Not only does Vladimir Putin practically control Ukrainian grain exports, but he can also count on the difficulties of other exporting countries. Westerners are looking for solutions to get wheat out of Ukraine.
If the question of Europe’s dependence on Russian gas and oil is at the center of the conflict being played out between Russia and Ukraine, that of wheat is just as sensitive, if not even more worrying.
Thanks to its very fertile lands, Ukraine was in 2018 the 5th world producer of corn, the 8th producer of wheat, the first producer of sunflower, the third producer of buckwheat. Overall, in the world, 12% of grain exports come from Ukraine. And if we add Russia, which cannot export its grain because of international sanctions, that’s a third of the world’s wheat that comes from the two countries.
However, many states are very dependent on Ukrainian wheat. Its productions feed the world market because Ukraine has limited domestic needs and can therefore export massively. In theory.
The Russian invasion has indeed completely changed the situation, the Ukrainian ports are blocked by the Russians, paralyzed exports: 20 million tons of cereals are on hold. Consequence: wheat prices have soared by 40% since the start of the war in Ukraine on the European market (Euronext). The ton is currently trading at 400 euros.
This is enough to raise fears of an acute food and social crisis, especially for countries like Egypt, the world’s largest importer of wheat (50% of its wheat came from Russia and 30% from Ukraine. The country also exports a large part of its production of wheat and maize to China, Algeria, Libya, but also Tunisia, Morocco and Nigeria.
“We expect social unrest in these importing countries in the coming months”, confirms on BFM Business this Friday Arthur Portier, consultant at Agritel.
Russia has taken the measure of this means of pressure and is now using wheat as a geopolitical weapon in order to force Western countries to put an end to their sanctions.
Make Westerners bend
Russian President Vladimir Putin said Thursday he was ready to help “overcome the food crisis” caused by the blocking of Ukrainian and Russian cereals due to the ongoing conflict, subject to the lifting of sanctions against Moscow.
Russia “stands ready to make a significant contribution to overcoming the food crisis through the export of grain and fertilizers, subject to the lifting of politically motivated restrictions by the West,” the Russian president said.
This Friday, “Vladimir Putin stressed that attempts to hold Russia responsible for the difficulties in delivering agricultural products to world markets were groundless,” the Kremlin said in a statement.
The Russian head of state once again pointed to “anti-Russian sanctions from the United States and Europe” as the cause of the food crisis.
A surprise ally: India
The Kremlin’s strategy is aided by a surprise ally: India. The country is the world’s second largest producer of cereals (110 million tonnes last year) but most of its production is intended for domestic consumption.
At the start of the war, the country had said to export a little of its production (something it traditionally never does) to relieve the importing countries. But finally decides to change his mind.
“Unfortunately there was the heat wave in india“, explained the Minister of Commerce, “the wheat has shrunk” and production estimates have had to be revised downwards.
In this context, “we must pay attention to our national food security”, justified the minister, also saying “not wanting people to take advantage of the misery of the poor” by buying and storing large quantities, with a view to put them back on the market later at much higher prices.
Production in other exporting countries held back
As Arthur Portier, consultant at Agritel, explains: “International demand is concentrated on very few exporters, there is in particular France, the United States which are currently themselves in the grip of difficulties due to bad weather, drought, which increases the price of wheat. There is also Canada, but they are having problems with sowing”.
“The weather is taking precedence over geopolitics and is driving the markets,” he continues.
Europeans are looking for solutions
Westerners are currently looking for solutions to get Ukrainian wheat out of the country and relieve global markets. The Romanian port of Constanta could be one of the solutions, but its capacity is limited to 90,000 tonnes per day. Above all, grain must be transported from Ukraine by train to this port. However, the gauge of the railway tracks is different between Romania and Ukraine. It is therefore necessary to unload the grains and reload them on another train: a complex and above all very long operation.
Northern European states are advancing a coalition project of “goodwill” in the Black Sea, part of which is under Russian blockade.
The idea would be to escort cargo ships transporting grain from Ukraine by ships of the Atlantic Alliance. But this scenario is very risky: what would happen in the event of a pass of arms between Russian and Western buildings? Moreover, its implementation depends on the good will of Turkey, which controls maritime traffic through the Bosphorus, whether in peacetime or in wartime.
At the same time, DB, the German railway company, is trying to extract massive quantities of grain from Ukraine via Poland to northern German ports for export.
Ultimately, Westerners want to combine the two modes of transport. But nothing says that this will be enough: the trains embark much less cereals than the gigantic freighters which are traditionally used. It takes 15 trains to have the equivalent of a freighter.