PARIS/HAMBURG  - Iran’s state grains agency GTC has discreetly snapped up around 1 million tonnes of milling wheat in the past 2 weeks mostly from the European Union, traders said on Thursday, showing increased ability to import food despite financial sanctions.

Iran has in the past exported wheat but Western sanctions aimed at its disputed nuclear programme coincided with a bad harvest, forcing the country to quietly enter global markets and make substantial wheat purchases to feed its large population. While sanctions don’t target food shipments, they make it difficult for importers to obtain letters of credit or conduct international transfers of funds through banks.

“They are buying bigger volumes than what was expected, they have big needs...,” one trader said, adding European origin was currently the most attractive.

Iranian wheat imports are usually handled by the private sector but the state has had to step in and help with purchasing since the disruption to trade financing. Origins of the grain bought for shipment in October, November and December also included Russian and Australian grain.

“In the most recent buys in the last two weeks they have been taking almost anything that is available,” another trader said. “They have been buying EU, Black Sea including Russian, Australian and other origins,” he added.

No details were given on price and payment terms, but to get around sanctions Iran has used non-dollar denominated currencies including the euro and Japanese yen.

One trade source suggested desperation to feed livestock was one of the reasons for the huge volumes of wheat normally reserved for human consumption.

“They don’t have enough feed for animals, which means they are using milling wheat instead,” he said, adding Iran had also purchased maize and barley as part of its latest purchase wave.

The state Government Trading Corporation (GTC) has taken to a method of contacting traders directly for offers rather than issuing purchasing tenders, making it difficult to glean details.

“The purchases are big,” a European trader said. “Their talks about the barter deals with India and Pakistan are never ending and maybe they are keeping their stocks high.”

On August 9 Pakistan agreed a price for 1 million tonnes of wheat it is ready to export to Iran in a barter for Iranian fertiliser and iron ore. India has said it is ready to export up to 3 million tonnes of wheat to Iran and is continuing talks.

“Origins bought in the last couple of weeks will have much better quality than India and Pakistan anyway,” he added.