A serious food crisis is looming in the Middle East
THE crisis caused by Russia’s invasion of Ukraine is disrupting the global political order and underlying trade structures.
Much of the trade disruption stems from the predominant role of Russia and Ukraine as exporters of wheat and other food staples. According to the United Nations Trade and Development Agency, the two countries account for 27% of wheat exports and 53% of sunflower oil and seeds in the world. Russia is also a major global supplier of fertilizers and hydrocarbons.
The Food and Agriculture Organization of the United Nations has expressed concern that the war will disrupt the spring harvest and planting season in Ukraine, with consequences for the world grain supply in beyond the next few months. Rising food and fuel import costs will affect households as well as national budgets already strained by the Covid pandemic.
The military conflict has largely cut off Ukraine’s access to its Black Sea ports, and the Ukrainian government banned grain and other food exports in early March to ensure domestic supplies. The country’s limited rail capacity to export overland was further hampered by the demands of war mobilization. The fighting threatens to interfere with the spring planting season in Ukraine, affecting labor and resources available for food production in the medium term. For Russia, heavy and comprehensive financial and trade sanctions have disrupted its ability to export and import. And the war in Ukraine broke out at a time when food prices were already rising due to rising costs of energy, and thus fertilizers and raw materials.
Arab countries get just over half of their wheat imports from Russia and Ukraine. For several countries, the ratio is much higher—96% for Lebanon; 92% for Sudan; 80% for Egypt. Shipping and transportation costs have increased due to rising fuel prices and will increase further if supplies of wheat and other staples have to be imported from a greater distance. According to the Paris-based Arab Reform Initiative, per capita wheat consumption in Arab countries (128 kilograms per year) is almost double the world average (65 kilograms per year).
Armed conflicts and economic mismanagement in importing countries amplified the impact of price spikes and supply disruptions, and drought reduced production of wheat and other cereals in several countries. In Yemen, where Russia and Ukraine provided around 40% of the country’s wheat imports, well over half of the country’s 30 million people are already experiencing high levels of food insecurity due to the war it is now in its seventh year. A mid-March UN donors’ conference for Yemen met only a third of its target, which a spokesman for the World Food Program attributed to the ‘shadow’ cast by the war in Ukraine.
Syria’s economic crisis, the result of persistent drought and the destruction of infrastructure after more than 11 years of war, has left the country with a severe shortage of wheat. Russia, Syria’s main source of wheat imports, recently suspended a December 2021 deal to supply one million metric tons of wheat. Areas outside Syrian government control in northwestern Syria source wheat and flour from Turkey, but Ukraine and Russia are major suppliers of wheat to Turkey, including its own production was affected by the drought.
Lebanon’s near total dependence on Ukraine and Russia for wheat supplies is likely to worsen food security in a country whose corrupt and incompetent elites have precipitated one of the worst crises economies of modern times and plunged more than three-quarters of the population into poverty. The country lost much of its grain storage capacity in the devastating August 2020 explosion that leveled Beirut’s port area.
The impact of the war in Ukraine on food supply in the Middle East region is most visible in Egypt, the most populous country in the region. Egypt is the world’s largest importer of wheat, about 80% of which comes from Russia and Ukraine, and one of the largest importers of sunflower oil, of which 73% comes from Russia and Ukraine. Egypt’s tourism sector, a major source of foreign currency, is also affected; Tourists from Russia and Ukraine made up a significant portion of visitors to Egypt’s Red Sea coasts.
Egypt imported over 13 million metric tons of wheat in 2020, of which 11.3 million came from Russia and Ukraine. Prime Minister Mustafa Madbuly said in late February that the country had a four-month supply and the national harvest starting in April would extend the supply to nine months. In March, the government banned all wheat and other commodity exports for three months and began talks with Argentina, India and the United States as alternative sources.
Egypt spends $3 billion a year to subsidize bread prices for 70 million people, or about two out of every three Egyptians. Even before war in Ukraine broke out, fiscal pressures, rising prices and austerity “reforms” imposed by the International Monetary Fund and other international lenders had driven up commodity prices. The government cut subsidies for sunflower, soy and other vegetable oils in July 2021.
In 2016, President Abdel Fatah al-Sisi said that “[b]read has not been affected and never will be”, but last August he announced that the bread subsidy would also be reduced. However, the generally well-informed independent Egyptian news site Mada Masr in August, citing “government sources close to decision-making circles”, said that “security agencies advised Sissi to postpone the decision to increase the price of the bread”.
Security agencies no doubt have in mind the angry protests that erupted in several cities in March 2017 when the supply minister reduced the daily amount of subsidized bread that bakeries could supply, and the days of “bread riots” in January 1977 that left dozens dead. and hundreds injured.
All of this happened before soaring wheat prices reached their highest level in 10 years in March, threatening to nearly double Egypt’s wheat import bill from $3 billion to $5.7 billion. The war in Ukraine, among other things, accelerated the outflow of capital from Egyptian bond markets. The central bank’s March 21 decision to float the exchange rate then led to a “bigger than expected” 15% depreciation of the Egyptian pound, which is virtually certain to boost inflation.
The price of unsubsidized bread jumped 50%. In an effort to rein in prices, the government fixed prices for bread from unsubsidized bakeries and ordered farmers to sell 60 percent of their harvested wheat to the state at prices below world market prices. On March 23, al-Sisi urged Egyptians to “rationalize” food consumption during Ramadan, but assured them that “we face challenges and demands…from shipments of wheat to the availability of bread for the people, it is a chain”.
Egypt’s growing financial difficulties and trending hashtags such as “the revolution of the hungry” are pushing the government to seek help abroad. On March 8, al-Sisi visited Saudi Arabia, which resulted in “a draft memorandum of understanding regarding the establishment of a high-level financial dialogue”. After a similar visit to the United Arab Emirates, an Abu Dhabi sovereign wealth fund planned to buy $2 billion worth of public shares in Egypt’s Commercial International Bank and other companies.
For weeks, the Egyptian authorities denied reports that they had asked the IMF for help, but on March 23 the IMF, citing “the rapidly changing global environment and the fallout from the war in Ukraine” , confirmed that the Egyptian authorities “had requested [IMF] support” which, according to a spokesperson for the Egyptian cabinet, “could include additional funding”.
Floating currencies and reducing subsidies are usually on the menu of IMF negotiations, so it is likely that Egypt and the wider region have not seen the final fallout from the war in Ukraine.
CommonDreams.org, March 31. Joe Stork is deputy director of the Middle East and North Africa division of Human Rights Watch. Previously, he co-founded the Middle East Research & Information Project and served as editor of its magazine, Middle East Report.