The Russia-Ukraine war has had significant political, economic, and social repercussions on a global scale. Food markets worldwide were particularly impacted as a consequence of unprecedented grain shortages. In this article, we take a look at Russia’s role in the global food market prior to the conflict, how economic sanctions added to the already complex situation, and how different countries reacted.
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Russia has been a primary producer of grains, oilseeds, and fertilisers for years. Its status as a global food producer, one that several countries depend on, has only intensified the global ramifications of food insecurity.
Russia’s default vis-à-vis its unprompted invasion of Ukraine in March 2022 was met with rightful international criticism through economic sanctions. However, despite its now demoted position in the international arena, states are reluctant to impose direct sanctions on food grain exports.
The question then arises: At the core of this, does there lie an overriding bargaining power in the hands of the Russian economy or a helpless global food economy?
Russia’s Role in the Global Food Market
Russia’s production and export of wheat make up a large part of the Black Sea food crop. For decades, the country has supplied wheat to regions in Asia, the Middle East, and Africa. While there have been several economic sanctions against Russia on the grounds of oil, coal, gas, and mining, there have been no direct sanctions on the trade of wheat and food grains. Such a hesitance amongst major states like the United States, the United Kingdom, Canada, and Germany is solidified by Russia’s wheat exports skyrocketing by more than 60% over the last decade and being projected to account for 20% of the world’s wheat supply by the end of 2023. This is largely due to the ample natural resources possessed by Russia, which allow the country to take on the food grain trade on such an extensive level.
While there is much to be said about the detrimental ways in which this war is taking a toll on civilians in Russia, an interesting point of contradiction is a rather favourable economic situation when it comes to a rise in food grain exports.
The southern agrarian regions of Russia are in a very good economic position. These areas experienced a record grain crop in 2022, which boosted exports. As a measure of production, exports rose year over year, especially in the third quarter of 2022, in each of the important agricultural districts of southern Russia: by 7.1% in the Stavropol territory, by 8.6% in the Krasnodar territory, and by 23.6% in the Volgograd region. This is in direct relation to Russia’s economic bargaining power for wheat, given its dominance in cultivation in the south of the country.
Wheat production in Russia, by region. Source: International Production Assessment Division.
Economically, Russia has been able to navigate through this war in a smoother way due to its specialised trade, largely due to the established identity of the country as a major supplier of food, in an already exacerbated market with all-time high prices,
What’s Holding Russia Back?
While the repercussions of the war have been significantly less burdensome on Russia than on Ukraine, there is no doubt that, without the economy of war, its presence in the global food markets would have been much more prominent.
Despite the US pegging Russian wheat exports at an all-time high of 45.0 million metric tonnes in the 2022–23 season, only second to the record high of 41.5 million metric tonnes in the 2017–2018 season, logistical restraints and a lack of global support have hindered the nation from reaching its optimum.
Given Russia’s newfound status as a pariah state, rendering it an outcast, the Russian government has strived to hold down the fort. In doing so, they have imposed export quotas and taxes to limit external production in 2021 and cater to domestic needs before international trade.
This is influenced by the obstacles to international trade faced by the Russian state, such as the large exodus of global grain merchants led by logistical constraints in railway wagons. Additionally, due to the fact that major agrarian business in Russia takes place in the southern and central regions, which border Ukraine, there is an even greater military obstacle to production.
Internally, there are several setbacks posed by the war on Russia’s status as a global food producer. One of them – which Putin is set to overturn – is that of the Black Seas Grain Initiative.
In July 2022, the United Nations signed an agreement that enabled 25 million metric tonnes of food to be exported from Ukraine. This initiative was launched alongside a Memorandum of Understanding with Russia, wherein their fertiliser and food product exports are to be promoted in global markets. In doing so, the UN’s aim was to create two-way trade beneficiance for Russia and Ukraine. Despite such efforts of gradual peace brokering, Moscow’s quest to assert power over Ukraine does not thrive on a mutually beneficial step such as this.
The initiative was renewed on May 18 after Russia agreed to extend the accord by two months, allowing Ukraine to tackle the growing food insecurity with its exports.
What’s Next for Russia?
While an agreement by Russia on the extension of the Black Sea Initiative is seemingly a step in the right direction, it is imperative to understand the consistent attacks on biodiversity that Russia has indulged in.
As recently as June 6, 2023, the primary water reservoir and dam in Ukraine were completely destroyed by the Russian military, wreaking havoc in the water and sanitation industries in the country. Such actions by Russia showcase their still-standing sentiment of being the aggressor, making global, regional, and even domestic socio-economic facets suffer the consequences.
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