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China sues Ukraine for breach of $3-bn loan-for-grain contract

04 March 2014

China is seeking compensation of $3 billion from Ukraine for the breach of a contract to supply grain against loans provided by Beijing in 2012, Russian media reported on Monday.

Under the loan-for-grain contract signed in 2012, the Export-Import Bank of China provided the loan to Kiev in exchange for supplies of grain.

Ukraine's State Food and Grain Corporation used part of the $3 billion Chinese loan to instead provide crops for other countries and parties, including Ethiopia, Iran, Kenya and the Syrian opposition groups, the ITAR-TASS news agency reported, citing a Ukrainian parliament official.

The contract stipulated annual supply of a maximum 6 million tonnes of Ukrainian grain for a 15-year period.

China also delivered half of the agreed loan to Ukraine last year and Ukraine had planned to export four million tonnes of grain to China.

However, Chinese importers have so far received only 180,000 tonnes of grain, worth $153 million, from Ukraine, the report said.

The Voice of Russia radio also broadcast the news in its Chinese-language service. There has been no official comment from China Exim Bank on the report.

The Ukrainian parliament official said China has already lodged a case against Ukraine at the London Court of International Arbitration. The report did not elaborate.

The Ukrainian parliament would provide state guarantees for the loan-for-grain contract, the report added.

China had of late stepped up agricultural co-operation with Ukraine and the Xinjiang Production and Construction Corps said last year it had reached an agreement with KSG Agro, a leading Ukraine agricultural company, on a 50-year contract farming programme to secure produce from three million hectares of Ukrainian farmland.

But KSG later denied it was "selling" any land to any Chinese companies, and that the agreement was only a "letter of intent" concerning a transfer of irrigation technology from Xinjiang.

The report appeared in the print edition of the South China Morning Post.

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