Ukraine War Creates Wheat Crisis in Middle East and North Africa, China Looking to Take Advantage

A combine harvester loads a truck with wheat in a field near the village of Hrebeni in Kyiv region, Ukraine, in this July 17, 2020, file photo. Reuters/Valentyn Ogirenko

Russia’s war with Ukraine is creating worries of a potential global wheat supply crunch, with countries in the Middle East especially standing to lose the most due to their dependence on the two nations for the staple.

Russia and Ukraine combined account for 29 percent of global wheat exports, with the Middle East being a major buyer. If Russia captures Ukraine’s Odessa port, it can essentially disrupt Kyiv’s wheat supply to the Middle East and North Africa. Importing around 50 percent and 30 percent from Russia and Ukraine respectively last year, Egypt remains the world’s top importer of the grain.

Egypt’s General Authority of Supply Commodities (GASC) buys wheat to supply heavily subsidized bread to over 60 million of the country’s more than 105 million people. Since the Russian invasion, GASC has been forced to cancel two tenders, owing to high prices and a lack of offers. Two cargoes are currently stuck at ports in Ukraine.

Taking into account Egypt’s wheat reserves as well as local supplies that will be soon added to the stocks, the country has enough grain for nine months, Ibrahim Ashmawy, deputy supply and internal trade minister, said to Reuters.

But for future imports during the rest of the year, “we will look into EU because of proximity but we will not exclude other exporters like the U.S., Kazakhstan, Romania,” he added.

The Egyptian government is expected to add an extra $950 million into the current budget to compensate for the higher price of wheat. Moreover, supplies from strategic reserves can also get depleted.

The price of local wheat had risen by 23 percent while that of flour had surged 44 percent as of March 7, Ezzat Aziz of the Cairo Chamber of Commerce, told Reuters.

Lebanon is another big importer of wheat and could be severely affected by the Ukraine crisis. The country only had wheat reserves for a month when Russian forces entered Ukraine. Lebanon imports 60 percent of its wheat from Ukraine.

“They import a lot of wheat from Ukraine or Russia, but they also import a lot of flour. Where is the flour milled? It’s milled in Egypt, Turkey, and the Arab Emirates. And where do they get their wheat? They get it from the Black Sea,” Joe Glauber, a senior research fellow at the International Food Policy Research Institute in Washington, told The Washington Post.

“There are a lot of knock-on effects that I think don’t show up immediately that we’re beginning to uncover.”

In Tunisia, the government has reportedly banned officials from discussing wheat imports. Bread stocks have fallen and shops are rationing flour. In Syria, the government has begun rationing wheat.

Though Libya, Algeria, and other oil-producing nations are also exposed to higher wheat prices, some of the additional costs could be offset by higher rates fetched from hydrocarbon sales.

China might seek to take advantage of the situation as the country is said to have a large surplus of wheat, accounting for roughly 50 percent of global stocks.

For instance, the Egyptian government has often supported Beijing in issues like the persecution of Uyghur Muslims of Xinjiang. Egypt not only arrested and deported Uyghurs in 2017 but also supported China’s policy on Xinjiang in 2019 in a letter to the United Nations.

By offering a small portion of its reserves to struggling countries like Egypt, China is aiming to strengthen ties in the region.