Grains Could Be the Next Front in the Trade Wars. And Europe is in Russia's Firing Line | Opinion
Russia's recent decision to suspend wheat exports contravened grave warnings from the WTO, the UN Food and Agriculture Organization (FAO), and the WHO about the danger of such a move to global food supply chains. Russia's export ban, coupled with its disproportionate influence over European food security, could spell disaster for the EU during an upcoming recession likely to be the worst in living memory.
After all, Russia's ban includes other essential food like rye, barley, corn, soy beans and sunflower oil. And it could get worse. These bans were originally imposed when Russia seemed to have largely weathered the COVID19 storm. But these past two weeks, confirmed that COVID19 cases in Russia have sky-rocketed, taking it to the third highest globally. Given the ensuing tidal wave of economic disruption, there is a good chance these current bans will not only persist beyond the summer, but that more essential foods will be added to the list.
That bodes badly for the EU, which is a net importer of wheat. The EU Department of Agriculture projecting EU wheat imports will rise 17 percent from 4,600 metric tons to 5,500 metric tons by 2021.
An even bigger deficit could exist on edible oils. Seven of the ten biggest sunflower oil importers in the world are European nations, with Belgium and the Netherlands the world's largest importers. And Russia is the world's second largest exporter.
Russia's blanket ban is therefore bound to hurt EU consumers. It is also an ominous indication of the extent of Russia's ability to cause disruption to global food supply chains.
It is hard to read Russia's long-term intentions. At its simplest, Russia's actions seem motivated by the same inclinations to stockpile also affecting other nations.
Yet, more maybe afoot. Russia has allowed notable exceptions for grain exports to close geopolitical allies, including South Sudan and Saudi Arabia, two countries Russia has increasingly tried to influence. More troubling are public proposals by Russian officials late last year to create a "Grain OPEC" to control world food supplies, an initiative that would be nothing short of a naked attempt to politicize global food supply. All this suggests the Kremlin's recent export ban has a deeper geopolitical imperative.
In addition, these current bans also coincide with the release of a little noticed food security strategy document unveiled by the Putin regime a mere two months ago, the first such document in a decade. In that document, new higher targets were set for domestic production of food items as part of a "Russia-exit" from the global trading system. What that means is Russia is now setting targets for food products whose domestic demand is already more than exceeded. In particular, Russia increased domestic targets for vegetable oil from 80 percent to 90 percent
However we choose to interpret the situation, it points to a bigger looming problem for EU food security in coming years.
Longer-term, for the EU to develop resiliency in safeguarding its food security, it must do more than diversify supply chains. It must overcome the inclination towards protectionism during times of global crisis - so that other global economic blocs reciprocate by doing the same.
A staunchly protectionist attitude (highlighted most aptly in the EU's historic protectionism over its agricultural sector), has already hamstrung major potential EU trade deals in the pre-COVID19 era—from a trade deal with the United States in the west, to another with the ASEAN region in the east.
Both the United States and ASEAN offer Europe vital sources of essential food items that could be guaranteed with under trade deals. While the US offers ample alternative sources of wheat and other cereals, ASEAN – particularly Malaysia – offers palm oil as a ready substitute to sunflower oil, a commodity that Russia has attempted to monopolize globally. Agriculture has remained the key sticking-point in US-EU trade negotiations. For ASEAN, the EU's ban on palm oil for biodiesel has been the major obstacle.
Russia's food export bans open up an opportunity for the EU to take advantage of U.S. eagerness to access European markets. And the EU may wish to consider a more constructive approach to palm oil to avoid alienating ASEAN as the COVID19 economic crisis escalates.
Palm oil, after all, is proven to have be less land, water and energy intensive than almost all other edible oils, including sunflower oil, soy, and rapeseed, and Malaysia has made significant steps towards sustainable palm oil production. In September 2018, the Malaysian government declared a moratorium on palm oil expansion to protect forest cover at 50 percent and enforced mandatory sustainability standards for 100 percent of Malaysia's palm oil production. Sustainable palm oil certification is now obligatory for Malaysian producers, as the government also embarks on reforestation programs like the one million forest tree planting initiative in the Ulu Segama-Malua Forest Reserve.
With the EU's food security now at stake as Russia opens up a new front in global trade wars, the only viable approach is for the EU to lead on negotiation, dialogue and compromise to cement new food trade relationships. Protectionism, however well-intentioned, will only accelerate economic disruption.
Dr. Theodore Karasik is a Non-Resident Senior Fellow at the Lexington Institute and a global security expert. He worked for the RAND Corporation and publishes widely in the US and international media. Twitter: @tkarasik
The views expressed in this article are the author's own.
