Elijah J. Magnier
Russia has suspended its gas supply to Finland after its refusal to pay in Rubles, in contrast to more than half of the 54 countries that have started paying for their gas supply with Russian currencies, most of them on the European continent, plus Japan, all allies of the US. This will raise energy and food prices across the continent, which has started to affect countries around the world due to the Western sanctions imposed on Moscow, which have generated the boomerang effect, hitting the West, especially Europe. The US claims that the increase in food and energy prices is due to the war waged by Russia against Ukraine, while the US sanctions against Russians and their means of transportation and receipt of payments indicate the opposite.
Russia – not Ukraine – is considered the world’s main source of wheat, accounting for about 24% of the world population’s needs and consumption. Canada (12.44%) is in second place, the US (12.24%) in third, France (10.30%) in fourth, and Ukraine (8.9%) in fifth.
The world is not dependent on Ukrainian wheat. The Ukrainian war adds to an already existing problem where many countries will not be able to meet their food supply, even if Ukraine recovers its exports.
Ukrainian wheat production occurs throughout the territory of that country. Although bulk production is in the east, which is exposed to a Russian military operation, the logistical supply line has suffered from the transport of NATO weapons on the railroads that Russia has targeted. These logistical supply routes will require reconstruction when the war stops. Ukraine is bypassing the sea blockade and has agreed with Lithuania, Latvia and Poland to export its wheat and sell it at a high price due to rising prices around the world. Russia says there are 75 ships from 17 countries anchored in the port of Odesa carrying the export cargoes of wheat. Meanwhile, the Ukrainian army has laid mines in the Black Sea, making navigation dangerous and impossible.
As for the most significant cause of the wheat crisis, the US announced sanctions on Russian energy supplies, raising the price of transportation and penalizing seven Russian shipping companies and 69 other ships. All were listed as prohibited property, including the state-owned “Sovcom Float,” Russia’s largest shipping company, and “United Shipbuilding,” the largest and most developed and widespread shipbuilder.
These Western sanctions directly affect prices for 2022-2023 for all transported goods, including crops, especially since there are no indications of the possibility of lifting these sanctions on Russia, even if military operations in Ukraine have ended.
Ukraine’s wheat and corn supplies are not dependent on survival or the end of the war. In fact, 70% of the diesel fuel and fertilizer (Russia is the largest exporter of fertilizer) that farmers need comes from Russia. Moreover, the labor that Ukraine needs will either be involved in the war – if it continues for any length of time – or in rebuilding the country. Ukrainian emigrants have exceeded five million people (expected to reach eight million) since the start of the war on February 24 this year. The European continent has opened its doors to Ukrainians, who will find better opportunities on the rich continent.
Global markets are bracing for a shortage in wheat and corn deliveries starting in August and September, representing a shortfall of at least 20 million tons. According to additional US and European sanctions against Russia and its means of transportation, these numbers could increase. Other factors related to climate change affect some countries, especially India.
In fact, what worsened the food security and wheat supply chain was the decision by India – eighth among wheat exporting countries with 4.1% of global exports – to stop wheat exports. Forty-seven countries had submitted a request to India to import its wheat this year. This led India to issue a decision on May 13 to ban all wheat exports with immediate effect.
The decision came amid a crop loss due to record heat waves in Punjab, Haryana, Uttar Pradesh, and Madhya Pradesh, rendering the crop unfit for human consumption, reducing production from 113.5 million tons to 105 million tons.
The US and Europe criticized India’s decision: EU trade chief Valdis Dombrovskis said “these export restrictive measures could exacerbate the wheat problem.” India responded that “blaming developing countries like India will not solve the global food crisis.”
The price of wheat was around $210 a ton, but today it reached almost $453 on European markets. The countries that import wheat from India will be the first to be affected by New Delhi’s decision. They are Bangladesh (which imports 55.9% of its wheat requirements from India), Sri Lanka (7%), UAE (6.9%), Indonesia (5.9%), Yemen (5.3%), and the Philippines (5.1%). However, Nepal, Korea, Qatar, Oman, and Malaysia are also expected to be the main affected. Kenya, Ethiopia, and Somalia have reached 20 million people below the poverty level and are unable to buy what they need at the current market price without international support.
Sudan, Algeria and many African countries have enough water and fertile land that can be exploited to cover the world’s deficit if they are financially supported and allowed to produce food for the world. This requires the planet to sustain and invest in financing food production. US President Joe Biden just signed a $40 billion support for the war to continue in Ukraine to weaken (not defeat) Russia: while $29.39 billion could increase the income of 5.64 billion people to just $10 a day (80% of the world’s population lives on $2.5 a day) and would be enough to end the world food crisis and support many farmers in several nations for decades.
It seems that the US has not thought through all aspects of the sanctions it has imposed on Russia and dragged Europe and the rest of the Western countries – which make up 15% of the world – behind it. The Western arrows launched against Russia hit, first of all, the European population and the poorest peoples of the world.
Blinded by its hatred of Russia and to defend its world throne, the U.S. did not bother to find an alternative or exempt from sanctions some goods or companies carrying food or oil and gas. After weakening Russia and maintaining its hegemony over the world, the US goal is to separate Russia from Europe at all costs, regardless of the suffering imposed on the people.
Several European countries are still dependent on Russian oil, gas and wheat without the US being able to impose a complete embargo on Russia. Moscow still receives tens of billions of dollars (in rubles) monthly from Western countries indirectly funding the war against Ukraine. However, there is a significant challenge for Western governments not to be exposed to domestic turmoil in the coming months, when EU countries will be forced to adjust to higher prices (even more than the current strong inflation) on oil, gas, and food, the price of which has indeed risen alarmingly.
European governments are predicting a “disaster” or “tsunami” that will hit the population like a whirlwind time bomb in the coming months. It is hitting many nations around the world. The United Nations World Food Programme warns that more than 52 million people worldwide are falling under the risk of starvation. However, none of these European leaders seem to be aware of how to address this crisis or have the courage to stand up to the dictates of the US, which is the root of the overall European suicidal decisions related to sanctioning Russia. The American sword is hanging over the necks of everyone in the West. What the US is demanding from Europe is to antagonize Russia and stop all avenues of trade cooperation. European officials must adapt to this unpopular and counterproductive decision. This is a situation they just have to accept: they themselves will pay a high price for what they helped create.
Elijah J Magnier is a veteran war correspondent and senior political risk analyst with more than three decades of experience.