Al Fusaic

View Original

The Impact of the Russia/Ukraine Conflict on MENA Countries

By Pilar Canón Ríos

See this content in the original post

Overview

The MENA region has been facing multiple and complex crises related to economic decline, internal disputes, climate change, natural disasters, diseases, and conflicts that have experienced a worsening due to the ongoing Russian-Ukrainian conflict. The International Federation of Red Cross estimates over 55 million people across the region are in need of humanitarian assistance.

Some MENA nations have close economic ties to Russia and Ukraine as trading partners. As a result, the impact of the crisis will considerably affect MENA economies, and, tragically, they may have a cascading detrimental influence on the region's food security and welfare. This is on top of COVID-19, supply chain disruption, and country-specific domestic issues. The conflict in Ukraine intensifies the impact of this pre-existing crisis and makes countries more vulnerable.

Schematically, the invasion of Ukraine is impacting the MENA region through three different channels: food price shocks (especially wheat), humanitarian deviation of funds, and oil and gas price hikes.

Food crisis and humanitarian assistance

The scarcity of basic goods like wheat is leading to a food insecurity problem all over the region. Wheat-based products are increasing their cost and subsidies implemented by some governments in the region do not solve the price problem anymore. Countries like Tunisia, Libya, Egypt, and Lebanon, which has no reserve of wheat, rely on Russia and Ukraine for their wheat supplies since these two countries are the largest supplier of wheat for most of the countries in the region (around 75-90% supplies of the wheat in these countries).

This situation is expected to worsen considering that food and energy prices skyrocket globally. In this scenario, the streets of many Middle Eastern and North African countries could witness riots and discontent about the economic and food crisis the whole region is facing.  The war could lead to social unrest in countries like Egypt because of the central role bread plays in society. Egypt is the country importing the largest amount of wheat in the world, and it’s the second-largest customer of Russia. Nader Saad, the spokesman for the Egypt government, stated in March that the country had supplies for nine months, but he added that they will no longer be able to buy wheat at the price before the crisis. The subsidies on bread were reduced in 2020 and now the Egyptian government is considering an increase in the price of this fundamental good, which will be devastating for the population who received five subsidized pieces of bread a day.

But the humanitarian crisis goes beyond food insecurity. External funding is being diverted from the Middle East and North Africa to address the growing number of Ukrainian refugees and the ballooning cost of post-conflict reconstruction. For countries like Yemen, Syria, Iraq, or Algeria -suffering a previous humanitarian crisis because of the effects of long-lasting wars- this would push them down on the priority list for donor governments, international institutions, and global media. The founding of ten MENA countries is expected to drop by 25% to 75%. This change in the monetary flow of humanitarian aid would be equivalent to shutting down critical life support. Palestine has already condemned the quick response from the media covering conflicts on European grounds, and the cynicism and double standards Western countries are showing punishing Russia while maintaining good relationships with Israel in the case of the US.

Oil and gas impacts in the region

In addition, as a direct consequence of the conflict in Ukraine, Europe has started to look for new alternative gas resources to gain independence from Russia. Those MENA countries leading the exportation of hydrocarbons like Qatar, Kuwait, Algeria, Saudi Arabia, or Libya might experience an improvement in their fiscal and external balance due to the restrictions imposed by Europe on Russia. They are expected to benefit from higher export earnings in the short and medium-term. On the other hand, energy and oil-importing countries in the region are experiencing adverse effects. International restrictions on Russia are preventing hydrocarbon supplies coming from Moscow from reaching traditional customers that now, are forced to look for new suppliers. This is leading to additional social stress and economic risks because of the inflationary prices. The rising price of oil and gas will have a knock-on effect on all commodity prices as well as transportation costs, which will lead to inflationary pressures and potentially disrupt supply chains for both essential and non-essential goods, further threatening the already precarious economies of MENA nations. Furthermore, the growing price of oil will drive oil-poor countries to devalue their national currencies, further reducing earnings and deteriorating living standards.

Geopolitical implications

Additionally, this conflict could lead to a switch in the geopolitical alliances at a global level.

Politically speaking, the conflict in Ukraine has not forced any significant realignments yet. However, the implications for some Middle Eastern countries like Egypt, Saudi Arabia, and the United Arab Emirates, which have been diversifying their defense industries trying to strengthen cooperation with Russia, might experience challenging situations due to the long-term sanctions on Russia.

