The US and the European Union are desperate to bring up contingency plans to stabilise the energy supply in Europe if Russia resorts to weaponising its gas supplies amid its standoff with Ukraine.
However, the standoff between the two nations, which account for nearly a third of global wheat exports, is threatening another catastrophe that can be felt in other parts of the world.
A Russian push into Ukraine and Western sanctions restricting Russian exports would deny global markets of the lion’s share of both nations’ wheat supplies. The uncertainty over the situation has already rocked international grain markets, driving wheat prices higher and leaving traders and consumer countries bracing themselves for more volatility ahead.
However, little effort was made to ensure the safety of the strategic grain supply, which if interrupted, could spread chaos beyond the Ukrainian-Russian border.
The problem for grain is complicated as the standoff came at the time when global wheat stocks are at their tightest levels in years following weak crops in North America, while drought in South America, a major supplier of grains and oilseeds, threatens to reduce that region’s production also.
So, there was no wonder to see wheat futures prices hovering around record levels, fuelling food price inflation worldwide. Corn futures also moved higher.
Any disruption of Ukrainian and Russian exports is also expected to pile onto a global inflationary cycle that in many countries is already the worst in decades. It will also be a crisis for large food importers, especially in northern Africa, Iran, Sudan, and Afghanistan. Last year, global food prices surged 28 per cent to their highest level in a decade, according to the United Nations food agency.
Thus, food insecurity is expected to exacerbate in many developing countries, while in politically unstable countries such as Libya, Yemen, and Lebanon, additional food price shocks and hunger could easily turn an already bad situation worse. Other price spikes and food insecurity could inflame conflict, heighten ethnic tensions and destabilise governments.
According to recent World Bank data, hunger was trending upward even before the Covid-19 pandemic, which exacerbated existing effects from extreme climate events, conflict, and other shocks to economic opportunities. Of the 161 million people experiencing crisis conditions in 2021, 81 per cent (or 132 million) lived in countries affected by fragility, conflict and violence.
The high food prices could also complicate United Nations efforts to alleviate the consequences of food insecurity, which it said is soaring across 20 hunger hotspots.
According to different markets’ reactions to the current standoff between Russia and Ukraine, any more escalation could have proved a gamble for which many innocent people will pay dear.
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