Bread Crisis Hangs Over Armenia

YEREVAN (RFE/RL)–Armenia’s grain stocks have dangerously shrunk and flour prices have soared over the last month–with analysts warning of an impending serious crisis.

Businessmen–involved in the sector–say there have been no shipmen’s of grain to Armenia lately–which increases pressure on the price of bread–a key food staple for the population. A possible price hike would be a political bombshell for new Prime Minister Vazgen Sargsyan and his cabinet.

Several flour mills across the country are standing idle due to the decreased grain supplies. The wholesale price of grain has risen by 20 percent as a result. Retailers find it increasingly difficult to keep bread prices at their current level in the hope that the situation will soon return to normal.

But according to Anahit Kalantarian–director of the Voske Hats firm specializing in bread production and sales–things are likely to worsen. "Everybody gives assurances that this is a temporary problem but I know that no grain enters Armenia [at the moment]," she told RFE/RL on Monday. "I have no hope that this will be over any time soon," she said.

Analysts examining causes of the looming bread crisis point to the growing monopolization of grain imports to Armenia–a lucrative type of economic activity. Over two thirds of the country’s bread demand is met from external sources – mostly American wheat supplies in the form of commodity loans.

The Mika Armenia trade company took dominant positions in the sector last January when it got hold of the lion’s share of 53,000 tons of American wheat sold in large blocks–at very low prices at an auction in Yerevan. Competitors who felt there was no sense to try to compete with Mika Armenia’shifted their financial resources to other sectors.

In the past there have been allegations that Mika Armenia enjoys the backing of the Internal Affairs Ministry. Whatever the truth–Mika has since become the number one importer of grain which renders the market highly dependent on its activities. Some informed sources say the recent government reshuffle in Yerevan and ensued tougher tax collection have led the company to put on hold its grain operations.

It will take some time before other firms will try to bridge the supply gap in the Armenian market. Besides–the next batch of American wheat will be coming no sooner than next autumn. The problem is further compounded by this year’s worse-than-expected grain harvest in Armenia.

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