Russia aims to take advantage of its relations with North African countries by positioning itself in the region as an alternative to the EU or the US. In the Middle East, one important Russian objective consists of exerting leverage over the West, as Moscow's assistance could play a crucial role in the settlement of major issues such as the Syrian conflict, Iranian nuclear talk, and the situation with violent jihadist groups. Its pursuit of influencing Middle Eastern countries could also be viewed as a strategy to avoid international isolation in the wake of sanctions that the international community is exerting on Russia’s trade as a punitive measure for the invasion of Ukraine, and that might affect its relationship with some countries in the region.

It takes advantage of the Arab autocrats' concerns about the sustainability of long-term American support, particularly in light of the alleged "pivot to Asia" and their dissatisfaction with the conditions that occasionally accompany American military shipments.

It is in Russia’s interest to persuade Western countries of its indispensability in handling major Middle Eastern issues.

Countries’ situations

In this section, the concrete situation of each country will be addressed and analyzed for a better understanding of the impact of the Ukrainian war and the response of the different countries to the difficulties they are facing 

Morocco

Until the end of April Morocco tried to remain neutral toward the Ukraine conflict and was careful with its public statements about the situation. On up to three occasions Morocco absented itself from voting on the resolution led by UN General Assembly condemning Russia’s military intervention in Ukraine. However, it seems that Washington’s pressure on Morocco demanding a clear position on the conflict had an effect. Morocco participated in the meeting held at the US base in Germany for increasing military aid to Volodimir Zelenski’s government. In terms of food and economic implications, the grain crisis is affecting Morocco to a lesser extent than most of the countries in the Middle East and North Africa region. However, Rabat remains vulnerable to price shocks as it imports 40% of the wheat its citizens consume, and an unprecedented drought has recently drastically reduced local production. The government responded by tripling its budget for flour subsidies. The Alawi kingdom is Russia’s top commercial partner in Africa with a total trade balance of $1.6 billion. Morocco’s political turnaround could have internal and external consequences for the country. After Russia asked its international customers to pay for the imported goods in roubles, it seemed that bartering could be used between Rabat and Moscow to avoid inconveniences for Moscow. Now, this agreement is not ensured.

Algeria

Algeria did not take an official political position in the Russian-Ukrainian conflict, however, Algeria's abstinence from voting on a Security Council resolution condemning Russia’s military invasion of Ukraine shows the country's interest in maintaining strong ties with Russia. The country is not as exposed as other North African countries to the economic impact of Russia's invasion of Ukraine. Algeria is a major hydrocarbon exporter and not only it does not depend on Russian gas but because of the crisis, the country will secure additional revenues from increased gas export to Europe, enabling Argelia to avoid a dramatic crisis of food security because of the difficulties in importing wheat from Russia (because of the sanctions imposed by the EU) and Ukraine.

Tunisia

Like many of the other countries in the region, Tunisia tries to stay neutral toward the Russian-Ukrainian conflict in an attempt not to lose its relationship with Europe and Russia.  The war has impacted Tunisia primarily at the economic and diplomatic levels. Tunisian economy, which was already facing a serious strain, obtain almost 50% of its wheat from Ukraine. Tunisia’s strategy consisted of maintaining a good relationship with Russia, because of its heavy reliance on tourism and trade, and avoiding alienating Europe and the US, because of the economic and diplomatic support. The non-opposition to Russia’s invasion of Ukraine did not sit well with Europe, and the EU ambassador to Tunisia stated that “remaining neutral between the aggressor and the victim is taking a stand”, referring to Tunisia’s neutrality. After this, in the UN General Assembly resolution denouncing the Russian invasion of Ukraine held on March 2, Tunisia did vote in favor of the resolution. A few days later, while receiving the new Russian ambassador to Tunisia, the Foreign Minister highlighted the importance of the good relationship between the two countries and the desire of strengthening that relationship. A gesture that Europe and the US could consider inappropriate given the circumstances. This attempt to maintain both channels open might have a detrimental effect on diplomatic relationships with Tunisia.

