The Russian invasion of Ukraine threatens global wheat and grain supplies, a particular danger to Middle Eastern and African countries such as Egypt, where bread is a staple food. Cairo, Egypt, March 9, 2022.
Photo by Ahmed Gomaa | Xinhua via Getty Images
For centuries, bread has been the lifeblood of civilization. Riots and revolutions erupted over the availability of this staple – and on food prices more broadly, particularly when it comes to the Middle East and North Africa.
The unprovoked Russian invasion of Ukraine now threatens a large proportion of the wheat and grain on which these countries depend. together or together, Russia and Ukraine account for nearly a third of the world’s global wheat exportsabout 20% of corn, and 80% of sunflower oil – they provide the majority of the MENA region’s supply.
Wheat futures are up 30% since the invasion began in late February.
Before the war, more than 95% of Ukraine’s total exports of grain, wheat and corn were shipped through the Black Sea, and half of these exports went to the countries of the Middle East and North Africa. This vital channel is now closed, stifling Ukrainian maritime trade after its ports were attacked by the Russian army.
A farmer wears a flak jacket while sowing crops are done 18 miles from the front line in Zaporizhia region, southeast Ukraine.
Dmytro Smolenko | Future Publishing | Getty Images
The country is now trying to export some of its produce by rail, which has enormous logistical limits, while Ukrainian farmers, whose infrastructure has not been destroyed, are trying to plow their fields in bulletproof vests.
Russia is the world’s number one exporter of wheat, as well as – crucially – the largest exporter of fertilizer. Fears of getting bogged down in Western sanctions against Moscow have already disrupted Russian exports as well.
Inflation and popular unrest
All of this is fueling spiraling inflation that is afflicting a population of nearly 500 million people, particularly the poorest and those already facing high unemployment rates and worsening economic prospects.
Kamal Alam, a non-resident senior fellow at the Atlantic Council, told CNBC that “inflation and the economy, more than political freedom, are key” to the region’s stability.
Alam cited the self-immolation of Mohamed Bouazizi, a young Tunisian street vendor whose protest sparked the 2011 Arab Spring protests.
“Even the seller who burned himself in Tunisia did it out of economic discontent, not (then Tunisian president) Ben Ali,” he said. “One might argue that the first and most important cause of unrest in the Arab world is always the lack of economic mobility.”
Inflation rose to 14.8% in the Middle East and North Africa region in 2021, according to the International Monetary Fund. At that point, rising food prices were the main driver – accounting for about 60% of the increase in the region, excluding the oil-rich Gulf Cooperation Council.
This was before the start of the war in Ukraine. Now, the United Nations says food prices as of April are 34% higher than they were a year ago.
“We now have 45 million people in 38 countries knocking on the door of famine,” David Beasley, executive director of the United Nations World Food Program, told CBS in an interview last week. “And you might see an overall increase in food prices, say 38 to 40%, but in some very difficult places, it’s going to be 100%, 200% like in Syria.”
While countries will look for alternative sources of their important food imports, high global inflation and potential export restrictions make the transition costly. Water scarcity in the Middle East and North Africa (MENA) region means that local agricultural production is very limited.
Warnings of riots, famine and exodus
Egypt, the most populous country in the Arab world, imports 80% of its wheat from Ukraine and Russia. Lebanon, already suffering from a stifling debt and inflation crisis, imports 60% of its wheat from the two warring countries, which provide 80% of Tunisia’s grain.
Amer Al-Hussein, an economic development expert and advisor to the Egyptian Foreign Ministry, said that Egypt “has a lot to lose from the war, as the bread subsidy program reaches more than half of the population and forms one of the pillars of the social contract that maintains stability in the most densely populated Arab country.” Post-Conflict Initiative Factory for Peace.
He says this may explain why Egypt’s wealthy Gulf allies are scrambling to help it with billions of dollars in funds for its central bank and other investments to boost its economy.
While the Egyptian government can continue to borrow money, higher interest rates in major economies and a weak appetite for emerging market bonds will greatly affect the country “and may become a sovereign risk factor and lead to a default that will have a disastrous effect on its population,” El-Hussein added.
Meanwhile, Al-Hussein said Lebanon faces “many warnings of an impending famine.” “The current situation could very soon develop into protests and riots like the one in 2019, but with a more violent impact given the deterioration of the standard of life and food security in the country.”
Moreover, higher wheat prices alone “could increase external financing needs (in the Middle East) by up to $10 billion in 2022,” the International Monetary Fund wrote in the latest Middle East and Central Asia Regional Economic Outlook released Wednesday. “Supply shortages arising from Russia and Ukraine could jeopardize food security, particularly for low-income countries, as they may also suffer from the potential for aid diversion.”
Analysts say about a quarter of Ukraine’s last wheat crop before the invasion is still available on the market, but that will last about three months.
Beasley warns the World Food Program this fall, when the impact of the war will really affect the Middle East and North Africa, in a crisis that he believes could lead to a mass exodus.
Lebanese demonstrators raise a large fist written with the words “revolution” in Martyrs’ Square in the center of the capital Beirut on October 27, 2019, during the ongoing protests against the government.
Anwar Amr | AFP via Getty Images
“If you think we have a hell on earth right now, get ready,” Beasley Cautious in an interview With Politico in March. “If we neglect North Africa, and North Africa is coming to Europe. If we neglect the Middle East, then the Middle East is coming to Europe.”
Tawfiq Rahim, a Dubai-based senior fellow in the International Security Program at the New America think tank, agreed that the worst may be yet to come.
“At a time when inflation is rising, commodity prices are increasing, and the supply chain is being throttled, the broader region may experience an unprecedented economic shock this summer,” Rahim told CNBC.
“Pandora’s new political box will open due to growing economic discontent and we will see governments under increasing pressure.”
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