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Ian Explains: Why is Russia trying to starve the world?
Why is Russia trying to starve the world?
Nearly a year-and-a-half into its invasion of Ukraine—after the massacre of civilians in the Kyiv suburb of Bucha, after the indiscriminate shelling of Europe’s largest nuclear plant in Zaporizhzhia, and after the torture of countless Ukrainian POWs—Moscow’s latest move may be its cruelest so far.
In July, Russia pulled out of a landmark wartime deal, brokered by Turkey and the United Nations, that had allowed for 33 million tons of food to flow from Ukraine to countries in Africa, the Middle East and Asia. And soon after announcing their withdrawal from the Black Sea Grain Initiative, Russian forces engaged in strikes against the port of Odessa, destroying substantial grain stocks while also inadvertently damaging the Chinese consulate there (oops).
So why is it in Moscow’s interest to spike global food prices? What does it have to gain from exacerbating hunger in the Global South? Many of the African nations likely to be hardest hit, like Ethiopia, have taken pains to remain neutral in the Ukraine war.
Maybe Putin is losing patience.
For more on the Russia Ukraine war, watch the upcoming episode of GZERO World with Ian Bremmer on US public television and at gzeromedia.com/gzeroworld.
Who's to blame for sky-high food prices?
More than a year after Russia's war in Ukraine, have we turned from not enough food to more expensive food for all? How is this having different impacts in the developed and developing world?
Who's to blame for food inflation? And can the US and Canada do something to make food more available and affordable for the rest of the world?
At a US-Canada summit, GZERO's Tony Maciulis caught up with Ertharin Cousin, who knows a thing or two about this stuff as CEO of Food Systems for the Future and former head the UN World Food Programme.
For more, sign up for GZERO North, the new weekly newsletter that gives you an insider’s guide to the world’s most important and under-covered trading relationship, US and Canada.
- Global food crisis: when food isn't merely expensive ›
- If we don't act fast to help smallholder farmers, developing world might soon run low on food ›
- Podcast: The Ukraine war is crippling the world's food supply, says food security expert Ertharin Cousin ›
- How Russia's war is starving the world: food expert Ertharin Cousin ›
A vendor arranges onions for sale at a market in Lagos, Nigeria.
Why food prices remain high
Thanks to the war in Ukraine and the pandemic before it, food inflation remains sky-high throughout much of the world. With the Black Sea grain deal set to expire on March 18, we take a look at global food security in 2023 with Eurasia Group expert Peter Ceretti.
Is the food security crisis over?
Unfortunately, not yet. International prices have moderated for staple grains — like wheat, and corn — since early- to mid-2022, but they’ve stabilized at a high level.
When Russia invaded Ukraine, food prices had already been disrupted by COVID-19. The war led to a blockade of Ukraine’s ports, higher energy and shipping costs, and Western sanctions and self-sanctioning targeting Russia, all of which caused prices for wheat, corn, and other grains to spike.
As the world learned, Ukraine and Russia are major exporters of wheat, maize, barley, and sunflower seeds and oils, and prior to the war, Ukraine used to ship most of its food exports through the Black Sea. Russia and Belarus are also major fertilizer exporters, especially to the MENA region and sub-Saharan Africa.
Over time, Ukrainian producers adjusted, shipping more of their crops westward over land and by river. Then, in July 2022, Russia and Ukraine reached a deal brokered by Turkey and the UN to reopen some of Ukraine’s ports for food shipments, helping to restore Black Sea shipments to Turkey, Europe, the Levant, and North Africa, among other destinations.
This helped to relieve concerns over shortages. Coupled with the Federal Reserve’s tightening cycle, and eventually a moderation in oil and gas prices, the improved outlook brought food prices down.
“Down” is a relative term though. Using the FAO’s Food Price Index as a benchmark, food prices are about 8% lower now than they were a year ago, but they’re also about 11% higher than they were in early 2021 and around 30% higher than in early 2020.
So availability is now less of a concern, but basic foodstuffs are still very expensive.
Why are food prices still so high?
Good old supply and demand are a part of the story. The USDA forecasts that global production will fall for rice and corn this year and that consumption will outstrip production for wheat, rice, and corn. There should be enough to go around in the aggregate, but this will mean that global stocks will fall compared to last year’s levels. A tight market keeps a floor on prices.
Inputs are another factor. Oil and gas prices are still relatively high, driving up prices for fuel used for farm equipment as well as for transportation and refrigeration. Natural gas is also used as a feedstock for nitrogenous fertilizers, and even though prices have come down in recent months, this year’s harvests could be affected by under-application in 2022.
