Millions of people in Africa could face starvation should the existing global food crisis persist or later worsen. The crisis is triggered by the decision of the West and the U.S to impose the severest sanctions in modern history on Russia over its special military operation in Ukraine.
The West’s attempt to isolate Russia as ‘punishment’ has sent the price of grain, cooking oil, fertilizer and energy soaring, leading to the global food crisis that could cause famine in not only Africa but the entire world.
In this piece, I analyze why a concerted demand by African countries to lift these unjustified sanctions on Moscow would save millions from starvation.
The reasons of the crisis in the global food market
The Russian Federation, which is constantly monitoring the situation on the world food market, notes the accumulation of prerequisites for the emergence of a global crisis in the field of food security and access to essential products.
International agricultural production has entered a period of global economic instability, characterized by catastrophic forecasts of the state of the industry, the harvesting of new crops and the production of livestock products.
The world is entering a period of significant growth in food prices, including wheat and corn.
The unfavorable situation on the world food market began to take shape since February 2020 in the process of combating the consequences of the coronavirus pandemic.
The United States has taken the path of injecting large amounts of money to support the population, individual enterprises and sectors of the economy. In two incomplete years from February 2020 to the end of 2021, the money supply in the United States increased by $ 5.9 trillion.
The total amount of money supply increased by 38.6 percent. At the same time, the US Treasury Secretary recently said that they had made a mistake. So this is a mistake of the financial and economic authorities of the United States, it has nothing to do with Russia’s actions in Ukraine.
And this was the first step, a very serious step towards the development of an unfavorable situation in the food market, because food prices went up.
The second reason is the policy of European countries, and above all the European Commission, in the energy sector. The ability of alternative sources of energy to provide the population with necessary amount of electricity and heat were overestimated: solar, wind, hydrogen.
At the same time the importance of traditional types of energy including hydrocarbons and coal was downplayed. Banks stopped lending because they were under political pressure. Insurance companies did not service the relevant transactions.
Local authorities stopped giving out plots of land to expand production, reduced the construction of specialized infrastructure, including pipelines. All this has led to a reduction in investment in the global energy sector, resulting in a rapid jump in energy prices. Western European countries have not extended contracts for the supply of natural gas.
All these had a negative impact on the European energy market: prices went up, which led to an increase in the cost of fertilizers, since a significant part of them (primarily nitrogen) is produced of gas as a feedstock.
Due to the increase of prices on fertilizers, many enterprises, including in European countries, have become unprofitable. Offer of fertilizers on the world market has fallen sharply, prices have significantly increased.
Unfavorable situation on the world fertilizer market has developed due to the illiterate actions of European politicians which has also contributed to the rise of food prices and it has become another step towards the impending of food crisis.
The worsening of the situation on the agricultural world market has been sparked by the decision of Western countries to impose unilateral restrictive measures against Russia in February – March 2022.
The sanctions turned out to be so harsh that the systemic errors of the West in the macroeconomic and food policies showed up and produced new serious problems that became the trigger of the impending food crisis.
Western politicians do not take into account that Russia is one of the world’s main producers of food and energy, one of the major exporters of agricultural and food complex products. Now Russia supplies 161 countries with agricultural raw materials and food.
The amount of export of food products and agricultural raw materials in 2021 amounted to 71 million tons worth 37.1 billion dollars, which is 21% higher than in 2020 (30.5 billion dollars).
According to forecasts, Russian export of food products and agricultural raw materials in 2022 may grow by about 6% compared to the level of 2021 and will achieve to more than $ 39 billion.
In 2021 the major part of Russian agricultural export consisted of cereals. Expectations for the new harvest of 2022 are mostly optimistic. In January 2022, the amount of Russian export of poultry increased by 39.1%, fresh and frozen fish – by 17%, seafood – by 24%. In the first quarter of 2022 export from Russia was $0.96 billion.
This is 43.2% more than the same period in 2021. The western sanctions affect all Russian agricultural export and have negative consequences for all countries without exception.
As a responsible participant of the global food market Russia is ready to faithfully fulfill all its obligations under international contracts regarding the export of agricultural products, fertilizers, energy resources and other critical products.
Moscow is well aware of the importance of the supply of socially significant goods, including food, for the socio-economic development of the states of Asia, Africa, Latin America and the Middle East, the achievement of food security indicators and the implementation of the UN program on Sustainable Development Goals.
Nevertheless, economic sanctions, including the blocking of international transportation and the arrests of large-tonnage vessels, inability to insure Russian sea shipments and the disconnection of Russian banks from the SWIFT system, have led to the rupture of logistics and financial chains that have existed for decades in the world trade system.
