Russia Proposes Establishing a Grain Cartel to BRICS

BRICS, an intergovernmental organization now comprising nine countries and representing 45 percent of the world’s population, is increasingly emphasizing its role in the global economy. While the declared goal of BRICS is multilateral cooperation, Russian President Vladimir Putin recently suggested a deeper ambition: the creation of a cartel to control grain prices, especially wheat, writes HUP in its weekly analyses.

Russia Leads the Initiative, Other Members Cautious

At the three-day summit, Putin emphasized that BRICS members are among the largest producers of wheat, legumes, and oilseeds in the world, which enables them to control the prices of key food products. Russia’s goal, according to sources close to the summit, would be to establish a pricing scheme similar to that which OPEC has for oil. Putin made it clear that this issue is of strategic interest to Moscow, frustrated by the low prices of Russian wheat on the international market.

Despite strong Russian efforts, other BRICS members are not yet ready to accept this approach. For now, they are observing the situation and hesitating to engage in grain market control in the manner proposed by Russia.

The Potential of BRICS

Market analysis shows that BRICS has the potential for significant influence on grain prices. According to data for the 2023/2024 season, China, India, and Russia are among the five largest wheat producers in the world. China tops the list with 136.59 million metric tons, India is third with 110.55 million tons, and Russia is fourth with 91.5 million tons. On the other hand, Brazil, another BRICS country, is the largest exporter of soybeans, corn, and coffee, while China is the leading importer of soybeans from Brazil. This economic potential has fueled Russian ambitions for BRICS to take a more active role in controlling prices. The idea is to establish a pricing mechanism that would be quoted on the Chicago Mercantile Exchange, an international benchmark for futures contracts on grains. Such a mechanism would allow for price stabilization, which is crucial for Russia, as it has been forced to recommend to domestic exporters not to sell wheat at a price lower than $250 per ton due to low prices.

A New Cartel

Putin’s vision of BRICS as a potential grain cartel has met with a cautious stance from other members, who remain hesitant regarding the Russian strategy. However, if BRICS as a whole decides to follow Russia, it could gain significant influence over global supply, demand, and grain prices. The establishment of such a cartel could bring greater profits to producers within BRICS but also cause instabilities in food markets worldwide. Price control of key food products could have far-reaching economic and social consequences, especially for countries that heavily depend on imports of wheat and other grains.

The question remains whether BRICS as a group will stand behind Russia in this endeavor or whether, given the different interests of its members, this proposal will remain at the level of political visions without concrete application, HUP notes.