Weather is a third consideration. We’ve had an exceptionally long “triple-dip” La Niña, which can lead to extreme weather events that are also becoming more frequent due to climate change. La Niña is expected to recede, but there’s a good chance that El Niño conditions will set in by late 2023, which could bring more disruptive weather.
What consumers pay for food does not correspond one-to-one to international price developments, either. Many food products are consumed in the country where they are produced. Most countries subsidize agriculture and enact some degree of protective trade policies. In wealthy countries, a large share of food spending goes to marketing and distribution, and only a small share of food prices — around 15% in the US — are determined by the actual cost of food. Finally, other factors like exchange rates and regional discrepancies in food costs can also distort the relationship between domestic and international food prices.
In practice, this means that the pass-through from changes in international prices to domestic food costs is partial and occurs with variable lags. There’s even some recent evidence to suggest that more of price rises on international markets is passed through to consumers than price falls. So even though international food prices are falling year on year, about 90% of countries are seeing consumer price inflation on food of 5% or more. In January, the median food inflation rate was about 14%.
What is the outlook for staple foods for the rest of 2023?
At present, the outlook is mixed. Barring any major, unexpected developments, I think prices are likely to continue to fall on a year-on-year basis through mid-2023, though there are some important uncertainties. Weather and the possible onset of El Niño later in the year is one factor.
Oil and gas prices are another consideration. My colleagues think that it’s likely oil and gas prices will rise again in the second half of 2023, as China’s economy gains steam, Europe recovers, and supply-side conditions remain tight — especially given Europe’s energy decoupling from Russia. This would help to drive food and fertilizer prices upward again.
What about the Black Sea Grain Initiative?
The continuation of the grain deal is a major wildcard. Our view is that the deal will be renewed. Russia has structural incentives not to let it lapse, as it nearly did last November. Among other things, Moscow is seeking to maintain ties with developing countries, which have been hit hardest by higher food costs and are disinterested both in the war and in Western sanctions. China, for instance, has purchased over 20% of the grains and oilseeds shipped through the grain deal and has sought to interject itself into diplomatic efforts to end the war. Turkey and Iran are also major beneficiaries of the deal.
On the other hand, killing the deal would bring the Kremlin closer to crippling the Ukrainian economy. About 11% of Ukrainian GDP came from agriculture prior to the war, and Putin aims to do long-term damage to Ukraine’s economic structure.
Are there any other factors to watch?
Rice is another watchpoint. Rice prices have been decoupled from other staple grains throughout the conflict, and they fell for much of last year. But international prices are now rising by around 17% year on year, and given the number of countries in Asia that depend on rice as a staple, this should be a point of concern. Most East, South, and Southeast Asian countries have support programs in place to shield the population from major rice price movements, and much of the rice that is consumed in the region is produced domestically. But a knee-jerk restriction on exports from a major rice exporting country, like India, has the potential to spike prices internationally.
People in Hong Kong hold sheets of paper in protest over coronavirus disease restrictions in mainland China.
What We’re Watching: China's zero-COVID shift, Russia's fertilizer deal, Ramaphosa's corruption probe, EU's oil wrangling
China hints zero-COVID shift, censors online protesters
Chinese people who can't wait to ditch zero-COVID — basically everyone except the government — got a glimmer of hope Thursday, when the senior official overseeing the policy said that China was entering a "new stage" in taming the virus. Although what that means is unclear, his comments follow moves by several big cities to relax lockdown rules. Meanwhile, now that most COVID protesters are off the streets, Xi Jinping's censors have taken the fight to cyberspace. They'll have to get creative because Chinese netizens are now ranting about zero-COVID with the online equivalent of the now-verboten blank sheets of paper: sarcastic memes or words that sound similar to Xi or resign. Interestingly, the government outsources content moderation to social media companies that use a mix of humans and artificial intelligence. Exhaustion with zero-COVID might be the biggest test to date of a system that’s not designed to be perfect but rather effective enough at wiping out critical voices.
Some rare good food news out of Ukraine
The UN says it is on the verge of brokering a deal to resume Russian ammonia exports via a Black Sea port in Ukraine. What’s ammonia anyway? The smelly gas is a key ingredient in nitrate fertilizer, which is needed to help plants and seeds grow. Russia and Ukraine are both major global exporters of grain and fertilizer, and disruptions to the output of both due to the ongoing war have led to a global food crisis that’s plunged some 47 million people into “acute hunger,” with import-reliant Africa and the Middle East particularly hard hit. The resumed use of this ammonia pipeline is crucial to avoiding mass food shortages in a year’s time. This comes after a deal brokered by Turkey in the summer saw grain exports pick up again after a Russian blockade caused global shortages and record-high food inflation in developed and emerging economies while bringing poor countries like Somalia to the brink of famine.