Payment restrictions and logistical difficulties caused by the sanctions have been affecting the entire global network of agricultural producers.
The cost of energy resources and fuel is growing, which has been caused by Western sanctions. Farmers all over the world reduce acreage. The amount of agricultural products is decreasing despite of constantly growing demand.
The situation has been aggravated by the low level of food supplies, unfavorable weather conditions (in particular, the prolonged drought in North America) and the lack of necessary investments in the industry.
Under these conditions, the Russian Federation has been forced to take certain retaliatory restrictive economic measures affecting a number of agricultural and raw materials in order to protect its interests in response to external restrictions.
About the situation on the world market of agricultural fertilizers due to Western sanctions
Western sanctions have severely restricted Russian supplies of fertilizers to the world market, thereby undermining the possibility of successful agricultural production in many countries of the world.
The policy pursued by Washington and its European allies towards Moscow does not take into account the fact that Russia is the third supplier of mineral fertilizers in the world.
In 2021, the production of fertilizers in Russia increased by 5.6%, to 24.9 million tons (in active substance).
About 65% of the products were exported. Russia is also an important supplier to the world market of basic raw materials for the production of fertilizers, including ammonia (potentially from June to December 2022 – about 2.5 million tons), apatite concentrate (about 1 million tons), sulfur (about 2 million tons).
Currently, these supplies are also blocked due to the Western sanctions.
Thus, Europeans and Americans have been facilitating on purpose to the shortages of raw materials for the production of fertilizers in the world.
The total amount of fertilizers supplied to foreign markets (mainly due to nitrogen and mixed fertilizers) have had steady growth rates in recent years.
Officially the Western countries haven’t imposed sanctions on the fertilizers and agricultural products from Russia, but the countries of the “collective West” have established restrictive quotas and additional duties that prevent free access of Russian fertilizers to foreign markets.
Since the beginning of the special operation in Ukraine, the cost of nitrogen fertilizers in the world has skyrocketed by an average of 40-50%, phosphorus and potassium fertilizers – by about 30%.
Prices on the nitrogen and phosphorus will continue to rise in the near future, but they could be stabilized and logistics have a chance to normalize by the end of the summer only if the western trade barriers are removed.
Since the beginning of March 2022, several major logistics companies have refused to carry Russian cargo. Since March 1, three major sea container carriers – Swiss Mediterranean Shipping Company (MSC), Danish Maersk and French CMA CGM – have stopped the transportation of goods from Russia, including mineral fertilizers.
There are also significant problems with the freight of cargo ships for the transportation of agricultural products from Russia to Africa and Latin America.
In April 2021, Washington imposed duties on the import of phosphorus-containing fertilizers from Russia: for Phosagro, they are set at 9.19%, for Eurochem – 47.05%, for other manufacturers – 17.2%.
In addition, on April 8, 2022, the European Union adopted the 5th package of sanctions against the Russian Federation, which also included measures against mineral fertilizers and basic raw materials for their production.
This document provides for the following restrictions: – quotas for the supply of potassium, complex fertilizers, as well as potassium-containing fertilizers of Russian production to the European market have been established for a year (until 10.07.2023); – a ban on the purchase of potassium, complex fertilizers and potassium-containing fertilizers of Russian production exceeding the quotas specified in the document has been approved, import and transfer; – a ban has been imposed on the provision of technical, brokerage and other services related to the supply, production and maintenance and (or) use of Russian products and technologies, including fertilizers.
The key negative effect of the restrictions is that they jeopardize the supply of Russian fertilizers to countries outside the European Union (including developing and poor countries in Africa, Asia and Latin America where the problem of famine is already acute), as existing logistics and financial chains are being destroyed.
The general confusion with logistics and the application of sanctions to Russian cargoes, including mineral fertilizers, provoked a drop in exports – its reduction amounted to 30-50% compared to the level of previous years.
The world food crisis and its roots
The situation on the world food market has worsened since the beginning of the pandemic, which disrupted the work of supply chains, which, in turn, led to a significant increase in the cost of logistics services, including food transportation.
Along with logistics, prices for energy resources, mineral fertilizers and other means of production have increased.
Sanctions against Russian which prohibit Russian vessels to use coastal infrastructure of Western countries, the entry of foreign ships into Russian ports, difficulties with paying for supplies, a ban on transactions and much more not only disrupted the work of global logistics and transport infrastructure, but also completely severed ties in this area.
