Not War Alone
Tom Stevenson on the global food crisis
Egypt’s Ministry of Supply is headed by Ali Moselhi, a former Mubarak crony whose career was resurrected in 2017 by the country’s current military ruler, Abdel Fattah el-Sisi. For weeks now Egyptian media have carried reports from Moselhi on how much wheat is left in the country’s permanent stores. Bulletins like these would normally be ignored as artefacts of the strange world of government communications (the Egyptian Ministry of Water Resources and Irrigation used to send me regular updates on the water level at the Aswan High Dam). But the most recent figure amounted to about eleven weeks of supplies. Egypt imports more wheat than any other state in the world. Declining grain reserves matter, since subsidised bread is the main method for averting mass starvation of the poor. This is not a unique situation. In its ‘strategic wheat reserve’, Saudi Arabia stockpiles enough for more than a year of bread-making – about 3.3 million tonnes. A lot of it is stored in massive silos just north of Buraydah, in the centre of the Arabian peninsula, surrounded by irrigation farms visible in satellite images as green crop circles dotting the hamada.
This may seem impressive, but Saudi reserves are tiny compared to the 650 million tonnes of grain which China has stored up. One site at Dalian, on the Liaodong Peninsula in the north-east, has 95 grain elevators, each a monument to hard memories of the mid-century famines. Until 1996 even the US, with its vast Midwestern farmlands, used to keep four million tonnes of wheat in reserve.
National grain supplies are an emotive subject: they are a test of the basic competence of the administrative state. An empty central granary once meant imminent political collapse. Russia’s invasion of Ukraine and US sanctions on Russia have severely disrupted grain exports from both countries. Between them, Ukraine and Russia produce about 15 per cent of the world’s wheat. The International Fund for Agricultural Development estimates that the area around the Black Sea is the source of 12 per cent of globally traded caloric intake. In addition, modern industrial farming is heavily reliant on hydrocarbons. As energy prices have risen so has the cost of fertiliser. The result has been a steep rise around the world in the price of all major staples except rice. Suddenly investment bank analysts are consulting soil fertility tables. Political commentators are paying attention to the UN Food and Agriculture Organisation’s food price index. It has been climbing since the summer of 2020, but April saw the third major jump in succession.
The price spikes are already having global effects. In March, Algeria restricted food exports. In April, flour mills in Kazakhstan were closed down thanks to a lack of cheap Russian wheat. In Turkey, inflation has hit 61 per cent and the price of food is rising even faster. The main producer of Indonesian instant noodles (19 billion packs per year) has warned of shortages.
Russia and Ukraine are home to the majority of the world’s highly productive humus-rich chernozem farmland. But the salient feature of Russian and Ukrainian agriculture isn’t productivity so much as the ratio of production to population. Ukraine produces a quarter as much wheat as India, but has three per cent of India’s population. The result is that Ukraine and Russia supply many of the world’s poorest countries with a large portion of their imported food. The war poses problems beyond the immediate fact that fields go untilled. For the last ten years, Ukraine has been using a superior wheat germplasm developed in Mexico to increase the yield of its farms. Thanks to the war the germplasm is no longer arriving. Future crops will be affected. The rise in prices may incentivise planters elsewhere: sugarcane farmers in São Paulo state say they will grow wheat to take advantage of higher prices. India has pledged to increase its exports, though its recent yields have been poor. But it isn’t clear that poor countries reliant on imported food will be able to make up for the loss of Ukrainian and Russian supplies with grain from Gujarat, Esperance or Buenos Aires.
The majority of wheat and other staples consumed around the world is grown within national borders. In places that grow little or nothing at all, however, the loss of Russian and Ukrainian grain supplies can be a serious blow. In Somalia and Benin, Russia and Ukraine are the source of 100 per cent of imported wheat, in Laos 94 per cent, in Egypt 82 per cent and in Sudan 75 per cent. Only half of Libya’s imported wheat comes from Ukraine, but that half accounts for around 20 per cent of consumption. The same is true of Afghanistan. Last year the UN predicted that 97 per cent of people in Afghanistan would be in poverty by this summer. It has since said the prediction was too optimistic. To make matters worse, the US Federal Reserve’s plans to keep raising interest rates over the course of this year are set to have serious effects on debtor countries. A list of states in sub-Saharan Africa and the Middle East face rises in the cost of national debts which are already close to unaffordable. Some of those states also have to import large amounts of food. The FAO is warning of a ‘hurricane of global hunger’ and the World Food Programme claims that hundreds of millions of people will soon suffer a major reduction in caloric intake. Many Russian and Ukrainian grain silos are full (I recently saw some myself near Ternopil), but in response to sanctions the Russian government has clamped down on grain exports. Ukraine’s Black Sea ports remain closed.