A weakened Ramaphosa likely to stay on
South Africa’s embattled President Cyril Ramaphosa could be forced out of office after an independent body found he may have covered up the theft of a large wad of cash from his game farm in 2020. It’s alleged that Ramaphosa, who was elected in 2018 to head the African National Congress – Nelson Mandela’s party – on an anti-corruption platform, illegally stashed up to $4 million at his farm and paid off thieves who stole $580,000 stuffed under his couch (you can’t make this stuff up)! Ramaphosa’s political future now hangs in the balance as he waits for the ANC to vote on Dec. 16 on whether he should lead them into the next general election in 2024 and for parliament to decide whether to impeach him. It is unlikely given that a two-thirds majority – including half of ANC’s parliamentarians – would need to back the motion. Though the ANC has been plagued by infighting since Ramaphosa replaced party stalwart Jacob Zuma in 2018, not enough ANC members will be willing to switch sides to show Ramaphosa the door.
A crude 60-dollar ceiling
Put a cap on it — a $60 cap, to be precise. That’s what the European Commission is asking all 27 EU member states to pay, maximum, per barrel of Russian oil from now on. The move, which requires unanimous EU approval, is meant to undermine the Russian war machine in Ukraine – the EU is Russia’s largest oil customer. But how much impact would it have? Russia sells its crude for about $20 per barrel less than Brent, the international standard. With Brent prices in the $80s, a $60 cap might be more of a fly than a buzzsaw for the Kremlin. Some of the EU’s more brazen Russia hawks — Poland and the Baltics — wanted a (knee)cap of just $30. Washington and other EU members worried that if the cap was too low, Russia would cut off oil exports to the EU entirely, sending energy prices soaring. A separate European ban on seaborne Russian oil is set to come into effect on Monday. The EU hopes the price cap will be agreed upon by members and other G-7 countries by then.
The perils of depending on food imports: UN Foundation chief
We all know there's a global food crisis due to the impact of shortages of Russian and Ukrainian grain, fertilizers, and fuel. But UN Foundation chief Elizabeth Cousens thinks high prices are hurting some countries even more.
Take for instance Yemen, which imports 90% of its food and is thus highly vulnerable to any external shocks.
While addressing famine is the top priority, Cousens says in a Global Stage livestream conversation that the long-term plan should be "laying the foundation for a much more resilient, equitable food system."
Her two dream goals: sustainable agriculture and reducing food import dependence.
David Malpass: I'm not a climate denier
World Bank President David Malpass has come under a political firestorm over his views on climate change science. But is he a climate denier?
No way, he tells Ian Bremmer on GZERO World when asked about the elephant in the room. Meanwhile, the institution Malpass leads has, among many priorities, two big crises to deal with: energy and food.
Malpass laments how Russia's war in Ukraine has hurt climate progress by creating more appetite for fossil fuels. Why? Countries are hungry for energy, and even Europe is scouring the world for more coal and natural gas.
And what about food? For the World Bank chief, whether we have enough to feed the world next year depends on two variables: the weather and how big producers like China, India, and the US respond to global shortages.
Watch the GZERO World episode: Can the world avoid a global recession?
Laborer carries food at the main market in Colombo, Sri Lanka.
Is the global food crisis here to stay?
The mood surrounding the annual UN General Assembly kickoff this week has been grim. Russia is pounding Ukraine and climate-related disasters are devastating places as far-flung as Pakistan, Portugal, and Puerto Rico.
In 2022, with total war returned to Europe and the global pandemic having scrambled supply chains, the food crisis is where the conversation is at.
But it’s not an issue of scarcity. This year’s global food crisis was initially (mostly) due to Russia’s blockade of Black Sea ports in southern Ukraine, which prevented millions of tons of grain from reaching countries that rely on Europe’s breadbasket to feed their populations. Ukraine is a major exporter of wheat, corn, and edible oils, accounting for more than 40% of sunflower oil supply globally before the war. (Dinner party fact: the yellow band on the Ukrainian flag represents the country’s vast golden fields of sunflowers.)
