Russia is the world’s top producer of wheat. Previously, China had restricted wheat imports from Russia due to concerns about the presence of dwarf bunt fungus — a disease that can cause severe loss of yield for wheat and other crops — in some parts of the country.
The agreement is the latest in a series of deals between Russia and China, and according to experts, it helps both nations.
The agreement also provides Russia with a secure buyer at a time when exports to other countries might be complicated by financial sanctions or other disruption.
“Uncertainty around potential sanctions is beginning to create a potential supply shock,” analysts from Goldman Sachs wrote Thursday in a research report.
“In our view, until the uncertainty around the rapidly escalating situation is resolved, commodity price risk remains skewed to the upside, with further escalation likely to send European natural gas, wheat, corn and oil prices higher from already-elevated levels,” they said.
China will likely be “the benefactor” of Russian commodities as other countries pare back on Russian imports, they added.
The analysts expect Russian commodities and raw materials to be “redirected to China” if the demand from the rest of the world drops significantly on further escalation of geopolitical tensions.
China’s decision has not gone down well with other countries.
On Friday, Australian Prime Minister Morrison slammed China over its “lack of a strong response.”
“At a time when the world was seeking to put additional sanctions on Russia, they have eased restrictions on the trade of Russian wheat into China…and that is simply unacceptable,” he said at a press conference.