US sanctions against Russia exacerbate the global food crisis
Even before war broke out in Ukraine, a global food crisis was already in the offing due to pandemic trade restrictions, adverse effects of climate change and rising oil prices and natural gas prices. This global crisis was pushed to the brink by sanctions one-sidedly imposed by the US on Russia.
Sanctions are trade and investment measures applied against a target country. There are currently 11,000 individual US sanctions against Russia. These target the ruble and trade, Russian banks and companies, production and exports of oil and natural gas, large-scale farms, ships, airplanes and trucks, the technology sector and even the Russian media. Russia considers these as a direct attack and a declaration of war against the Russian people.
There are no sanctions directly on agricultural products and its exports but trade is hampered by the sanctions’ domino effect. Russia cannot freely export its products even to countries which do not support the sanctions.
Russia is one of the largest food exporters in the world. It exports almost a fifth or 18% of the global wheat supply, three times larger than Ukraine’s. According to the United Nations, 36 countries import more than 50% of their wheat from Russia and Ukraine.
Moreover, over 20% of the global supply of key fertilizer components come from Russia (15.4%) and Belarus (5%), which is also under US sanctions. Russia supplies up to 40% of potash and other nitrogen-based fertilizers. Fertilizer prices have already been rising before the Ukraine war due to the increase in oil prices. It further rose due to US sanctions against the two countries.
Many consider restrictions on fertilizer supply and trade as the “biggest threat to the food system.” This is because it affects all farmers. This will bring down production of all crops, not just wheat. This will also bankrupt many farmers, especially in backward countries, as prices of remaining fertilizer in the market will shoot up.
Worsening shortage and rising food prices
Even now, major exporters have started reducing food exports to ensure local supplies. Last May, India suspended its wheat and sugar exports. In April, Indonesia announced that it will temporarily stop exporting palm oil. Russia has slowed down food exports to neighboring countries also to protect local supply. The impact of the sanctions will be most felt on the next harvests. Many farmers are forced to reduce production as fertilizer supply tightens and prices increase. In the Philippines, prices of a sack of fertilizer have doubled from ₱1,436.21 in 2021 to ₱2,943.63 this year. As a result, farmers will be further burdened with high production costs. Even large commercial farms are worried that they cannot reach target production because their produce is dependent on fertilizers.
People in industrialized countries are not exempt from skyrocketing oil and food prices. They face rising cost of living as wages could not keep up with rising prices of basic commodities. In the UK, food inflation is estimated to reach 20% next year. Food inflation has already hit “historical highs” in the US (10.4%), France (6.4%), Japan (4.7%) and Germany (12.7%).