The scarcity issue has begun to stabilize since the UN and Turkey brokered a deal between Moscow and Kyiv in July, allowing exports to resume. But the problem is far from resolved.
Surging prices → hunger pains. Amid the war in Ukraine, global food prices rose in July by 13% year on year and could continue to rise another 8.5% over the next five years, according to the UN. There are several reasons for this.
The food crisis has been exacerbated by the surging price of fertilizer ingredients that are crucial to crop nutrition. Crucially, many fertilizer ingredients – like ammonia, nitrate, and potash – come from Russia and Belarus, both of which are unable (or unwilling) to meet global demand due to Western sanctions. Meanwhile, the situation has been exacerbated by Chinese curbs on some fertilizer ingredient exports.
Though the EU insists that its sanctions “have minimal impact on the agriculture sector,” Russian and Belarusian entities have been cut off from the SWIFT global payment network, and shipping companies face extremely high insurance premiums to transport Russian goods. Russia, for its part, says that Western sanctions make it difficult to export its stockpiles.
“While the information fog of war dictates caution, it’s pretty clear the invasion is the primary cause of food disruption. The Russian track record also indicates they are not above weaponizing food,” says Gerald Butts, vice chairman of Eurasia Group.
Connecting the dots. Fertilizer production is extremely energy-intensive, particularly for nitrogen fertilizer, which needs a lot of natural gas. Europe, for its part, is grappling with an energy crunch as it limits its reliance on Russian natural gas, which has driven up prices for European fertilizer producers that are then passed along to consumers.
What’s more, as Europe has become a net importer of fertilizer, many states have turned to alternative sources – like Morocco – for key fertilizer ingredients. However, upscaling takes time and has led to bidding wars for limited supplies that put emerging market economies at a disadvantage.
“In 2022, we have enough food that is not well distributed,” UN Secretary-General António Guterres told GZERO Media in a recent interview. “But in 2023, if we don't normalize the fertilizer market we simply won’t have enough food worldwide,” he says, adding that “fertilizer is extremely important not only for the present situation but for next year.”
African agriculture reels. The impacts of the food crisis are being acutely felt across Africa, long vulnerable to climate change, drought, and food insecurity. Heavily dependent on imported fertilizers, many African farmers either can’t afford the ingredients or can’t find them on the market. The African Development Bank, for its part, says the continent is short of at least two million metric tons of fertilizer, which could exacerbate hunger crises in countries already on the brink of famine, like Somalia.
In some African states, including the Ivory Coast and Cameroon, fertilizer prices have increased by 50% since Russia invaded Ukraine, prompting some agriculture workers to slash fertilizer usage, further threatening food production. In other countries, farmers have sought fertilizer substitutes: Some Ugandan farmers are replacing nitrate with … maggots, whose digestive systems transform food waste into fertilizer. And while a few international fertilizer producers are donating fertilizer to African farmers, many say it’s “too little too late.”
When leaders huddle at the UN this week, the deepening hunger crisis – including how climate change is exacerbating food insecurity – will be high on the agenda.
But what can the UN actually do to mitigate the worsening food disaster?
“Wealthy economies have limited capacities to directly tackle the issue of price inflation in the short run,” says David Laborde, a senior researcher at the International Food Policy Research Institute. However, they “could prioritize fertilizer production when dealing with natural gas rationing, make sure that global trade remains fluid and … avoid new waves of export restrictions,” Laborde says, pointing to concerns over India’s recent decision to limit some rice exports.
“It’s really a ‘money issue,’” Laborde adds, noting that “UN agencies need 30 more billion this year to tackle the hunger and malnutrition crisis.”
Overlapping factors make the current global food crisis extremely hard to address. But one thing is clear: maggots are not the only answer.
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António Guterres: the world won’t have enough food in 2023 without Russian fertilizer
The UN- and Turkey-brokered deal with Russia to unblock Ukrainian grain exports stuck at Black Sea ports was a big success for the United Nations — and for Secretary-General António Guterres.
Look, he recalls he told Vladimir Putin and Volodymyr Zelensky: this is a dramatic situation caused by the war because it is threatening the living conditions of most of the world.
The UN chief tells Ian Bremmer on GZERO World that we need to find a way for Ukraine to ship its grain; and the UN hopes to negotiate with the US, the EU, and others to get some exemptions from Western sanctions against Russia so Moscow is able to export the food and fertilizer that the world needs right now.
Guterres says that this year we have enough food. But we may not in 2023 if we don't fix the fertilizer market soon.
Watch the GZERO World episode: How a war-distracted world staves off irreversible damage
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