Sanctions prevent the implementation of full-fledged supplies of agro-food raw materials to the world market. At the same time, it is almost impossible to compensate for the shortage of agro-food raw materials from Russia, primarily grain, legumes and oilseeds.
Russia and Ukraine provide almost a third of the world with key food products, in particular grain, sunflower oil. In this regard, any statements from both sides today are perceived by the market as a kind of signal.
Therefore, a sharp decline in their supplies, caused for Ukraine by logistical paralysis against the background of hostilities, for the Russian Federation by anti-Russian sanctions illegally adopted by the “Collective West”, led to an increase in prices. It is obvious that next year Ukraine will leave the international food arena.
Russia in its turn will also have to change logistics routes and switch to other sales markets, which may take some time.
The information that it is necessary to export 20 million tons of blocked grain from Ukraine is controversial. It is extremely difficult to judge the current volumes of grain in all Ukrainian ports (except Mariupol and Berdyansk), because some of them are in terminal warehouses, some are on ships already loaded and blocked to exit, the rest are trying to take out alternative routes.
In the 2021/22 Ukraine has produced 86 million tons of grain. As of June 3 of this year, more than 47 million tons were exported, that is, 55% of the total production, of which 18.5 million tons of wheat, 5.7 million tons of barley and 22.4 million tons of corn with domestic consumption of 10.5 million, 3.8 million and 11 million tons, respectively.
Thus, there are about 14 million tons of reserves left, of which if anything can be exported, it is only corn. But that’s not the question, the question is how many of these 47 million tons were actually exported, and how many are stuck and are still on the territory of Ukraine, no matter whether it’s ports, ships or warehouses.
At the same time, it was reported that by the decision of Washington and Brussels, grain from Ukraine was transported to warehouses in Europe instead of the countries of Africa and the Middle East, where it had been originally supposed to be delivered.
The Ukrainian grain stuck in the Black Sea ports is 0.2% of the total grain production in the world, and it is less than 1% of the grain being turned on the world market. Last year, this turnover amounted to about 470 million tons.
Russian stance on the world food crisis
Agriculture is an energy–intensive branch of the world economy. The total amount of energy required for the production, transportation and storage of agricultural products includes not only motor fuel, gas and electricity, but also energy spent on the production of fertilizers and pesticides, as well as on agricultural machinery and the construction of storage facilities.
Further along the chain – the production of flour, oils, animal husbandry, food industry – the share of costs up to 30% of energy. If the West arranges an energy crisis at home, then it turns into a global food crisis.
Russia and Ukraine jointly supplied up to 30% of wheat and barley, up to 20% of corn and almost 75% of sunflower oil to the world market. The total economic war against Russia and the export blockade, including the blocking of payments in foreign currency and the refusal of European ports to accept ships from Russia, as well as loading mines in the Black Sea waters near their ports by the Ukrainian armed forces, threatens these supplies.
After the start of the special operation in Ukraine, Western countries imposed large-scale sanctions against Russia, which seriously hampered foreign trade activities.
In particular, international companies suspended the entry of their vessels into Russian ports, European ports closed for vessels flying the flag of the Russian Federation, and the disconnection of large Russian financial organizations from the international SWIFT interbank payment system caused difficulties with payments for the supply of goods.
Russia is ready to make a significant contribution to overcoming the food crisis by exporting grain and fertilizers, if politically motivated western sanctions are lifted.
Russia was unfairly accused of problems with the supply of agricultural products to world markets, since the difficulties encountered were connected, among other things, with failures in the operation of production and logistics chains.
In Russia, the grain harvest this year could reach 130 million tons, including a record 87 million tons of wheat. The last record for the harvest was set in 2017 (135.5 million tons of grain, including 86 million tons of wheat).
Russia-Uganda
Russia is a major trade and investment partner with Uganda and Africa generally, while Ukraine is not among the main sources of trade or investment, according to available figures and national statistics.
Talking of trade between Uganda and Ukraine, reminds one of wheat, military hardware and education, especially in science studies.
In 2020, for example, Russia supplied 33 percent of Uganda’s wheat and meslin imports worth US$ 50 million, followed by Argentina with 28 percent or US$ 43 million. Ukraine sent to Uganda wheat worth US$ 17.7 million or 17 percent.
Other European countries include Germany, Latvia, Estonia, Lithuania, Poland and the Czech Republic, according to COMTRADE a UN trade data collection agency.
The writer is a Ugandan journalist with passion for current African Affairs.
adamkungu7@gmail.com