Ukraine war drives Gulf to double down on food security

Reuters

As the war in Ukraine has pushed up food prices and disrupted supply chains, hard-hit Mena countries explore ways to protect themselves

In Abu Dhabi clusters of fresh tomatoes are growing inside rows of climate-controlled greenhouses in the middle of the desert – just one example of the lengths the arid region must go to to secure its food supply.  

The UAE imports more than 80 percent of its produce and the technology-enabled project backed by the Abu Dhabi government aims to help reduce that figure and shore up the nation’s food security.  

Other countries in MENA will be hoping for more initiatives like this, as the war in Ukraine pushes up global food prices and disrupts supply chains.  

In Lebanon, the cost of a loaf of bread soared 70 per cent through March. In Egypt, the price of bread is being increased for the first time since 1988, to ensure the country’s subsidised bread programme can continue to feed its 70 million beneficiaries.  

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“The global coronavirus pandemic, and now the inflationary pressures on food price imports brought about by the Russia-Ukraine crisis, is a wake-up call that the region needs to reduce its high dependence on food imports,” said Wesley Schwalje, chief operating officer of Dubai-headquartered Tahseen Consulting, which specialises in government relations and international development.  

“Some countries, particularly in the GCC, are making progress through high-level government commitment to multi-pronged food security strategies. However, in the short to medium term, MENA will remain the largest food importing region in the world.”  

When Russia invaded Ukraine in February, the ensuing conflict halted food shipments from Ukraine – one of the top five global exporters of wheat and maize. It also paused Russian grain deals due to uncertainty around sanctions. The two countries together supply 30 percent of wheat and 20 percent of maize to global markets, according to the United Nations’ World Food Programme (WFP). But around 13.5 million tonnes of wheat and 16 million tonnes of maize are currently in limbo – 23 percent and 43 percent of their respective forecast exports in 2021-22.

Global food prices shot to an all-time high in February on the back of the crisis, surpassed by a new record in March, according to the UN Food and Agriculture Organization’s Food Price Index.  

Escalating food prices

In MENA, the war has heaped strain particularly on Lebanon, Syria, Tunisia, Libya, Yemen, and Egypt. They are the leading importers of Ukrainian wheat and are also countries where inflation and other internal stressors, such as drought and financial meltdown, were already contributing to escalating food prices.  

According to the FAO’s index, the cost of a basic food basket – the minimum food needs per family per month – went up 351 percent year-on-year in Lebanon in February, 97 per cent in Syria, and 81 percent in Yemen. The price of cooking oil rose 36 percent in Yemen and 39 per cent in Syria, while the price of wheat flour soared 47 percent in Lebanon, 15 percent in Libya and 14 percent in Palestine. 

“This crisis is creating shockwaves in the food markets that touch every home in this region. No one is spared,” said Corinne Fleischer, the WFP’s regional director. 

MENA food prices could increase by eight to 15 percent in the next 18 months based on historical precedent from the regional food price spike of 2007 caused by drought and rising oil prices, according to Schwalje. “The situation is extremely concerning,” he said.  

Countries grappling with conflict, economic uncertainty and high dependence on government food and energy subsidies are highly vulnerable to food insecurity, noted Sorana Parvulescu, partner at risk consultancy Control Risks.  

“For countries with weaker currencies and current account deficits, high spending on food supplies will take away resources from other priorities and could increase sovereign risk ratings for these governments, making access to capital more expensive,” she said. “Both these factors could affect long-term growth prospects and opportunities for the private sector.”  

Countries facing social unrest

MENA countries facing these challenges are also more likely to see an increase in social unrest this year in reaction to higher food prices, inflation and potential shortages in basic foodstuffs, Parvulescu added. The oil exporting GCC states are in a better position to weather price fluctuations due to a range of food security strategies they have implemented over the last decade.  

Such initiatives include establishing and maintaining strategic stockpiles, expanding local production capacity, diversifying supply sources, and making sovereign wealth fund investments in food, agricultural and agtech companies. Abu Dhabi Investment Office’s undisclosed investment in startup Pure Harvest Smart Farms, operator of the tomato greenhouses, in 2020 is one such example, and the company last year raised a further $65m to expand its operations.  

Making food production sustainable

“With our severe climate in the UAE, which will become even more arid and extreme as a result of climate change, the use of technology to solve food production, storage and waste challenges is essential,” said Sky Kurtz, founder and chief executive of Pure Harvest. “We have decoupled the relationship of food production from its dependence upon climate, and instead married it to energy and capital sources – making sustainable and economic fresh produce production possible.” 

The UAE in 2020 set up the Emirates Council for Food Security, a task force dedicated to increasing food security. And on April 25, Abu Dhabi-based Emirates Development Bank announced an agreement to provide financing for companies operating within Dubai’s food technology hub, Food Tech Valley.  

Diversifying food sources

Elsewhere in MENA, food security remains a “legacy policy challenge that has not yet been addressed with sufficient resources and political will”, according to Schwalje. The Ukraine crisis is forcing governments to implement responses to protect themselves, such as capping food prices, extending subsidy programmes, and boosting government pensions and salaries. Egypt, for example, has added India as an approved supplier for state procurement of wheat imports to diversify its food sources.  

“We’re also likely to see more controls or outright bans of exports of critical foodstuff, as well as government initiatives to encourage local food production through the private sector,” added Parvulescu. “The Gulf again is a step ahead in this regard and has a better chance of success.” 

In its latest World Economic Outlook report this month, the International Monetary Fund (IMF) revised downwards its growth forecasts for MENA to five percent in 2022 and 3.6 percent in 2023 largely because of its high exposure to rising global food prices.  

Without concerted efforts from governments and businesses, food insecurity could continue to hamper economic prosperity in parts of the region.