When on March 12, Denis Shmygal, the Ukrainian Prime Minister, announced that a prohibition or severe restrictions would be imposed on exports of wheat, buckwheat, eggs, oil, sugar and other foods, his message produced no sensation, given Ukraine’s largely crippled agrarian sector. The military action has disrupted economic, transport and logistical connections, limiting shipping in the Sea of Azov and the Black Sea (Azov’s main port, Mariupol, is not functioning, while the Ukrainian authorities have totally or partially close the ports of Kherson, Nikolaev, Odessa, Izmail, among others, since February 25). Despite Kyiv insurance As for state support for agricultural manufacturers, it is hardly to be expected that Ukrainians will start sowing in time in 2022, let alone the resumption of full-fledged exports in the foreseeable future.
On the other hand, it is quite difficult to say what impact the tightening of anti-Russian sanctions will have on the Russian agricultural market and its agricultural exports. This uncertainty, combined with the desire to prevent price gouging on the world market, compelled the Russian government on March 14 to ban exports wheat, rye, their mixture (meslin), barley, maize to the countries of the Eurasian Economic Union until June 30, 2022, and sugar exports to third countries until August 31.
Even before the Russian military operation in Ukraine, FAO experts considered that the lower harvests had a negative effect on the turmoil in the world grain market, and the dominance of Russia and Ukraine in wheat sales became an additional factor. In 2020, according to FAOstat, Russia was the leading exporter of wheat (USD 7.92 bn), emerging ahead of the United States (USD 6.32 bn), Canada (USD 6.3 bn) and France (USD 4.5 bn ). Ukraine was the fifth largest exporter (USD 3.59 billion). Russia and Ukraine therefore together accounted for some 30.5% of total sales. In addition, Ukraine was the largest maize exporter (according to UN Comtradeits total exports in 2016-2020 were USD 15 billion, compared to USD 3 billion for Russia).
It is therefore not surprising that the price of a tonne of food wheat on the MATIF, the Paris futures exchange, dope from 197.25 euros on July 9, 2021 first to 265 euros (February 17, 2022), followed by the record of 396.5 euros a few days later (March 7). Many analysts have expressed reasonable concerns that the ongoing Ukrainian crisis could produce inflation and other consequences, the impact of which would be even greater than that of the Great Recession of 2008. It would be relevant to to quote Gilbert Houghbopresident of the International Fund for Agricultural Development, who warned of a possible rise in food prices as well as famine – something he says threatens global food security, heightening geopolitical tensions.
Arab countries in the Middle East and North Africa fall into the risk group, especially those with large populations (Egypt – 106 million people; Algeria and Sudan – 45 million people each), those involved in armed conflicts (Yemen, Libya, Syria, area of the Israeli-Palestinian conflict), those in the throes of an internal crisis (Lebanon) or those confronted with an unstable political situation in terms of interior (Iraq).
As much as in troubled countries, elites in relatively prosperous nations, such as Jordan, are increasingly apprehensive about the prospects for domestic political stability following an influx of 674,000 refugees of Syria (as of February 28, 2022), as authorities fear that food riots under the slogans of the “Arab Spring” are entirely possible. In the Kingdom of Bahrain ruled by the Sunni Al Khalifa dynasty, an unexpected spiral of food inflation could cause unrest among the local Shia majority, as happened in February-May 2011.
The leaders of the Arab nations have never forgotten that the initiators and participants of the first wave of protests in 2011-2012 demanded both freedom and bread. The main slogan of the “Jasmine Revolution” in Tunisia was “Bread, water and no Ben Ali [Tunisia’s President – I.M.].” Since Tunisia’s food security depended directly on Ukrainian wheat deliveries ($242 million in 2019 and a total of USD 770 million in 2016-2020), a simultaneous halt in deliveries can indeed result in an outbreak of social discontent.
According to UN Comtrade, Egypt, the region’s largest importer, bought wheat for $7.39 billion. in Russia and for 2.34 billion dollars. in Ukraine in 2016-2020. In 2019 out of total shipments worth $3.02 billion, Russian shipments alone totaled $1.44 billion, while Ukrainian shipments totaled $773.4 million. This suggests that the two countries accounted for 73% of Egypt’s imports. Today, given the volatility of the market, due both to the operation in Ukraine and to the tightening of anti-Russian sanctions imposed by the West, Egypt faces an acute shortage of offers: the GASC, the national procurement agency, was forced to to cancel the tender announced on February 24, with deliveries between April 11 and 21, 2022, since only one bid had been submitted. In the coming days, Cairo will apparently have to take swift action to diversify its deliveries in order to avoid a significant deterioration in its food security.
