Some of the immediate global effects of the Russia-Ukraine crisis are within commodity supply chains, particularly related to food and energy, with potentially long-lasting social and institutional implications.
As the conflict continues, it increases the threat of food insecurity; those countries most dependent on imports could suffer dramatic setbacks. This is especially true in the Middle East and Africa, where demographic pressures and food insecurity are a constant threat.
With the pandemic ongoing and continuing environmental stresses, pressures from the crisis are impacting a broad set of countries that were counting on economic recovery to reverse recent social and political crises. Rapidly rising energy prices globally are compounding the pressure.
Increasing current account deficits and inflationary pressures would inevitably challenge most economies in the Middle East and Africa, including Egypt — the world's largest importer of grain and a country highly dependent on tourism revenues and Suez Canal transit fees (see Figure 1). In Egypt, fluctuations in the cereal market caused by the current crisis are weighing on the state’s budget, particularly as the government subsidizes bread.
At least 50 countries depend on Russia and Ukraine for 30% or more of their grain supplies, and many developing countries in North Africa, Asia, and the Near East are among the most dependent. In 2020, Ukraine accounted for 20% of China's imported cereals, making it second only to the US among Beijing's suppliers. Ukraine is also the leading exporter of sunflower oil, particularly to Asia; more than 25% of Ukrainian sunflower oil, valued at US$1.4 billion, was sold to India. Inflation could further impact countries that have seen a marked increase in consumer prices, such as Turkey, which imported 78% of its wheat from Russia and Ukraine in 2020.