Page 48 - bneMag April 2022 Russia living with sanctions

48 I Eurasia bne April 2022
country’s food security. Egypt is the world’s largest importer of wheat while Russia and Ukraine are the world’s largest exporters. Cairo imports more than 80% of its wheat needs from the two countries. Russian and Ukrainian tourists also represent a considerable percentage of foreign tourists visiting Egypt, especially in the Red Sea area. When Russia suspended its flights to the North African country over a plane crash in South Sinai a couple of years ago, the tourism industry in Egypt was almost stagnant.
Egypt is also depending on Russia to construct a peaceful nuclear power plant in the Dabaa region to generate electricity and awarded the Russians a multi-billion dollar contract for that purpose a few years back.
On the other hand, political and economic stakes with the West are dominant in the Egyptian decision. The country depends heavily on Western financial assistance and purchases large amounts of Western arms, especially from the US, Germany and France.
It is clear that the Egyptian choice to vote in favour of the Western position against Russia had considered negative consequences that would have followed if Cairo had showed full support of Russia, given the many issues which the Egyptians need Western support to resolve, including a war on terror and
a struggle for their share of Nile water after the construction of the Grand Renaissance Dam in Ethiopia, which Egypt says it threatens its share of historical water rights.
But the Egyptians do not, at the same time, want to lose Moscow, since the two countries have a remarkable history of economic and political partnership. In an attempt to reduce the impact of the Egyptian vote on relations with the Russians, Cairo affirmed its rejection of employing economic sanctions outside the framework of the mechanisms of the multilateral international system.
Egypt was eager to cancel two wheat tenders in the past few days due to high prices and uncertainty of supply.
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The Egyptian government is currently considering alternative wheat suppliers following the outbreak of war between Russia and Ukraine – two countries on which Egypt relies heavily to secure
the grain needed for its population
of 103mn. The options include some countries outside Europe, including India, Argentina, Paraguay and Brazil.
The Ukrainian crisis is expected to
drive up global wheat prices, which will impose yet more financial burdens on an already cash-strapped Egypt, which is the world’s biggest wheat importer.
The Egyptian government said last week that it had a 5mn-tonne strategic stockpile of wheat, sufficient for nearly five months. That period will rise to nearly nine months after the addition to the stockpile of grain from the local wheat harvest in March/April.
The direct effect of cuts in wheat supply from Russia and Ukraine will thus not be felt in the coming months, but the long- term impact on the Egyptian budget
and economy will be much harder if the military operations escalate further, as global grain prices are expected to soar.
Syria
Syria voted against the UN General Assembly resolution, preferring to stand with its partner Russia. The move was expected and comes as a “reward” for Russian support of the Assad regime in its intense war against Western-backed forces. However, the consequences of such a decision will be harsh on Syria if the economic sanctions against its military ally distract or weaken the Russians. Black Sea trade will be disrupted and the Syrians will have to pick more expensive options to buy the grain they need – purchases that are vital to avoid any humanitarian crisis in the war-torn country.
Iran
Iran abstained from the vote on the Russian aggression on Ukraine in the UN General Assembly. Tehran has always preferred to strengthen its ties with Russia in the past, mainly to evade Western sanctions. It was clear on this occasions that the Iranian wanted to show support for Russia, but at the
same time not to anger the West, with which it has been rebuilding trust lately. The US and its allies could have reactivated sanctions on Tehran if the latter had chosen to support Russia openly and vote against the resolution. The Iranian decision to abstain from the vote took into consideration the future of economic cooperation with Russia in renewable energy projects.
Qatar
Qatar voted against the Russians. The GCC country weighed up its interests and preferred to stand with the US and its allies. The energy crisis in Europe resulting from the war could potentially allow the Qataris to increase their LNG exports. However, it is unclear until
now whether this could in practice take place, as the Qataris had announced earlier that their production and export capacity could not currently be extended to meet Europeans’ growing needs.
However, Doha might be looking for an opportunity to mediate between Russia and Ukraine, drawing upon its good relations with Western partners while maintaining a window of opportunity for containing Russian anger, which could harm the small country’s national security given the strong relationship between Russia and Qatar’s neighbour Iran.
Libya
Libya voted to condemn the Russian aggression on Ukraine. The war-torn country preferred to send a message that foreign military intervention
– something which it has already suffered for years – is against any law. The country's grain market will not be affected by the Russian-Ukrainian crisis in the short term, as its wheat reserves are sufficient for more than a year.
Wheat imports from Ukraine represent only 20% of Libya's total grain imports. The North African country consumes 1mn tonnes of wheat annually, and imports only 200,000 tonnes per year (tpy) from Ukraine. The country could approach other options if the crisis in Ukraine continues and its government proposed to establish a grain bureau to provide a strategic stock of wheat in the country.