Australia's large wheat sale to Iraq under threat

By GREG ANSLEY

CANBERRA - Iraq has threatened Australia with the immediate loss of large wheat sales and a longer-term ban on wider exports worth A$830 million ($950 million) a year because of Canberra's support for American military action against the regime of Saddam Hussein.

Trade Minister Mahdi Saleh told the official INA news agency yesterday that Baghdad would halve Australian wheat purchases because of the hostile position Prime Minister John Howard and members of his Government have adopted.

The Australian Wheat Board yesterday confirmed that Iraq had put a 500,000-tonne order on hold.

If Australia persists in its policies, Iraq will adopt tougher measures and blacklist it, barring it from all trade exchanges, Saleh said.

The statement has alarmed the Australian wheat industry, despite reassurances from Trade Minister Mark Vaile and AWB hopes for negotiations now under way with the regime in Baghdad.

The board has enjoyed a strong and special relationship with Iraq based on mutual goodwill, said managing director Andrew Lindberg.

"As the manager of a single desk system we have maintained the flow of essential food items through some very difficult periods, and the fact that this trade has continued through such tough times is testimony to the strength of the relationship that exists between Iraq and the AWB."

But he said the board remained concerned at the potential impact on its sales and marketing programme.

Grains Council president Keith Perrett said the industry had previously been able to separate political and market issues and he hoped that was the way Australia would continue doing business with Iraq.

At immediate risk is the balance of annual sales normally running at about 2 million tonnes a year through the United Nations oil-for-food programme, under which Australia supplies most of Iraq's wheat imports.

Australia has already shipped about 1.3 million tonnes and had only recently contracted to sell a further 500,000 tonnes.

But despite industry concern and the possibility of even tougher trade retaliation by Baghdad, Canberra said yesterday it would not step back from its support for America's first-strike policy against Iraq.

Foreign Minister Alexander Downer told ABC Radio: "Whatever the trade is worth, we can't put ourselves in a position internationally where we chop and change our adherence to UN Security Council resolutions and the need to get rid of weapons of mass destruction because some country threatens to downgrade our trade."