In Egypt, the risks posed by the war in Ukraine were clear well in advance. The country has a very large, very poor population surviving on bread priced below cost. It imports 13 million tonnes of wheat per year, enough to fill St Paul’s Cathedral a hundred times over. The majority of that wheat is bought from Russia and Ukraine, shipped across the Mediterranean to ports in Alexandria and Damietta, and then transported to mills in the Nile Delta or to the north of Cairo. In the first weeks of the war, the price of bread produced outside the state-run bakeries rose by 50 per cent. The government moved to cap prices, but the rising cost of wheat has already become a great burden on the treasury. The Egyptian pound has lost 15 per cent of its value. In March alone, the government more than once had to raise the toll for ships passing through the Suez Canal. On 23 March, Egypt sought assistance from the IMF.
By April, the government had raised the price of petrol, the latest in a series of price hikes encouraged by the IMF since 2016. Factory bosses in large Egyptian companies have been forcing wage cuts on workers whose unions were liquidated or hollowed out after the 2013 coup. The government has been negotiating new wheat supply deals with Bulgaria, Germany and India but it will still be paying elevated prices. It has had to request aid from the rich Gulf states. In 2013 the Gulf monarchies bankrolled the coup, mostly in the form of grants or cash transfers. Now, with the exception of Saudi Arabia, which has agreed to transfer $5 billion directly into the accounts of Egypt’s central bank, the Gulf states have for the most part offered only to buy stakes in Egyptian companies. Investment pledges will be of less use than aid. In the meantime, the control exercised by the Egyptian security apparatus has been sufficient to prevent the stirring of any real opposition. To challenge the state is to risk ending up in the massive prisons the army has been building in the Sinai peninsula following a decade of military repression.
Lebanon imports far smaller quantities of grain than Egypt, but there too around 75 per cent comes from Ukraine and Russia. The Lebanese economic crisis, driven by brazen corruption, set in long before Covid, not to mention the Ukraine war. Since October 2019 the country has experienced a major rise in poverty rates and a 90 per cent drop in the value of the lira. Not long after the Russian invasion Banque du Liban was failing to deliver payments for imported wheat. Supplies of bread started to run down. By April, Lebanese newspapers were reporting that bakeries were running out of flour and shutting down their ovens. The state news agency began reporting on individual shipments of wheat as they arrived at Lebanese ports. Like Egypt, Lebanon has sought aid from the IMF. In early April it signed up to a $3 billion loan, tied to the imaginative goal of reforming Lebanese banks. The remaining scraps of the Lebanese economy will be fought over in parliamentary elections scheduled for May.
In Tunisia the abrupt curtailment of grain shipments from the western steppe met with a pre-existing political crisis of a different order. In July 2021, President Kais Saied suspended parliament and dismissed the sitting cabinet in a blunt power grab. In December, he had the vice president of the religious-conservative Ennahda party arrested. In February, he dissolved the judicial council and appointed a new one. After Russia’s invasion, bakeries in Tunisia – half of whose wheat and cereal imports come from Ukraine – closed for lack of flour. As the extent of the shortages became clear, the government criminalised ‘fake news’ about food supplies. On 30 March, Saied dissolved the suspended parliament. Although he appears to have the army’s support, his steady, grinding mode of presidential strong-arming has been more reminiscent of recent Turkish history than the Sisi-style military takeover. And unlike Egypt, Tunisia still has opposition political parties, Ennahda prominent among them. Citizens Against the Coup, a civil society initiative, has held sit-ins in Tunis that don’t end in massacres. Rule by presidential decree is far from settled. Tunisia now has probably the worst food shortage in the Maghreb, which is all the more sobering given that Morocco is currently experiencing its worst drought in decades and is expected to lose more than half of this year’s grain crop. Saied has accused his opponents of ‘sowing seeds of chaos’.
In Egypt, Lebanon and Tunisia the damage caused by the food crisis will be considerable. Yet the potential for human suffering is much greater in Syria. Even before the war in Ukraine more than 50 per cent of Syrians had insufficient access to food. A decade of civil war and droughts has destroyed what was once an adequate domestic agricultural system. US sanctions have coincided with hyperinflation. Until recently, Damascus was importing large quantities of wheat from the Crimean peninsula. Those supplies are now under threat.
Closest to Syria in potential for humanitarian catastrophe is probably Sudan, which imports three-quarters of its grain from Russia and Ukraine. In 2021, a counter-revolutionary coup led by General Abdel Fattah al-Burhan led to the suspension of international aid and worsened a long economic collapse. The World Food Programme estimates that the number of Sudanese facing acute hunger will double to 18 million in the next few months. The only country in worse condition is Yemen, which has been in a constant state of famine or near famine for eight years. The Saudi-enforced blockade – supported by the US and the UK – continues, punctuated by atrocities that are barely reported. Yemenis are for the most part reliant on humanitarian aid shipments. These too are under threat: in March, the UN received less than a third of the pledges it requested for humanitarian relief.
