheat Australia with 350,000 tonnes from its national pool, as an exception to its government-granted export monopoly, for the first and only tender won by the new group.
Since the May tender win, however, Wheat Australia has said it has been unable to convince AWB to release further supplies. Wheat Australia had been keen to bid on a tender for 150,000 tonnes by Iraq in June, Ainsworth told Reuters on Wednesday.
"In making a request to AWB to see whether they would be willing to supply Wheat Australia to pursue that opportunity we were given a negative response by AWB," he said. Responding to Reuters questions, AWB recently said Iraq had no tenders in the market so the issue of supply was irrelevant.
Spokesman Peter McBride said: "There are currently no tenders in the market, so it's hypothetical. AWB will look at its options when a new tender is called in a way which is in the best interests of the national pool." Ainsworth said Wheat Australia was keen to talk with the Iraqi Grain Board about future opportunities.
He also raised questions about recent statements by AWB that it would not undertake more risk with wheat sales to Iraq until Wheat Australia's current tender sale had been "executed".
Wheat Australia was finalising arrangements to ship the 350,000 tonnes, although no wheat was on the water yet, he said, adding there were no problems with letters of credit. "We're just finalising the final bits and pieces prior to loading commencing," he said.
Industry analysts, who asked not to be named, said AWB was "very grudging" in selling the initial 350,000 tonnes to Wheat Australia, and was not keen on selling any more. "There was a belief at highest levels that it will do it once, but not again," one industry source said. Iraq was Australia's largest market for wheat in the years leading up to the end of the Saddam regime, taking a peak 2.65 million tonnes in 1999/00, then 2.59 million tonnes in 2000/01 and 2.25 million tonnes in the following year.
After the toppling of Saddam in 2003 AWB's sales fell as US wheat re-entered the market, ending years of effective exclusion in retaliation for the Gulf War of the early 1990s. "We're obviously hopeful that we can continue to trade with Iraq post Cole inquiry," AWB's McBride said.