VZCZCXYZ0006
RR RUEHWEB

DE RUEHEG #1436/01 2081222
ZNR UUUUU ZZH
R 271222Z JUL 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 3270
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS CAIRO 001436 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON ETRD EAGR EINV PGOV EG
SUBJECT: ROW OVER WHEAT IMPORTS LEADS GOE TO TOUGHEN PENALTIES BUT 
IGNORES UNDERLYING PROBLEMS 
 
REF:  A. CAIRO 1208 
 ¶B. CAIRO 2111 
 
¶1. (U) Key Points 
 
-- Egyptian import inspectors rejected a large shipment of Russian 
wheat in May, raising fears over imported wheat quality and 
prompting the quarantine of several other wheat shipments. 
 
-- Inefficient import inspections and continued incentives to import 
substandard wheat contributed to the dispute but are unlikely to go 
away despite import regulations reforms. 
 
--------------------------------------------- -------- 
Disputed Russian Wheat Import Stokes Political Debate 
--------------------------------------------- -------- 
 
¶2. (U) The dispute over imported wheat and its fallout in Egypt have 
brought back into focus the Government of Egypt's (GOE) problematic 
agricultural imports inspections regime and the political 
sensitivity of wheat imports. It began in May when an independent 
parliamentarian, Mustafa Bakri, alleged that a recent shipment of 
Russian wheat contained impurities above the allowable limit and had 
entered Egypt illegally. Bakri requested that the Ministry of 
Justice (MOJ) bar Russian wheat entirely and summon the responsible 
officials for questioning. 
 
¶3. (U) However, a dispute soon arose among agencies responsible for 
import inspections over whether the wheat shipment was actually 
substandard. Spokesmen from the General Organization for Export and 
Import Control (GOEIC) and the Ministry of Health (MOH) announced 
that their own inspections had approved the wheat for human 
consumption and therefore allowed the shipment into port. But the 
Director of Plant Quarantine, Ali Soliman, contradicted the GOEIC 
and MOH, claiming that the wheat shipment contained dead bugs, seeds 
and other impurities above the allowable limit, and that his agency 
had rejected the shipment accordingly. The MOJ sided with Soliman 
and ordered that the shipment continue to be quarantined. Around 
this time, the GOE seized several other shipments of not only 
Russian but also Ukrainian and Australian wheat. 
 
¶4. (U) Meanwhile, the Ministry of Trade and Industry launched an 
investigation into whether Egyptian Traders, a private company that 
imported the Russian wheat shipment for the Ministry's main 
commodities purchasing agency, the General Authority for Supply 
Commodities (GASC), had forged inspection papers. Although Egyptian 
Traders alleged that a Swiss cargo inspection firm, SGS, had 
certified the wheat shipment, SGS countered that the quality 
certificate that Egyptian Traders submitted had been falsified and 
denied having ever inspected the shipment. 
 
¶5. (U) In late June, Minister of Trade and Industry Rachid Mohamed 
Rachid announced new measures to improve import inspections and 
quality control. This may have been influenced by well-publicized 
deliberations in the Shura Council on wheat imports and calls from 
parliamentarians that the GOE toughen penalties for import 
violations. The new measures include requiring a state-issued 
inspection certificate, doubling the financial sureties deposited by 
cargo firms, and heightened penalties (reftel A). However, the usual 
process of tendering for wheat purchases by GASC would continue 
unchanged, and there was no mention of significantly modifying 
agricultural import inspection procedures. 
 
--------------------------------------------- -- 
Underlying Problems and Political Sensitivities 
--------------------------------------------- -- 
 
¶6. (U) The dispute is rooted at least partially in Egypt's large and 
confusing import inspections bureaucracy. Four agencies, spread 
across as many ministries, are responsible for inspecting wheat 
imports: the Ministry of Agriculture's Central Administration of 
Plant Quarantine, the MOH, the Atomic Energy Authority, and the 
GOEIC, which is part of the Ministry of Trade and Industry. Each 
agency carries out different tests and none adhere to uniform 
standards. The Quarantine Administration tests for agricultural 
pests and foreign seeds, while the MOH checks for impurities that 
may affect human health. GOEIC, meanwhile, inspects the wheat for 
grade and quality, and the Atomic Energy Authority checks for traces 
of radioactive material. 
 
¶7. (SBU) Egypt's import inspection agencies routinely reject wheat 
shipments due to quality concerns. Such disputes usually receive 
scant media coverage, but a few occasionally turn into contentious 
political debates. In May 2007, for instance, the GOE quarantined a 
62,000-ton shipment of US wheat after finding pests (reftel B). The 
story drew widespread and negative media attention in Egypt, and the 
Ministry of Trade of Industry bowed to political pressure and 
rejected the wheat, which was re-exported, according to Assistant 
Regional Director of US Wheat Shannon Schlecht. A similar incident 
occurred in December 2008, when parliamentarians claimed that wheat 
from Ukraine was substandard, and one oppositionist party member 
 
accused the Minister of Trade of illegally colluding with an 
importer. 
 
¶8. (SBU) Comment: The political sensitivity of wheat imports stems 
from Egypt's strategic reliance on cheap wheat from abroad for 
subsidized bread. The world's largest wheat importer, it imports 
around eight million tons annually, mostly from Russia. With 45% of 
the Egyptian population living on less than US$2 per day, subsidized 
bread, and the imported wheat that goes into it, are extremely 
sensitive political issues. In this environment, scares over wheat 
quality or potential shortages can quickly spiral into contentious 
disputes and leave import inspection authorities and other GOE 
officials vulnerable to public criticism and political pressure. 
 
¶9. (SBU) Comment Cont'd: Without better coordination and 
standardization of inspection regulations across the GOE, 
inter-government disputes over agricultural imports are likely to 
continue. Additionally, the lowest-bidder tendering process 
incentivizes private companies, which import wheat and other 
agricultural products on behalf of GASC, to attempt to import 
substandard products, overlooking quality concerns or forging 
inspection documents to attempt to slip substandard wheat past 
import inspectors. 
 
TUELLER