Business: Another Soviet Grain Sting

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How the Russians again outfoxed the experts—and the eye-in-the-sky

To the sharp-trading stereotypes of the Philadelphia lawyer, the Greek shipowner and the Swiss banker must now be added a new model of shrewdness: the Russian grain buyer. In the celebrated "Great Grain Robbery" of 1972, Soviet agricultural agents bought up whole shiploads of U.S. wheat, managing not only to secure it at bargain prices but also to get the U.S. Government to foot part of the bill through a farm subsidy program. Now, much to Washington's embarrassment, the Russians have struck—and stung—again.

The sting came to light when Soviet President Leonid Brezhnev announced that the 1977 Soviet grain harvest would amount to 194 million metric tons—the lowest since 1975. That bland statistic caused tremors of shock through not only the U.S. Department of Agriculture but the Central Intelligence Agency as well. All summer long the Agriculture experts and the CIA operatives who try to keep track of conditions on Soviet farms had forecast a fat 215 million-ton harvest, indicating that Moscow would not need to buy much foreign grain this year. But the bulletin from Brezhnev meant precisely the opposite: the Russians would be buying a lot of grain—some 10 million to 15 million tons more than anyone had expected—and the bulk of it would be coming from the U.S. More embarrassing still, they turned out to have already made most of their purchases—skillfully skirting some provisions of a U.S.-Soviet trade agreement for buying grain—and chartered ships to move it at the lowest possible cost. By the time Brezhnev told all about the poor harvest, the Russians had secretly signed contracts for 18 to 20 million tons of grain from Australia, Canada and India—as well as the U.S.

In the grain deal of 1972, the Russians bought large quantities of U.S. wheat and corn at a time when American farmers were already fairly scraping their silos to meet heavy domestic and foreign demand. Prices of some grains more than doubled as a result, giving a sharp upward kick to inflation. Even more annoying was the fact that, because U.S. officials were not aware of the big Soviet purchases, the grain was sold under a Government subsidy program, which meant that U.S. taxpayers paid for much of the Russian grain bought in the U.S. To avoid a replay of that fiasco, in 1975 Washington got Moscow to agree to a long-range sales arrangement intended to stabilize Russian grain purchases and do away with at least some of the secrecy surrounding them. Under the plan, Moscow is required to buy at least 6 million tons of U.S. grain every year; if its purchases rise above 8 million tons, it is supposed to report the fact to Washington.

So why were U.S. officials caught by surprise? The sting seems to have been the result of a combination of Soviet duplicity and U.S. gullibility.

In mid-July agents acting for the Russians arranged for food deliveries through both European subsidiaries of U.S. grain dealers and European companies with offices in the U.S. The purchases were heavy and—under the letter of the U.S.-Soviet agreement—did not have to be reported to Washington. "Official" purchases are continuing at a modest rate.

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