Kiev poses risk to Russian billionaire’s grain empire

Alexi Fedoricsev exports barley via his Ukraine terminal and provides most of the staple Saudi Arabia uses. Now, the east European country’s government wants to take his facility.

A barley field near the village of Zhovtneve in Ukraine. Saudi Arabia imports 3.9 million tonnes a year from Ukraine. Valentyn Ogirenko / Reuters

MONACO // For 10,000 years barley has fed man and animal.

Its cultivation aided ancient Egypt’s advance, it was part of a special diet for Roman gladiators and helped a civilisation in Tibet to raise great armies.

Today its usage is more prosaic but barley – or the lack of it – can still have significant impact.

The grain is particularly prized among the Bedouin of Saudi Arabia. Unlike other animal feed, it produces marble white fat when consumed by sheep rather than fat of a yellowy hue. It is also a key foodstuff for their approximately one million camels.

Indeed barley’s importance is such that it is one of the few imports that will continue to be protected and subsidised by the government under Saudi Vision 2030.

But a geopolitical tussle involving Ukraine, China and a business based in the small principality of Monaco could have a knock-on effect in the kingdom.

Saudi Arabia imports 7.1 million tonnes of barley a year, including 3.9 million tonnes from Ukraine. The vast majority of that comes through a company called Fedcom – a name better known to Champions League followers as the main sponsors of the football club AS Monaco, where the company is based.

Fedcom’s owner is the self-made Russian billionaire Alexi Fedoricsev. Over the past two decades he has built up a major grain terminal called TIS on the Black Sea, which can handle exports of 27 million tonnes of grain a year.

The Ukraine State and Food Grain Corporation (SFGC) terminal in nearby Odessa is a paltry affair by comparison, capable of exporting just 4 million tonnes. Government chiefs and representatives of SFGC have for years looked on with envy at the slick private operation next door.

That envy has now become something more tangible. Mr Fedoricsev believes the state is plotting to seize his terminal by advocating what he says are trumped-up “politically motivated” charges.

If the TIS terminal is seized it is likely to fall into disrepair under Ukraine’s notoriously corrupt state, one that the former British prime minister David Cameron said had corruption levels that were “unacceptably high” in Kiev this month.

Mr Fedoricsev concurs. "If Ukraine takes over my terminal corruption and malpractice will inevitably follow and this will have a severe impact on exports," he told The National at his home in Monaco.

But how does this affect Saudi Arabia? Fedcom and Mr Fedoricsev provide the smooth export of high-quality grain to the kingdom. If that deal fails, the Saudi Grains Organisation will be scrambling to look for barley elsewhere to ensure supply and, to a certain extent, political stability given the Bedouin support for the government.

And China is, in part, to blame.

Three years ago Ukraine entered into a US$3 billion deal with the Chinese government to export between 2 million and 4 million tonnes of grain a year. Possibly to decrease its reliance on US grain imports, China demanded the maximum 4 million tonnes contracted.

Unable to meet demand the SFGC went to Fedcom. But the complex shipping arrangement agreed later resulted in a commercial dispute that has since expanded into criminal investigation targeting Mr Fedoricsev.

The government called in its NABU anti-corruption unit to look into his affairs and into corruption among SFGC representatives.

Mr Fedoricsev has not been formally accused but the authorities have frozen his assets in Ukraine.

A spokesman from NABU, which has been examining the case since July last year, says an investigation into “state embezzlement” is ongoing.

In January detectives from NABU detained a former head of the SFGC and a TIS manager on suspicion of causing losses of more than $60 million.

“At present searches are in progress. Large amounts of cash and computer equipment allegedly used for criminal purposes have been seized,” it said at the time.

Mr Fedoricsev sees things rather differently, fearing that the state is planning to use spurious criminal charges to seize the terminal, jeopardising trade links with Saudi Arabia.

“These are politically motivated actions right out of the Moscow playbook,” he says.

“Fedcom is an open and transparent business that is recognised around the world.

“The Ukrainian barley that we export to Saudi Arabia is of the highest quality and much loved by the Bedouin. As the Bedouin are the indigenous people of Saudi Arabia, I understand that the government is keen to keep them happy and their subsidy on imports is seen as crucial.

“I do not think that the Ukraine government realises the wider impact their actions will have.”

This all plays into the food security issue crucial to Saudi Arabia’s stability, more so now because the government last year decided to halt grain production to conserve scarce water resources. Despite the billions spent on hydro projects, water is now considered too precious to use on most crops. Counting on its oil exports covering the cost, the kingdom is going to become heavily reliant on food imports.

Barley is clearly considered important. Last month the Saudi Grains Organisation confirmed it had purchased 1.5 million tonnes of feed barley paying $188 per tonne including freight. The feed will then be subsidised for livestock herders by up to 60 per cent.

The Bedouin were the original inhabitants of Saudi Arabia when it became a kingdom in 1932, its rulers coming from the powerful desert tribes. While the Bedouin number just 467,000 of the total Saudi population of 29 million they underpin support for the monarchy.

Riyadh is now working hard to build up a strategic food reserve to guard against emergencies by developing strong relationships with agricultural countries.

"Our embassies around the globe, have made it a priority to develop strategic partnerships with countries like Zambia and Ukraine, who are blessed with natural resources such as fertile soil and water reserves," Farhan Alfarhan, a Saudi scholar and foreign direct investment (FDI) expert, tells The National.

“In the years ahead, the use of water in Saudi Arabian agriculture will be minimised and we will look to our international partners to import high quality grains such as barley, wheat and corn. I am aware of just how important grain supplies are to our hard working Saudi farmers, particularly the Bedouin who breed some of the finest sheep and camels in the world.”

Meanwhile, Mr Fedoricsev awaits the outcome of civil proceedings, brought by Ukraine against private shipping companies at London’s Grain and Feed Trade Association (GAFTA) tribunal.

He has warned that the Ukrainian government’s actions jeopardise FDI into the country where agriculture accounts for 37 per cent GDP.

“Ukraine must face up to the real situation if they want other investors to come,” he says. “Before I built the TIS terminal Ukraine had never delivered so much barley to Saudi Arabia, so this situation could be very bad for their economy.”

A former professional footballer with Dynamo Moscow, the 62-year-old made his first millions by trading car brakes then railway sleepers and finally selling sulphur phosphate to Italy and Turkey for fertiliser.

He is now one of the world’s biggest barley and grain exporters, even taking barley from Newcastle in north-eastern England, to Saudi Arabia.

He comes from humble roots – his father was a taxi driver and mother a factory worker.

In 2002, French authorities investigated him for Mafia links and found the allegations to be baseless.

For a Bedouin herding his sheep and camels in the desert, the courts in London could be as distant as the stars above him.

But a decision made there or in Kiev or in Monaco could have an impact on his life and that of the whole of Saudi Arabia.

Such is the globalised world we live in.

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