The Russian-Ukrainian war: the impact on MENA

Meloui- A Moroccan pancake

The Russian-Ukrainian war is a headache for the world as well as for MENA economies specifically. Ahmed Abdel-Rahman explains how the war might impact them in terms of food supply.

The Russian invasion of Ukraine looms large over the world and has prompted the largest number of countries to evacuate their nationals from Ukraine since World War II. The impact of the invasion will have severe consequences on the world economy but will affect some countries more greatly than others. This is because Ukraine ranks number four in the world as a grain exporter, famous for its corn and wheat cultivation, and is one of the world's 10 largest producers of soybeans, barley, and turnips.

The impact on Morocco

Ukraine is an important source of corn and wheat shipments to the Arab world, especially to the Kingdom of Morocco, which is among the largest importers of wheat in the world, and the largest consumer of Ukrainian wheat. Algeria is also the largest importer of Russian wheat.

According to the Moroccan newspaper, Hespress, Morocco is studying multiple scenarios to ensure that wheat will remain available to the general public, especially since both Russia and Ukraine are major wheat exporters.

Moroccan researcher in international relations Nabil Al-Andalusi said: "The Russian-Ukrainian crisis will have serious economic repercussions for a number of countries in the Middle East and North Africa (MENA), including Morocco," stressing that Ukraine is one of the country's largest suppliers of wheat. Therefore, the probable decline in Ukraine's wheat exports will force Rabat (Morocco's capital) to search for alternatives on the global market, primarily from the US, France, and Canada, he said

"The increase in the price of wheat will not only have serious economic effects on the country but social ones too", he added.

Consequently, the Moroccan government is preparing for the worst possible scenario given that bread is a basic food source for the Moroccan people. Any potential price increase will have major social repercussions.

Algeria faces the same fate

Algeria faces the same potential fate as Morocco, as a consequence of the current war between Russia and Ukraine. Russia's wheat exports to Algeria in 2021 amounted to 5,363,000 tonnes, a 13-times increase over the previous year's exports, according to the local newspaper Al-Shorouk.

Algeria's gas puts it in a dilemma

Algeria also offers a potential solution to the energy crisis facing Europe, especially if the war continues for a long time, thanks to its huge gas reserves and its proximity to Europe. According to Bloomberg News, Algeria is a major gas supplier to Italy and Spain, and the third largest natural gas exporter to the EU after Russia and Norway. This means that Algeria can mitigate the effects of any possible disruption to Russian natural gas supplies. This will not only be a substantial source of income to Algeria's public treasury, which suffers from a large fiscal deficit, but it will also give the Algerian state diplomatic leverage in Europe.

Lebanon, Yemen and Libya

Half of Lebanon's wheat consumption is imported from Ukraine. In addition, Yemen and Libya import 22 per cent and 43 per cent of their total wheat consumption from Ukraine, respectively. Therefore, the greatest threat to global food security is the likely reduction of Ukraine's wheat exports. Moreover, because of Russia's attack on Ukraine, this move could lead to reduced wheat production as farmers flee and infrastructure is destroyed.

Gulf region

Since the start of the Ukrainian crisis, most of the Gulf stock market indices have risen, reflecting the rise in oil prices. They are at their highest level in seven years. The Saudi index rose 1.5 per cent, recording its best performance in nearly two months.

"The stock markets in the Gulf Cooperation Council (GCC) moved in different directions in light of the increase in geopolitical tension in Eastern Europe and the rise in oil prices," said Farah Murad, senior market analyst in the Middle East and North Africa (MENA) department at the Dubai-based Global Financial Markets Services (XTB).

As to relations between the GCC and Ukraine, it was not until 2017 that they became closer. That year they signed a collective framework agreement with Ukraine, according to The Independent newspaper (in the UK).

Economic relations between Ukraine and Saudi Arabia specifically, are still below what both countries want, although Ukraine considers Saudi one of its main partners in the GCC.

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Friday, 29 September 2023