Russia’s invasion of Ukraine is threatening global wheat and grain supplies, a particular risk for countries in the Middle East and Africa like Egypt, where bread is an important staple. Cairo, Egypt, on March 9, 2022.
Photo by Ahmed Gomaa | Xinhua via Getty Images
Bread has been the lifeblood of civilization for centuries. Riots and revolutions have been sparked over the availability of this staple food – and food prices more broadly, particularly in the Middle East and North Africa.
Russia’s unprovoked invasion of Ukraine now threatens much of the wheat and grains these countries depend on. Together, Russia and Ukraine account for about a third of global wheat exports, nearly 20% of corn and 80% of sunflower oil — and they provide most 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 grain, wheat and corn exports were shipped across the Black Sea, and half of these exports went to the MENA countries. This vital line is now closed, choking off Ukraine’s maritime trade after its ports were attacked by the Russian military.
A farmer wears a bulletproof vest during sowing, which is taking place some 18 miles from the front line in the Zaporizhia region of south-eastern Ukraine.
Dmytro Smoliyenko | Future Publishing | Getty Images
The country is now trying to export some of its produce by rail, which is encountering enormous logistical limitations, while Ukrainian farmers, whose infrastructure has not been destroyed, are trying to till their fields in bulletproof vests.
Russia is the world’s largest exporter of wheat and, crucially, the largest exporter of fertilizers. Fears of being implicated in Western sanctions against Moscow have already disrupted Russia’s exports as well.
inflation and civil unrest
All of this is accelerating rising inflation, which is hitting the population of around 500 million people, particularly the poorest and those already facing high unemployment and a deteriorating economic outlook.
“Inflation and the economy are more important than political freedom” to the region’s stability, Kamal Alam, a nonresident senior fellow at the Atlantic Council, told CNBC.
Alam pointed to the self-immolation of Mohammed Bouazizi, the young Tunisian street vendor whose protest action sparked the 2011 Arab Spring protests.
“Even the salesman who burned himself in Tunis did so out of economic outrage, not (then Tunisian President) Ben Ali,” he said. “One would argue that the first and most important reason for unrest in the Arab world is always the lack of economic mobility.”
According to the International Monetary Fund, inflation in the MENA region rose to 14.8% in 2021. Already at this point, higher food prices were the main reason – they accounted for about 60% of the increase in the region, excluding the oil-rich Gulf Cooperation Council states.
That was before the war in Ukraine started. Now the UN says food prices in April were 34% higher than 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, said in an interview with CBS last week. “And you can see a general increase in food prices, say 38-40%, but in some of the very difficult places it’s going to be 100-200%, like Syria.”
While countries will seek alternative sources for their key food imports, rising global inflation and potential export restrictions make the switch expensive. And water scarcity across the MENA region means local agricultural production is very limited.
Warnings of civil unrest, famine and mass migration
Egypt alone, the most populous country in the Arab world, imports 80% of its wheat from Ukraine and Russia. Lebanon, which has been mired in a crippling debt and inflation crisis for years, imports 60% of its wheat from the two warring countries, which supply 80% of Tunisia’s grain.
Egypt “has much 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,” said Amer Alhussein, economic development expert and adviser to the Post- Conflict initiative Plant for Peace.
This, he says, could explain why Egypt’s wealthy Gulf allies have rushed to aid Egypt 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, rising interest rates in major economies and a weak appetite for emerging market debt will weigh heavily on the country “and could become a sovereign risk factor and lead to a default that would have catastrophic consequences for the population,” added Alhussein.
Lebanon, meanwhile, faces “many warnings of impending famine,” Alhussein said. “The current situation could very soon evolve into protests and riots like those that took place in 2019, but with much more violent repercussions given the ever-deteriorating living standards and food security in the country.”
Furthermore, higher wheat prices alone “can increase (the Middle East’s) external financing needs by as much as $10 billion in 2022,” the IMF wrote in its latest Middle East and Central Asia Regional Economic Outlook released on Wednesday. “Supply shortages emanating from Russia and Ukraine can pose food security threats, particularly for low-income countries as they may also suffer potential aid diversion.”
About a quarter of Ukraine’s recent pre-invasion wheat crop is still available in the markets, but that will take about three months, analysts say.
This fall, WFP’s Beasley warns, the effects of the war will really hit MENA in a crisis he believes could trigger mass migration.
Lebanese protesters raise a large clenched fist reading ‘Revolution’ in Martyrs’ Square in the center of the capital Beirut, October 27, 2019, during ongoing anti-government protests.
ANVAR AMRO | AFP via Getty Images
“If you think we’re in hell now, just brace yourself,” Beasley warned in an interview with Politico in March. “If we neglect North Africa, North Africa comes after Europe. If we neglect the Middle East, the Middle East comes to Europe.”
Taufiq Rahim, a Dubai-based senior fellow in think tank New America’s international security program, agreed the worst could be yet to come.
“At a time of rising inflation, rising commodity prices and supply chain blockages, the entire region could experience an unprecedented economic shock this summer,” Rahim told CNBC.
“Growing economic discontent is opening a new political Pandora’s box and we will see governments under increasing pressure.”