The Arab Spring of 2011 coincided with a spike in global food prices. Poor residents of Cairo’s slums played a critical role in the seizing of Tahrir Square on 25 January; the Tahrir movement’s first demand was ‘bread’. This raises the question of whether the present food crisis may contribute to new irruptions. In countries where sacks of sugar are distributed at election time, a food crisis will always be seen as dangerous by those in power. High energy prices, and the blackouts they have caused, were mainly responsible for the political breakdown in Sri Lanka, but rising food prices have also played a part. In Lebanon, Tunisia, Sudan, Syria and Yemen it sometimes seems that the reason we don’t see major uprisings is that there is no stout equilibrium against which to struggle.
Russia’s invasion of Ukraine took place at a time when global grain prices were already at extremely high levels. The FAO argues that the war didn’t cause the crisis so much as reveal ‘the fragility of the dominant global food system’. In February the World Food Programme warned of the dangers of ‘an unparalleled global hunger crisis’. The current cycle dates to the summer of 2020. A number of causes have been suggested, from volatile weather to changes of diet in China and India. A more significant factor is the lasting impact of the Covid pandemic on transnational shipping and production: there are currently five hundred ships circling outside the port of Shanghai. The disruption has led to all manner of shortages: there has been a 70 per cent drop, for example, in global inventories of aluminium, copper, nickel and zinc. But it is the critical commodities – hydrocarbons and grains – that have put the extent of the problem on display.
Yet for all the damage the pandemic has done, it can’t fully explain the remarkable rise in food prices that predated the war in Ukraine. An important part of the story has to do with the movements of poorly regulated commodities markets, dominated as they are by a handful of financial institutions and corporations. Investor speculation helped drive the price of food out of the reach of much of the world’s poor during the economic crisis of 2008. Investment banks tend to deny that speculation is responsible for unusual rises in food and commodity prices. Jeff Currie, Goldman Sachs’s lead commodities analyst, has blamed a capital deficit – too much investment in Netflix, too little in oil, mines and industrial farming – and, predictably, too much regulation of banks. But that is hardly convincing. Large financial institutions and traders making bets on the prices of energy and food are almost certainly amplifying the severity of price spikes. The liquidity even of such giant commodities specialists as Trafigura, Vitol, Glencore and Cargill is stretched thanks to their derivatives positions. Collectively they have a long record of high-handed dealings with power – Vitol’s former CEO once flew into Benghazi escorted by a Nato drone; during a period of hyperinflation in Zimbabwe, Cargill illegally printed its own currency using presses in Harare; Glencore ripped off the government of Romania and bought out the Australian mining industry – but such manoeuvrings won’t always guarantee their protection. The implosion of any of them could lead to food shortages and rationing.
Food crises are not just another instance of geography – unevenly distributed alluvial soil, say – frustrating human designs. President Biden has publicly acknowledged that the price of US sanctions ‘is not just imposed on Russia’. But his administration is exacting a price in other ways too. In April it relaxed the rules concerning the sale of petrol cut with corn ethanol. As much as 40 per cent of all corn grown in the US is used to make biofuel. This is corn that can’t be eaten by humans (though it can be fed to animals), and encouraging farmers to plant more corn reduces the supply of other crops. The decision was taken in an effort to keep petrol prices low, and was also favoured by agribusiness lobbyists. Commentators talk of a multipolar world, but the US still has enormous power in the far reaches of the global economy. Thanks to US sanctions, Brazil must seek Washington’s approval to buy much-needed fertiliser from Iran. The war in Ukraine is not the only factor contributing to destitution in the slums of the Middle East.
Throughout the 2010s, the World Bank published a series of reports announcing ‘tremendous progress’ in reducing extreme poverty. These were exaggerated claims based on data full of gaps and a specious methodology. The former UN special envoy on extreme poverty and human rights, Philip Alston, showed in 2020 that the Bank’s measures were largely designed to tick off development goals. It defined poverty out of existence rather than working to alleviate it. The eradication of poverty was being presented as a triumph of the existing order and a justification for the continuing inequalities of the global economy. The triumph was illusory. The war in Ukraine and the food crisis it has compounded will result in growing poverty and privation. Wheat price futures fall or rise on news of peace negotiations. The longer the war continues, the greater the certainty of hunger. On 13 April, eight of the biggest US arms companies were called in to the Pentagon for a briefing on stepping up arms supplies to Ukraine. According to an anonymous US official, the meeting was about preparing for a protracted conflict.
Feature image: Ukraine provides around half the wheat bought by the World Food Programme.
Posted on London Review of Books May 2022