The End of the Black Sea Grain Deal: Implications for Middle East Wheat Importers

Russia’s announcement to terminate the Black Sea Grain Deal, a deal facilitating secure export routes for about 20% of the world’s grain, has left governments pondering its impact on global hunger. Ukraine, renowned as the breadbasket of Europe and a significant producer of sunflower oil, wheat, and maize, faced turmoil when Russia invaded its agriculturally-rich east in February 2022. The invasion caused wheat prices to skyrocket amid a broader surge in global food prices.

Within a week, wheat futures jumped by 60%, but by July, a deal was signed between the UN, Turkey, Russia, and Ukraine, allowing for the safe export of food through the Black Sea, which is under the control of the Russian navy. The deal facilitated the movement of around 30 million tonnes of food from Ukrainian ports, stabilizing prices to some extent.

However, the termination of the Black Sea Grain Initiative poses new challenges, particularly for countries heavily reliant on wheat imports. For Gulf nations and major oil exporters like Iraq, which have benefited from elevated oil prices, managing the impact of rising wheat prices is more feasible. However, for net energy importers like Syria, Tunisia, Jordan, Egypt, and Lebanon, the economic stress is acute, especially considering the aftermath of the COVID-19 pandemic.

Countries such as Tunisia have been severely affected, importing a large percentage of soft and durum wheat from Russia and Ukraine. The war’s impact led to increased grain, fertilizers, and energy costs, exacerbating subsidy allocations by the government to support the local market. This increase in subsidies further worsened budget deficits, leading to a shrinking of funds for essential sectors like health, education, and investment.

Last year, two factors contributed to stabilizing prices: the Black Sea deal and increased production in wheat-growing areas. However, with the deal now at an end and record-breaking temperatures likely to affect harvests, the future remains uncertain. Lebanon, already suffering from a prolonged economic crisis, continues to depend heavily on Ukraine’s wheat exports, and failure to renew the Black Sea Grain Initiative could deepen food insecurity in the country.

Egypt, the world’s largest wheat importer, faced significant wheat shortages after procuring the majority of its imports from Russia and Ukraine just before the war broke out. While Iraq, with sufficient strategic reserves of locally procured wheat, is unlikely to be heavily affected by the grain deal’s collapse.

As global markets adjust to these changing dynamics, concerns arise about the sustainability of wheat production and supply in the region. With water shortages looming and disputes over water resources, ensuring a stable supply becomes a pressing issue. For many Middle East wheat importers, the failure of the Black Sea Grain Initiative threatens to worsen food insecurity and exacerbate the economic challenges they already face.

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