Russia’s Proposed BRICS Grain Exchange Faces Years of Development

Russia's proposal to establish a new international grain exchange for BRICS nations, while welcomed by members at the recent summit in Kazan, is likely to face years of development before becoming operational, according to a Reuters report.

The proposed exchange, viewed as part of Russia's broader strategy to reduce dependence on the US dollar and mitigate Western sanctions, was approved by BRICS leaders, which include Brazil, Russia, India, China, and South Africa. The group's communique at the summit expressed support for the exchange's development and potential expansion to other agricultural sectors.

However, Eduard Zernin, head of the Grain Exporters Union, which represents 80% of Russian grain exporters, cautioned that establishing the exchange would require years of preparatory work, drawing comparisons to the lengthy process involved in setting up the BRICS New Development Bank.

Speaking to Reuters, Zernin emphasized the need for the exchange to achieve international status to safeguard it from potential Western sanctions. "The main stage of the process has been completed, the initiative to create an exchange has been approved at the level of BRICS country leaders," Zernin said.

Russia, the world's largest wheat exporter, has been actively seeking to develop its own commodity pricing mechanisms to challenge the dominance of Western exchanges, particularly following this year's decline in global grain prices.

The Russian government, concerned about high export volumes at low prices, has informally collaborated with leading exporters to avoid selling Russian grain to sovereign buyers through intermediaries. Additionally, the government has recommended a minimum wheat export price of $250 per metric ton, significantly higher than current market levels.

Despite the enthusiasm surrounding the proposal, some industry analysts question the immediate necessity of a new grain trading platform, given the smooth operation of existing international exchanges.

"Due to the advantages that established exchanges have in terms of customers, infrastructure, track record, and liquidity, it will take some time for the new exchange to catch up," said Yaroslav Lissovolik, head of the BRICS+ Analytics think tank, to Reuters.

Alexander Belozertsev, head of Alexandra Inc consultancy, further pointed out that BRICS members like India, China, Brazil, and South Africa already possess well-established commodity trading platforms of their own.

"Strategically and technologically, all these exchanges have significantly advanced in trading agricultural derivatives compared to their Russian competitors. Do they really need the implementation of Russia's initiative under the BRICS umbrella?" he questioned.