Libya

The war in Ukraine has deepened the rivalry between the two claimants to governing authority. The nation is once again embroiled in a conflict between two rival governments, both of which assert their legitimacy: the Abdulhamid Dabaiba-led executive in Tripoli, in power since March 2021, and the Fathi Bashagha-led executive, which received the confidence of the parliament in Tobruk on March 1. Moscow is the only foreign capital recognizing the Bashagha-led government, and, because of this recognition, no other capital wants to irritate Washington by siding with Moscow in this Libyan feud. Even Bashagha himself prefers to maintain his distance from the Kremlin and on 26 March Bashagha stated Lybia was standing by Ukraine’s side “as much as we can”. In the same line, the Dabaiba-led government voted in favor of expelling Russia from the UN Human Rights Council and condemned the Russian aggression in Ukraine. The redeployment from Libya of some Wagner units and pro-Moscow Syrian fighters, whose numbers were estimated at several hundred during the 2019 war in Libya, appears to be the Ukraine war's most noticeable effect in the country. The authorities have been working to get foreign fighters out of Libya since 2020, but Russia's military tactics in Libya are still unknown.

Egypt

In relation to the conflict between Russia and Ukraine, Egypt is in a very delicate position. The country tries to stay neutral and is reluctant to condemn Moscow’s actions. Russian-Egyptian relationships are excellent since Sisi stands in power. Egyptian authorities have relied on Russian military equipment in an effort to reduce the country’s dependency on the US in this regard, with whom it also has tensions over accusations of human rights violations by Washington. After receiving pressure from Europe and the US, Egypt voted in favor of the Security Council resolution condemning Russia’s attack on Ukraine, but a few hours later, the Egyptian government stated the legitimate security concerns Russia had about Ukraine and claimed the illegitimacy of the sanction imposed by the European Union and the US over Russia, ensuring this way its good relationship with Russia. In addition, Egypt and Russia signed in 2018 a comprehensive partnership agreement to bolster trade and other ties between the countries. The conflict has placed Egypt in a position of economic vulnerability.

Palestine

As Palestine is inextricably linked to Israel in a political and economic sense, the repercussions Israel experiences from the Ukrainian crisis will inevitably be felt by the occupied Palestinian territories. Israel is the main supplier for Palestinian territories (around 70-80% of its trade) and it is also the one mediating Palestinian access to the global economy. Thus, any shortage in the Israeli economy will affect Palestine. The West Bank and Gaza are particularly vulnerable to supply chain shocks and fluctuation in food prices given Israel’s restrictions on trade and travel in the Gaza Strip.

The Ukrainian crisis is pushing Palestine to the bottom of the list for receiving international economic aid. Donors are a significant source of income for Palestine’s economy, which largely depends on external economic contributions. The quick response from the European countries, the US shaking hands with Israel while condemning Russia’s invasion, and the media coverage of the conflict, have been considered by Palestine cynical and Western double standards. Picking sides in the Russian-Ukrainian conflict could bring negative repercussions for Palestine. PA officials have stated Palestine will remind neutral in this matter since it is an occupied country that financially and politically terms depend on Western countries that support Ukraine, but also, relies on Russia for humanitarian aid. Apart from an end to the fighting, Hamas has not declared support to any of the parties involved.

Lebanon

Lebanon imports more than 80 percent of its grain from Ukraine, leaving it vulnerable to price shocks. The country has been facing problems that have ended up eroding its economy. Since the outbreak of the Syrian civil war in 2011, Lebanon is hosting around 1.5 million refugees, nearly a quarter of Lebanon’s total population. In 2019, the collapse of the Ponzi scheme sustaining Lebanon’s baking sector led to the decline of the Lebanese lira. The arrival of COVID in 2020 aggravated the already economic stagnation and, the same year, the capital experienced a double explosion at the port of Beirut. The Russian-Ukrainian war has aggravated these problems, placing the country in an unsustainable economic situation marked by social unrest and riots. Lebanon depends heavily on food imports from Russia and Ukraine, especially wheat-based products, and oil sunflower. 

Lebanon has condemned Russia’s invasion of Ukraine and voted in favor of the 2 March UN General Assembly resolution. However, Hezbollah, which by the time the resolution was voted harbored strong influence in the government, considers Moscow an important ally in the counterbalance of regional power. 

Iraq

Since the invasion of Ukraine in February, Iraq has refrained from taking a position in the conflict. It voted in favor of a statement designed by the Arab League that did not assign responsibility to Russia. The country abstained itself from voting in the March 2snd UN General Assembly condemning Russian aggression towards Ukraine. The war has complicated trading with Russia due to the sanctions imposed on Moscow -which used to buy large amounts of arms from Iraq- and this could have a long-lasting impact on the Iraqi economy. Even though Iraq does not rely on wheat from Russia or Ukraine, growing world prices have an adverse effect on the country's economy. The strides made in the past years between Russia and Iraq are unlikely to be destroyed by this war, however, Baghdad could limit its relationships with Moscow to essential spheres and overcome the economic impact of sanctions by embracing a multipolar foreign policy. 

