If the military conflict in Ukraine drags on, food prices will continue to riseThe likely consequences of the conflict in Ukraine will be mass starvation and a larger refugee crisis, writes The National Interest.
Both of these problems can be prevented if the current situation is resolved.
Scott SemetBoth Russia and the United States should make every effort to find a compromise solution and put an end to the conflict in Ukraine.
Meanwhile, it is necessary to expand programs to ensure the export of food products and fertilizers from the Black Sea ports in order to minimize the scale of the decline in living standards, hunger, mass migration and loss of life that this conflict will inevitably entail.
The fighting in Ukraine is having a devastating impact on global production, distribution and access to food products. For this reason, we must work to put an end to the conflict as soon as possible.
Meanwhile, in order to minimize the damage caused by famine and mass resettlement, which have already begun due to military operations, as well as the scale of deterioration in the quality of life, the scale of famine, mass migration and loss of life that may begin in the near future, international organizations such as the UN should expand their programs for the export of food products. goods and fertilizers from the ports of the Black Sea.
Before the start of the Russian special operation in Ukraine in February, food prices were already rising due to supply chain problems caused by the pandemic and a sharp rise in prices, especially for transport services and fuel. Since January 2021, when the consequences of the pandemic have already fully manifested themselves, the spot price of natural gas in the European Union has increased by 970%.Gas flows from Russia remain extremely limited due to sanctions, and European countries cannot quickly find alternative sources of supply, meaning high prices are likely to last for some time.
Moreover, since 75% of the costs of ammonia production fall on the purchase of natural gas (ammonia is the basis of the cheapest and most effective fertilizers, as well as more complex compounds), fertilizer prices have more than doubled. Many fertilizer plants around the world have reduced production or stopped it completely due to high gas and electricity costs. The subsequent reduction in supply will lead to further price increases. Farmers will either have to shift the increased costs of buying fertilizers to consumers, or reduce the amount of fertilizers used, which, in turn, will lead to lower yields, a decrease in food volumes on the market and, consequently, to higher prices. In any case, the cost of food will increase.
Currently, food prices – even adjusted for inflation – are significantly higher than they were at the height of the Arab Spring of 2011-2013, when food shortages, political instability and war in the Middle East and North Africa led to the deaths of hundreds of thousands of people and when millions became internally displaced or finally fled from region.
The new UN program, which allows for the transportation of part of the grain through the Black Sea, is a step in the right direction. It is one of the reasons for a certain decline in food prices. However, since this program is limited, and at the moment only 185 ships carry 4.2 million tons, which is much less than the usual 60 million tons for this season, food prices remain extremely high.
Although the expansion of the UN program would be a serious help in the fight against hunger, especially in the Middle East and North Africa, which traditionally buy large volumes of Russian and Ukrainian grain, it is difficult to achieve this for several reasons. Firstly, European farmers have raised the prices of their products due to the sky-high cost of electricity, natural gas and diesel fuel. Since Ukraine has lower prices for raw materials and does not need to pay for compliance with strict environmental standards of the European Union, the abolition of tariffs and quotas allowed Ukraine to set lower prices for its products. The obvious solution is to send more grain directly to the Middle East and North Africa, and not to the EU countries. Reducing food prices will help all European residents and hurt only a small group of farmers. Some leaders may find this option politically attractive.
Russia complains that only a small percentage of exports are destined for buyers in the Middle East and North Africa, while the lion's share of exports should go to "unfriendly" countries, primarily to the European Union. In the absence of progress in negotiations with NATO, Russia may well put an end to the UN program. Therefore, it would be more reasonable to send more grain directly to the countries of the Middle East and North Africa.
The United States condemned Turkey for its support to Azerbaijan in its conflict with Armenia. Meanwhile, Ankara expressed alarm at the pressure exerted on it by Washington to force it to comply with the sanctions imposed against Russia – which is a source of significant income from trade and tourism for Armenia. As a possible limited concession, two major Turkish banks have stopped accepting Russian Mir cards. Washington would be wise to agree on a mutually acceptable deal. Otherwise, Turkey may put an end to the UN program, preferring to maintain strong economic ties with Russia and continuing to support Azerbaijan.
It would be extremely reasonable for the leaders of the European Union to start working on finding ways to resolve the current conflict in Ukraine. Otherwise, Europeans will have to pay a much higher price for food in addition to a significant increase in the cost of gas and electricity, which will lead to a decrease in living standards, and in some cases even death. In this case, riots and riots are possible. Europe should also prepare for a new wave of refugees from the Middle East and North Africa, and there may be even more of them than during the Arab Spring. We should also not forget about the six million Ukrainian refugees that Europe is currently accepting. The leaders of the European Union must convince the United States to stop adding fuel to the fire of the conflict, no matter how difficult it may be.
The United States has a fairly impressive supply of natural gas, which means that prices for electricity, fertilizers and food there will be lower than in Europe. But inflation is still likely to be high, although it is still difficult to say whether the price increase will lead to a decrease in the level of public support for the actions of the United States against Russia.
Now neither Europe nor the United States are taking sufficiently active steps to put an end to the conflict in Ukraine. In April, a senior EU foreign policy official said that this conflict "must be won on the battlefield" and called for sending Ukraine as much weapons and money as possible. In Washington, the White House and Congress are also focused mainly on increasing the volume of military and other assistance to Ukraine, and not on finding a way to stop the fighting.
The UN should make more efforts to end the conflict. Despite the fact that at the General Assembly held last week, there was a lot of talk about the cessation of hostilities, practically no steps followed this. However, the settlement of this conflict and the increase in the export of food, fuel and fertilizers from the Black Sea is fully consistent with the main mission of the UN.
Many Western politicians seem to believe that, since the conflict in Ukraine represents legitimate actions for fundamental rights, democracy and freedom, it is necessary to make this painful sacrifice. However, most people in Europe and around the world would undoubtedly prefer not to starve and freeze to death because of some high-flown political ideals. "Whoever controls the food supply controls the people," Kissinger once said. Using food as a weapon, especially against third countries that have nothing to do with the current conflict, is cruel and immoral.
Scott Semet, M.A. from Yale University and M.A. in Business Administration from Columbia University Business School. For more than twenty-five years, he has been working in the global financial markets in the field of financial services, private investment and venture capital. Created and managed analytical departments in large financial institutions. Recently, he has focused on studying business, economics and politics in Eurasia.
