The hidden cost of war
Food shortages caused by the war in Ukraine could spark a second Arab Spring in North Africa.
In a nutshell
- The war in Ukraine has severely disrupted food markets
- Maghreb countries will be among the most affected
- Widespread political instability could resurface as a result
War is more than bombings and fleeing civilians. It has much broader repercussions, especially when it is fought between two strategically important nations like Russia and Ukraine. Ukraine is the easternmost part of Europe and a buffer between Russia and NATO countries. Russia is one of the world’s largest gas and oil producers. Both countries are major suppliers of wheat, corn and fertilizers.
Ukraine is also an important producer of steel, iron and fossil coal. But it is the disruption to its wheat production that is most problematic, especially following the economic shock caused by Covid-19. Wheat prices have now hit a 10-year high: $523 per ton this past March. This is a serious problem for government budgets and a threat to citizens’ purchasing power.
The situation on the ground
The war suspended part of the production and led to a blockade of the Ukrainian ports on the Black Sea (Odesa, Kherson, Mykolaiv) from which 95 percent of food shipments were sent out. More than 20 million tons of wheat have been stopped by about 20 Russian ships. Food prices are rising around the world.
Russian forces have been stealing everything they can from the occupied territories: 400,000 tons of grain, a third of all the region’s reserves according to Deputy Minister of Agriculture Taras Vysotskyi. Worse, in April, there was an attack on a silo in Luhansk containing 19,000 tons of wheat and about 9,400 tons of sunflower seeds – a war crime, if confirmed.
It is very likely that the war will last for a long time, becoming a real conflict of attrition. But the wheat deliveries cannot wait.
Ukraine’s 32 million hectares of intensively cultivated land produce 18 percent of the world’s supply of sunflower seeds, 13 percent of the corn, 12 percent of the barley and 8 percent of the wheat. But it is highly likely that if the conflict continues, between 20 percent and 30 percent of the fields will remain uncultivated. Together, Ukraine and Russia produce 30 percent of the world’s wheat and barley, and supply most of Egypt and Turkey’s grain. Ukraine also exports to Asia (Philippines, Thailand, Indonesia and South Korea) and to Morocco and Tunisia as well. Russia supplies a significant percentage of the demand for wheat in Africa, especially in Nigeria, Senegal and Sudan.
The interruption in the supply of crops and the consequent 30 percent increase in cost – as of April – will result in devastating hunger. According to the Global Report on Food Crises, 2021 was a record year, with 53 countries at risk of famine, meaning nearly 193 million people – a whopping 40 million more than the previous year – live in an unsustainable situation. Millions of these are children under the age of five.
Facts & figures
It is very likely that the war will last for a long time, becoming a real conflict of attrition. But the wheat deliveries cannot wait. It is necessary that the 20 million tons stopped in Ukrainian ports be treated as an absolute priority, said Prime Minister Mario Draghi to the Italian parliament, to prevent millions of people from dying in the poorest parts of the world. Countries such as Eritrea and Somalia, Armenia, Azerbaijan and Mongolia depend almost exclusively on exports from Russia and Ukraine. If the cereals and fertilizers fail to arrive, their population could face an unprecedented catastrophe.
Those agricultural products are difficult to replace, also because of climate change. The exceptional heat is harming the crops of Pakistan and India, which is the second-largest wheat producer in the world. Many hoped Indian wheat could replace part of the Ukrainian supply, but in many regions crop yields have fallen by up to 50 percent because of extreme temperatures. In Punjab, for example, temperatures of over 60 degrees caused a loss of more than 500 kilograms of grain per hectare, prompting the Indian government to block wheat exports and making global prices jump by another 6 percent.
The war has shown how extraordinarily interconnected the world is. The crisis in Ukraine will have a different impact on several countries depending on the local context.
In Tunisia, 80 percent of the wheat consumed wheat comes from Ukraine. The government has stated that until June the stocks will cover national needs, but it is by no means certain that this will be the case. Moreover, the Tunisian state owes a debt of $300 million to Ukrainian exporters. Even if the supply of grain was certain, Tunis might not be able to pay for it.
Unlike other neighboring nations, Tunisia produces only 30 percent of its oil consumption while the rest is imported. This means that every increase in oil prices will further burden the government budget and the population – yet another blow to the fragile country.
Moroccans have been taking to the streets to protest the high cost of living. Prime Minister Aziz Akhannouch is the main shareholder of the Afriquia Group, a leading hydrocarbon distribution company, and many have accused him of having conflicting interests.
The government has tried to improve the situation with measures to support the agricultural and infrastructure sectors. It has also raised the minimum wage. Thanks to this step, protests have subsided, but the specter of grain shortages is very much present. The country imports about half of what it consumes, but its main suppliers are France and Canada. As a result, it is less exposed to grain supply disruption from the Black Sea region compared to its neighbors in the region.
However, the impact of the January drought will have significant consequences on grain production (this year’s grain harvest is expected to be 69 percent lower than in 2021) and will therefore be reflected in the volume of imports needed to meet domestic demand.
Of all the Maghreb countries, Algeria is the least exposed to the consequences of the Ukrainian conflict. It imports only 3 percent of its grain from there, and domestic stocks can feed the country for at least another year. The country is also rich in hydrocarbons, which will fill the state’s purses considerably, especially given the current prices.
The Kremlin could decide to allow certain ships loaded with foodstuffs to pass toward specific countries, but this will not suffice to halt the current price surge in the short term.
Libya imports most of its food, including 90 percent of its wheat from Ukraine and Russia. Unlike Algeria, it has extremely limited reserves that will barely last three months. Prices have risen substantially in the past few months. All this is happening while two parallel governments are facing off. While political and bureaucratic institutions bicker, there is a risk that the people will be left to their own devices in the face of this new crisis.
Egypt, with its 105 million citizens, is by far the largest importer of wheat in the region – 12-13 million tons annually. The halt of grain exports from Ukrainian ports has the potential to wreak havoc. In February the government said its strategic reserves could cover five months. But while in the past it used to spend $3 billion annually on wheat imports, now the price could reach $5.7 billion.
The war in Ukraine has upset food supply all over the globe. Possible scenarios here are closely dependent on the course of the war, which is unlikely to end rapidly. Short-term, it is certain that the price of raw materials will increase due to sudden shortages. Each of these Maghreb countries will have to diversify its wheat supply and increase local production in the longer term – but this will be challenging in a region where land is arid and water is precious.
Russia opens the ports: This is a highly improbable scenario. The Kremlin could decide to allow certain ships loaded with foodstuffs to pass toward specific countries, but this will not suffice to halt the current price surge in the short term. North Africa, already mired in a widespread economic crisis for months, will be severely affected and see increasingly frequent protests.
Russia maintains its embargo, using it as a bargaining chip against sanctions: This option would compound existing economic problems and lead to a humanitarian catastrophe. Protests in the Maghreb could escalate into riots like those of 2011. If not resolved in time, the food blockade could trigger successive waves of destructive political unrest.