Having lost stable imports of wheat from the Black Sea region, Algeria the state grain agency, OAIC, is also considering an option to expand the geography of its suppliers. It is a question of authorizing the imports of French wheat, prohibited since October 2021 following the scandal aroused by the negative statements of Emmanuel Macron accusing the Algerians of rewriting the history of their colonization.
Food security issues are quite difficult in the territories controlled by the Palestinian National Authority (of total wheat shipments worth USD 10.98 million in 2020, Russia accounted for 9.18 million, or 83%) as well as in Lebanona country which, like the United Kingdom Crown Agents reports, imported 67% to 95% of its grain in 2010-2018 from the Black Sea region. In 2010-2017, Russia was the main exporter, while the leadership passed to Ukraine in 2018-2019 (with the exception of 2013, when Romania was the second exporter). In 2021, Lebanon bought 630,000 tons of wheat, of which 520,000 tons came from Ukraine, the rest from Russia, Moldova and Romania. Consequently, in the midst of a protracted domestic crisis and an inexorable rise in the prices of practically all products, an ordinary Lebanese citizen had to face, as one would expect, a rapid and acute shortage of bread and of flour once deliveries from Ukraine had ceased.
However, the situation was most difficult in countries going through internal armed conflicts and often unable to finance commercial food deliveries. For example, the UN reports that in 2019, out of total imports of nearly $550 million, Yemen imported $145.8 million of wheat from Russia (26.5%) and $79.8 million of wheat from Ukraine (14.5%). Accordingly, the Executive Director of WFP David Beasley did not rule out the possibility of a catastrophic deterioration of the food security situation in Yemen in the near future. Things aren’t much better in Libya, a country ravaged by civil war: amid developments in Ukraine, bread and flour prices have risen by 40%, while oil prices have risen by 25%. In Iraq, the prices of bread and sugar rose by around 20%. Although Syria Prime Minister Hussein Arnous assured on March 14 that wheat supplies would be sufficient to last until the next harvest, the situation in the country is still very ambiguous, due to disturbed economic links (the trans-Euphratian region, long considered the “breadbasket” of Syria, is still controlled by the Kurds), the devastation and the sanctions.
Can Russia save the Arab world from food riots? This is not a rhetorical question. Moscow seems to have real potential to boost its exports to the Middle East. For example, in January-July 2021, Russia managed to increase its agricultural exports to Tunisia by 4.5 times compared to the same period of 2020 – in monetary terms, there was a sixfold increase, up to 112 million USD. Class 3 Russian agribusinessrd and 4and class wheat is quite competitive in the world market, as it is a good quality grain sold at reasonable prices.
It would be naive to expect that with a declared sanctions war against Russia, the West would refrain from erecting barriers preventing Russia from taking over the niche of Ukrainian exporters. The West will certainly use negative publicity, political pressure, manipulation of grain quality requirements (e.g. setting ergot requirement of zero or near zero content, which caused Egypt to reject as defective some of the wheat exported from Russia in 2018). Some international agencies may, using external restrictions as a pretext, withhold funding for Russian humanitarian deliveries to curry favor with Western rivals.
In the emergency environment of hostile sanctions, Russia will have to devise a comprehensive approach to developing its foreign trade with the Arab world, which means introducing new effective mechanisms, such as payments in national currencies and payment clearing – which the USSR successfully used in its trade with India. They could be used in trade relations with Egypt, Morocco and Algeria, where Russia shipped 60,000 tonnes of its wheat in June 2021, after a five-year hiatus. Above all, it would be appropriate to use the interest of these countries to increase exports of their own agricultural products to Russia (citrus crops, seasonal vegetables).
Markets in the creditworthy Arabian Peninsula are also of interest. Here, Russia has achieved some success – the Federal Service for Veterinary and Phytosanitary Supervision (Rosselkhoznadzor) reports that Russia shipped 916,000 tonnes of wheat to Saudi Arabia as of January 17, 2022, in the current agricultural campaign (2021/2022), a figure six times higher than that of 2020/2021. Between July 1, 2020 and January 13, 2022, Saudis imported 2.9 million tons of barley. If mutually beneficial agreements on a wide range of cooperation were to be reached, including deliveries of advanced Russian technologies, members of the Cooperation Council for Arab States of the Gulf could, as an option, finance expanded humanitarian deliveries of Russian wheat to the Yemen, Syria and Libya.
To recap. We should recognize Russia’s promising ability to play a more active role in ensuring food security for countries in the Middle East and North Africa. This would solve the priority tasks of supporting Russian agrarians and acquiring additional sources of income for the Russian Treasury.
From our partner RIAC