Forward Contracts and Uncertainty
School of Accounting
Seidman College of Business
On August 5, Prime Minister Vladimir Putin issued a decree to ban all wheat exports from Russia, effective immediately. A government imposed ban on exports was considered a force majeure which effectively voided the forward contract and freed both parties from liability as the event lead to circumstances beyond control. The ban proved a nightmare for wheat importers in Egypt as the resultant food shortage would have disastrous effects on bread availability and bread prices in Egypt with the potential of stirring riots on streets of Cairo and elsewhere in the country. The issue is whether Glencore was instrumental in the declaration of a ban on wheat exports by the Russian government i.e., did the Russian Prime Minister issue the decree to halt exports on the insistence of Glencore's subsidiary in Russia? In addition, did Glencore use its market intelligence to enter into a quid pro quo arrangement with the Putin government? How could the Egyptian government have avoided from being trapped in a piquant situation?
48th Annual MBAA International Conference
DeBruine, Marinus and Bhagwat, Yatin, "Forward Contracts and Uncertainty" (2011). Faculty Scholarly Dissemination Grants. 442.
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