Russia’s invasion of Ukraine threatens global wheat and grain supplies, a particular risk for Middle Eastern and African countries like Egypt, where bread is a major staple. Cairo, Egypt, March 9, 2022.
Photo by Ahmed Gomaa | Xinhua via Getty Images
For centuries, bread has been the cornerstone of civilization. Riots and revolutions have been sparked over the availability of this staple – and food prices more broadly, particularly as they relate to the Middle East and North Africa.
Russia’s unprovoked invasion of Ukraine now threatens much of the wheat and grain on which these countries depend. Whole, Russia and Ukraine account for around a third of world wheat exportsnearly 20% of its maize and 80% of its sunflower oil — and they supply the majority of the MENA region’s supply.
Wheat futures prices have risen 30% since the outbreak began in late February.
Before the war, more than 95% of Ukraine’s total grain, wheat and corn exports were shipped via the Black Sea, and half of these exports were destined for countries in the MENA region. This vital conduit is now closed, stifling Ukraine’s maritime trade after its ports were attacked by the Russian military.
A farmer wears a bulletproof vest during planting which takes place about 29 kilometers from the front line in the Zaporizhzhia region of southeastern Ukraine.
Dmytro Smolienko | Edition of the future | Getty Images
The country is now trying to export some of its production by rail, which has huge logistical limitations, while Ukrainian farmers whose infrastructure has not been destroyed try to plow their fields wearing protective vests. -balls.
Russia is the world’s leading exporter of wheat, as well as – above all – the leading exporter of fertilizers. Fears of being caught up in Western sanctions against Moscow have also already disrupted Russian exports.
All of this is accelerating the rising inflation that is hitting the population of around 500 million people, especially the poorest and those already facing high unemployment and deteriorating economic prospects.
“Inflation and the economy, more than political freedom, are essential” for the region’s stability, Kamal Alam, nonresident senior fellow at the Atlantic Council, told CNBC.
Alam pointed to the self-immolation of Mohammed Bouazizi, the young Tunisian street vendor whose act of protest sparked the 2011 Arab Spring protests.
“Even the salesman who burned himself in Tunis did it out of economic outrage, not (then-Tunisia’s president) Ben Ali,” he said. “It seems that the first and foremost reason for unrest in the Arab world is still the lack of economic mobility.”
Inflation jumped to 14.8% in the MENA region in 2021, according to the International Monetary Fund. Already then, rising food prices were the main driver – accounting for around 60% of the increase in the region, excluding the oil-rich states of the Gulf Cooperation Council.
It was before the start of the war in Ukraine. Today, the UN says food prices in April are 34% higher than a year ago.
“We now have 45 million people in 38 countries knocking on the door of starvation,” David Beasley, executive director of the UN’s World Food Program, told CBS in an interview last week. “And you can see a general increase in food prices, say 38-40%, but in some very difficult places it will be 100, 200% like in Syria.”
As countries will seek alternative sources for their essential food imports, soaring global inflation and potential export restrictions make the switch costly. And the scarcity of water in the MENA region means that local agricultural production is very limited.
Egypt, the most populous country in the Arab world, alone imports 80% of its wheat from Ukraine and Russia. Lebanon, which has already been experiencing crippling debt and an inflation crisis for years, imports 60% of its wheat from the two warring countries, which supply 80% of Tunisia’s cereals.
Egypt “has a lot to lose from the war as its bread subsidy program reaches more than half the population and is a pillar of the social contract that maintains stability in the most populous Arab state,” Amer said. Alhussein, economic development expert and advisor for the Plant for Peace post-conflict initiative.
This, he says, could explain why Egypt’s wealthy Gulf allies have rushed to its aid with billions of dollars in funds for its central bank and other investments to boost its economy.
While the Egyptian government may continue to borrow money, rising interest rates in major economies and weak appetite for emerging market bonds will weigh heavily on the country “and could become a sovereign risk factor and lead to a default that would have a catastrophic impact on its population,” Alhussein added.
Lebanon, meanwhile, faces “numerous warnings of impending famine”, Alhussein said. “The current situation could very soon turn into protests and riots like those that took place in 2019, but with a much more violent impact given the steady deterioration of living standards and food security in the country.”
In addition, rising wheat prices alone “may increase (the Middle East’s) external financing needs by up to $10 billion in 2022,” the IMF wrote in its latest regional economic outlook for the Middle East. East and Central Asia published on Wednesday. “Supply shortages from Russia and Ukraine can put food security at risk, especially for low-income countries, as they can also suffer from potential diversion of aid.”
About a quarter of the last wheat crop from before the invasion of Ukraine is still available in the markets, but that will last about three months, analysts say.
This fall, WFP’s Beasley warns, is when the impact of war will really hit the MENA region, in a crisis he says could trigger mass migration.
Lebanese protesters raise a large clenched fist with the inscription ‘revolution’ in Martyrs Square in the center of the capital Beirut on October 27, 2019, during ongoing anti-government protests.
ANWAR AMRO | AFP via Getty Images
“If you think we have hell on earth now, get ready,” Beasley warned in an interview with Politico in March. “If we neglect North Africa, North Africa comes to Europe. If we neglect the Middle East, the Middle East comes to Europe.”
Taufiq Rahim, a Dubai-based senior fellow in the international security program at think tank New America, agreed that the worst may be yet to come.
“At a time of rising inflation, rising commodity prices and supply chain lockdowns, the wider region could experience an unprecedented economic shock this summer,” Rahim told CNBC. .
“A new political Pandora’s box will be opened by growing economic discontent and we will see governments come under increasing pressure.”