Middle East will suffer from the grain shortage due to the war in Ukraine

World Monday 07/March/2022 15:54 PM
Middle East will suffer from the grain shortage due to the war in Ukraine

Nicosia: As Russia's invasion of Ukraine continues unabated, many countries of the Middle East are seriously concerned about the inevitable shortage of grain as Russia and Ukraine together account for 30 per cent of global wheat exports.

Russia is the world's largest exporter of wheat, with Ukraine in fourth place, while the two countries together account also for 19 per cent of corn exports.

The war in Ukraine, if it continues for several weeks more, will also prevent Ukrainians from planting the wheat, while the sanctions imposed by the West will prevent Rusia from selling its produce. As a result, the prices of grain will continue to rise steeply, causing sharp rises in the prices of bread, milk, meat, and other products.

According to data taken from the FAO's 2020 balance sheet, Lebanon buys 81 per cent of its national wheat consumption from Ukraine and 15 per cent from Russia. Egypt buys 60 per cent of the wheat it consumes from Russia and 25 per cent from Ukraine. Turkey has a similar proportion: 66 per cent of wheat imports come from Russia and 10 per cent from Ukraine.

Several Middle East governments and especially those of Egypt, Lebanon, Libya, and Turkey will find it extremely difficult to pay for the increased prices of grain and may be forced to reduce or even abolish subsidies for bread, risking violent popular protests, which may topple some of them.

Egypt is struggling desperately to find alternate sources of wheat after the Russian invasion of Ukraine has put supply to the country in jeopardy. As last year the country imported about 85 per cent of the wheat it needed from Russia and Ukraine, the government of Abdel Fattah al-Sisi will need to find urgently alternative sources of supply.

Last week the Egyptian government had to cancel an international tender for the supply of wheat from France, as only one tender was received, instead of a minimum of two offers required, and Cairo rushed to invite a new tender 48 hours later. But, in view of the fact that last week the price of wheat reached a 14-year high, there is no doubt that it would have to pay much more for the same quantities.

The price of bread has been a politically explosive issue in Egypt as on several occasions in the past 50 years it triggered angry protests, to which the Police usually responded by firing shots over the heads of demonstrators. Particularly strong protests were staged in March 2017 in Alexandria, Giza and many other areas after the government cut the supply of subsidized bread amid an economic crisis.

Also during the so-called "Bread Intifada" in January 1977 violent protests broke out and the Egyptian security forces killed 70 people and wounded more than 550 protesters, but in the end the government was forced to re-institute the subsidies.

Bread subsidies are considered a red line among Egyptians and people in other countries in the Middle East, as they are a staple for every family in the region.

Bread is sold at very low prices, for example, a subsidized flat loaf costs 0.05 Egyptian pounds, less than one US cent, which covers only a small part of the real cost of producing it and the government coffers cover the rest.

Lebanon is facing a huge problem with grain supplies, as it imports more than 80 per cent of the grain it needs from the Black Sea and does not have a strategic stockpile of grains due to the enormous explosion in the port of Beirut in August 2020 which destroyed its only large grain silo.

Furthermore, as its economy has been facing a large-scale, multi-dimensional crisis, including a banking collapse, a liquidity crisis, and sovereign default, it may not be able to pay the skyrocketing prices for the grain it needs.

Turkey's economy has been faltering in the past three years, and the sharp devaluation of the Turkish lira has forced the majority of its estimated 81 million people to increase consumption of wheat-based products at the expense of the protein, increasing in this way the need for grain.

Moreover, the approximately 5 million refugees hosted in Turkey have bread as their main food. All this is coupled with the fact that Turkey is a major producer of pasta, flour, biscuits and semolina. Turkey is now a key player in the international wheat market, as its grain imports have increase to record levels.
In 2021, Turkey imported 64.6 percent of its wheat from Russia and 13.4 per cent from Ukraine.

Ankara would desperately need to find enough wheat to cover its needs. This year's Ukrainian harvest may be considered lost due to the war and the closing of its Black Sea and Sea of Azov ports, while Russia will find it extremely difficult to export its grain, as major shipping giants including Switzerland-based MSC, Denmark's Maersk and France's CMA CGM have announced last Tuesday that they would halt cargo bookings to and from Russia until further notice.

Currently, the world grain markets are in a paralyzing state of uncertainty. Traders do not want to make deals that may be affected by the sanctions imposed on Russia and may find themselves in trouble either with the sanctions of the international community or their clients.

So, apart from the serious violation of international law and the big humanitarian crisis it created, Russia's invasion of Ukraine will have serious repercussions also on the international grain markets and will affect millions of people who due to steep price rises may be forced to reduce the consumption of bread and thus may be close to famine, as in the case of Yemen.

In the end, everything will depend on how long this war will last. Russia could be able to maintain its grain production to the previous levels but would face great difficulties in exporting it, while Ukraine's grain production will disappear from the international markets at least for several months.