Russia’s grain export restrictions could affect Africa

Russian President Vladimir Putin has given orders to restrict or prohibit import and export of certain products and raw materials from Russia in 2022, according to the decree on special foreign economic measures aimed to ensure Russia’s security.
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With the Russian government’s announcement on March 14 to temporarily halt exports of wheat, rye, barley and maize abroad, a number of importing African countries are experiencing rising prices. The Russian government decision was directed at saving domestic (internal) shortages as Western and European sanctions are broadened against Russia for the special military operation it began February 24.

As the United States and European Union (EU) tighten their sanctions on Russia due to special military operation, demilitarisation and denazification in Ukraine, Prime Minister Mikhail Mishustin signed an order banning the export of white and raw sugar until Aug. 31, and banning wheat, rye, barley and maize exports to neighbouring Eurasian Economic Union states until June 30. The measures were adopted “to protect the domestic food market in the face of external constraints”, the government statement said.

Many external countries will be affected by the export suspensions, but will keep on providing special export licences to traders within its current quota. Russia is the world’s largest wheat exporter, with Egypt and Turkey among the main buyers. It competes mainly with the European Union and Ukraine. European wheat prices rose after Interfax news agency reported Russia’s ban on grain exports. It did not initially mention exclusions from the ban.

With the Russian government slapping restrictions on exports, a number of African countries risk possible shortage of wheat and fertiliser due to the Russia-Ukraine crisis. For instance, the Mozambican government has warned that the country could experience a shortage of wheat and fertiliser as a direct result of the crisis between Russia and Ukraine – the main producers of these materials.

In an interview with Dr. Chtatou Mohamed, Senior Professor of Middle Eastern politics at the International University of Rabat (IUR) and Mohammed V University in Rabat, Morocco, he explains that the outlook for African countries is bleak in the wake of the war in Ukraine. The cessation of exporting cereals, including wheat and other agricultural inputs, will hit most of them hard as they are already facing a structural food crisis (climatic disturbances, conflicts); or have been considerably weakened by price increases and stock market speculation on essential products.

This is a concern for the African continent, which is a net importer of wheat and sunflower oil. In addition, there are concerns about drought in some parts of the continent. The disruption of shipments of essential commodities will only add to the general concern about food price inflation in a region that imports wheat.

Citing statistical figures, Professor Chtatou says Moscow and Kiev account for 34% of trade in wheat – a commodity that has increased by 70% in price since beginning of the year. The countries around the Mediterranean are suffering greatly. For Egypt, this represents 80% of imports. It is the largest importer of wheat in the world (12 million tonnes).

He concluded that Russia and Ukraine are major players in the global commodity market. Russia supplies about 10% of the world’s wheat, while Ukraine produces 4%. Collectively, this represents almost the entire wheat production of the European Union. This grain is intended for domestic consumption and export markets. Together, these two countries account for a quarter of global wheat exports; in 2020, they amounted to 18% for Russia and 8% for Ukraine.

According to the Minister of Agriculture and Rural Development, Celso Correia, this could result in higher prices for these products and their derivatives. He was speaking at the official launch of the rice harvest campaign in Regadio do Baixo Limpopo, Gaza province. Minister Correia took advantage of the opportunity to reiterate that the country hopes, by 2030, to attain self-sufficiency in rice production, while in the meantime reducing imports of the cereal as much as possible.

In an article written for The Conversation, Wandile Sihlobo, Senior Fellow, Department of Agricultural Economics-Stellenbosch University, says that wheat and other grains are back at the heart of geopolitics following Russia’s invasion of Ukraine. Both countries play a major role in the global agricultural market. It is very important for African leaders to pay attention to the current situation and related trends.

Russia is the world’s leading exporter of fertiliser materials in value terms, followed by China, Canada, the US, Morocco and Belarus. These fertiliser mixtures include minerals or chemicals ranging from nitrogen to phosphorous and potassium. Fertiliser constitutes a significant share in the growth of agricultural commodities and crops across the world, and a substantial share of input costs. In South Africa, fertiliser accounts for about 35% of grain farmers’ input costs.

Widely popular Russian media, Rossiyskaya Gazeta, on March 10 reported that the global food crisis which began during the pandemic is compounded by suspending the export of wheat and sunflower oil from Russia and Ukraine. While this problem might not significantly affect Russia, the European Union is already concerned over lack of the products.

Signs of a food crisis were already obvious before the special military operation in Ukraine, says Evgenia Serova, Director for Agricultural Policy of the Higher School of Economics. The price hike was triggered not only by the pandemic but also the EU-US switch to biofuel, which began draining the volume of crops used as food products, the expert said.

Besides logistics problems due to the aggravated geopolitical situation, the world market may be negatively impacted by the suspended export of Russian fertiliser. The Russian Industry and Trade Ministry recommended this move amid the sabotage of carriers refusing to transport Russian products. Russia ranks among the top-three global exporters of mineral fertiliser. Freezing this export will only spark a price hike, the expert noted, and predicted further that “For at least the next couple of years, we will have to live under the conditions of galloping food products inflation”.

During previous years, Russia raised its exports aiming for revenue and to get a foothold in the foreign markets. Director General of the Institute for Agricultural Market Studiesm Dmitry Rylkom considers that exports initiative to be promising – though Russian products are not very popular abroad. He thinks that promoting exports will not only help raise awareness of the marketed goods on international markets, but also improve their quality. “The issue is about promoting premium-segment products, which will also foster tourism internationally,” Rylko said.

There is still a lot that is not known about the geopolitical challenges that lie ahead. But for African countries there are reasons to be worried, given their dependency on grains imports. In the near-term, countries are likely see the impact through a surge in prices rather than an actual shortage of the commodities.

According to research reports, African countries imported agricultural products worth US$4billion from Russia in 2020. About 90 percent of this was wheat and 6 percent was sunflower oil. Major importing countries were Egypt, which accounted for nearly half of the imports, followed by Sudan, Nigeria, Tanzania, Algeria, Kenya and South Africa.

Similarly, Ukraine exported US$2.9billion worth of agricultural products to the African continent in 2020. About 48 percent of this was wheat, 31 percent maize, and the rest included sunflower oil, barley and soybeans. Reports say eighteen African and less-developed countries import at least 50 percent of their wheat from either Ukraine or Russia.

In the meanwhile, Russian President Vladimir Putin has given orders to restrict or prohibit import and export of certain products and raw materials from Russia in 2022, according to the decree on special foreign economic measures aimed to ensure Russia’s security.

“Ensure implementation of the following special economic measures until December 31, 2022: export and import ban of products and/or raw materials in accordance with lists to be defined by the government of the Russian Federation,” the document says, adding that a separate list will define goods whose export and import will be restricted. The decree becomes necessary in order to ensure Russia’s security and uninterrupted operation of agriculture and industry.

Long before the February 24 crisis, Russia indicated strong preparedness and high interest to broaden cooperation in trade and the economic sectors of Africa. It is difficult to predict now. Looking forward, Russia have been planning to hold the second African leaders summit to concretise strategies for forging a broadened cooperation.

According to the Russian Ministry of Foreign Affairs, preparations for the Russia-Africa summit are in the active stage and dates for the summit have not been determined yet. The first Russia-Africa summit took place in October 2019, and was co-chaired by Russian and Egyptian Presidents Vladimir Putin and Abdel Fattah el-Sisi. The next summit is scheduled for autumn 2022.

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