After the Russian invasion of Ukraine food prices spiked in early 2022, from already elevated levels, especially for cereals and vegetable oils, where both countries have substantial shares in global exports. Around 30 percent of global exports of wheat and barley, 20 percent of corn, and a whopping three quarters of sunflower oil come from the two countries. In the Arab world, dependence on them for imports of wheat – the world’s largest source of calories – is still higher, 50 percent. The greatest vulnerability exists in Egypt, Lebanon, and Sudan. Production elsewhere is affected as well, since both Russia and Ukraine are major exporters of nitrogen, phosphates and potassium fertilisers. Add to this the rising energy costs, and the inflationary impact on global food systems has been substantial.
Subsequently, prices have fallen back to and below pre-war levels. Yet, the episode has raised important questions for the Middle East and North Africa (MENA). It affects the region at a time when the global food system has undergone a significant change since the 1970s, towards greater globalisation and corporatisation of value chains. The MENA region will be affected by this in major ways. It is the largest grain-importing region of the world and food self-sufficiency is not an option, for lack of water. Memories of the 2007-2008 global food crisis have not been forgotten in the MENA, when agricultural exporting nations such as Argentina, Russia and Vietnam declared trade restrictions, out of fear for their own food security. More recently, supply chain disruptions following the COVID-19 pandemic have intensified concerns about the reliability of the multilateral food trading regime that emerged after World War II.
This raises past spectres. The 2007-2008 global food crisis hit MENA countries at a time when many of them had to downsize domestic agriculture. Aquifers had been depleted and local food production compromised local water security. Technical solutions such as drip irrigation can only go so far. If its efficiency gains are used to expand production, as in the case of Morocco, the so-called rebound effects can actually lead to increased water consumption, as a result of its introduction. Agriculture is by far the largest water user in the region, with roughly 80 percent of water withdrawal and over 90 percent of consumptive water use. There are notable differences: in the arid Gulf countries, cereal import dependency is nearly total, especially after Saudi Arabia decided to phase out its wheat production in 2008. More fertile countries such as Turkey, Egypt or Syria have some cereal production, but not enough to cover all local needs. In Egypt, the largest wheat importer of the world, imports account for some 60 percent of consumption. The water needs of cereal production also compete with the interests of a sizeable export industry in fruit and vegetables, in countries such as Turkey, Tunisia and Morocco. Turkey is among the ten largest agricultural economies of the world and the world’s largest producer of hazelnuts, apricots, figs and cherries, just to mention a few.
Food self-sufficiency is not an option in the MENA due tolack of water; food imports will even need to rise if population growth and dietary changes towards meat and dairy products are taken into consideration. All this food trade constitutes ‘virtual water’ that can be imported by MENA countries via food trade. Virtual water describes water needed to produce a particular commodity,whichis thus virtually embedded in it. Certainly, agriculture is the largest water consumer in the world: about 70 percent of global crops are produced with rainfed agriculture. The latter does not use ‘blue water’ of irrigation, but ‘green water’ from rainfalls, captured in soil. Such green water cannot be metered, bottled or shipped by pipeline. It does not figure in global statistics about total renewable water reserves, which only comprise surface and groundwater. Yet, green water is extremely important for global food security and for the import needs of food-deficient countries. By importing rainfed cereals from Brazil, Canada, France, Australia, Russia or Ukraine, MENA countries effectively import rainfalls from there and can benefit from them. Virtual water has added a second river Nile to the region’s water balance, as the late Tony Allan – the father of virtual water paradigm – famously remarked.
Today, interruptions of trade flows hit Middle Eastern countries unevenly, like during the global food crisis of 2007/08. With plenty of petrodollars in their pockets, Gulf countries could afford rising food prices, but they were gravely concerned about export restrictions by some agro-exporters and the reduced liquidity on international food markets. They reacted by increasing domestic storage and investing in their global supply chains. The state-owned Saudi company SALIC teamed up with international grain trader Bunge to buy a majority stake in the privatised Canadian Wheat Board, for example. Such investments in the downstream sectors of processing and distribution were much more consequential than controversial land investments in food insecure countries, such as Sudan or Ethiopia. The latter had a spotty implementation record and, over a decade later, still does not provide a meaningful contribution to the Gulf countries’ food imports. The UAE, for instance, has implemented a comprehensive food security strategy, ranging from storage to price monitoring, as well as the streamlining of domestic agriculture. In the wake of the COVID-19 pandemic, a special task force was formed to source alternative imports and adapt to supply chain disruptions.
Food diplomacy and management of value chains have been at the core of the Gulf countries’ food security strategy over the past decade, in order to manage risks to food imports that are ultimately out of their control. This could also entail cooperation in multilateral bodies, to make them more resilient and receptive of food importers’ interests. Even if richer countries of the MENA region managed to insulate themselves from direct impacts of the Russo-Ukrainian war, they would still be affected if food insecurity threatened political stability in the region.
Against this backdrop, international food trade and diplomacy is crucial to maintain food security in the MENA and beyond. Maintaining the multilateral food trading system and avoiding the kind of export restrictions that occurred during the global food crisis 2007/08 are urgent requirements. It should be a priority area of concern for the EU and partner countries, as well as multilateral bodies such as the WTO and FAO, including initiatives such as the Agricultural Market Information System (AMIS), which the G20 launched in reaction to the global food crisis 2007/08 in an effort to increase market transparency and reliability.