Syria

The conflictive situation and the military operations have been significantly reduced in Syria over the past few years, however, the country’s situation reminds still unstable. Turkey, Russia, the US, and Iran have each established zone of influence in Syrian land. While the dominant external parties’ overall goals are likely to remain the same in Syria, their priorities, approaches, and capacities are likely to change because of the war in Ukraine. This will likely lead to further modifications and increase the likelihood of a new and worsening conflict in Syria. The extent of these changes will depend on the duration of the war between Ukraine and Russia and the escalation of the NATO-Russia confrontation. The volatile status quo in Syria could be not only seriously affected by endangering ceasefire agreements - tilting the power balance in favor of Iran - but also complicating the fight against ISIS. Geopolitical dynamics in Syria seem not to be seriously affected and are limited so far; nonetheless, the capabilities at Russia’s disposal for its engagement in Syria are directly impacted by the war in Ukraine. Russia must contend with the difficulty of maintaining its position in the MENA region while facing a reduction in its resources.

Israel

Israel has tried to play both sides in this conflict. On the one hand, it has shown its alignment with the West (Europe and the US) but stays neutral on condemning Russia’s invasion of Ukraine.  It has refused to support Ukraine beyond sending humanitarian aid. The country is very interested in maintaining its ties with Russia due to the great investment the Russian Jewish oligarchs have in Israel and, in addition, for the implication its relationship has in attacking Iran in Syria.

Israel not only voted in favor of condemning the Russian invasion of Ukraine at the UN General Assembly but also joined the bloc of countries that suspended Russia from the Human Right Council, although it did not support in any way the sanctions imposed by Europe and the US on Russia. This last (in)action gained the displeasure of President Zelenskyy and the criticism of the US. 

Gulf Arab States

Gulf States have been receiving pressure from the US to increase the production of oil due to the lack of this product in the global market at this moment. It is at this point that the Gulf States are having disagreements at the bosom of the OPEC+. Saudi Arabia has stated it will not increase its production due to the OPEC+ agreement with Russia that limits it to 400,000 per barrel a day. However, the UAE is trying to push OPEC to reconsider this immovable limit of production level. For its part, Qatar has signed a gas deal with Germany.

Due to this circumstance, these countries have adopted an ambiguous position in relation to the ongoing conflict. They are closer partners to the US but in the past years, they have forged strong ties with Russia in an attempt to diversify their international scope. While most of these countries have tried not to give the impression of siding with Russia, security partners of the US like Saudi Arabia and the United Arab Emirates have coordinated with Russia on oil and signed arms deals. These movements highlight the effects of the US retreating from the Middle East. However, they are aware that, at the moment, Russia cannot serve as their security patron but rather as a complement to stabilize the security situation in the region.

Yemen

The war on Ukraine has further exacerbated food insecurity in Yemen. Russia and Ukraine both countries together supply Yemen with 30-40 percent of its wheat imports. Yemen imports a lot of fuel as well. As a result, prices for wheat and fuel have already increased nationwide. Donor funds are being diverted to Ukraine since the war started and this poses a serious humanitarian concern for Yemen since donors, like Germany, will be spending more on defense and Ukrainian refugees and less on external aid. The situation in Yemen at this point is dramatic considering the country is, in the UN’s words, going through the world’s worst humanitarian crisis at the moment.

Jordan

Jordan is not as heavily dependent on either Russia or Ukraine as other MENA countries, obtaining its food and fuel mainly from other sources. However, around 30% of its wheat import comes from Ukraine. For Jordan, neutrality has long been a pillar of its foreign policy. The country joined the majority of Arab countries in condemning Russia’s invasion in the UN General Assembly, but it is careful about mentioning Russia in its statements. In addition, Jordan is one of the largest recipients of US foreign aid.

Iran

Iran finds itself in a difficult diplomatic position. While having close relationships with the Russian Federation, the country wants to maintain a good relationship with Ukraine. Iran did not recognize the independence of the Donetsk and Luhansk regions in February 2022. On the other hand, it abstained from voting on the UN General Assembly resolution condemning Russia’s invasion of Ukraine. Teheran’s main concern about the Ukrainian conflict is the implication this war could have on the talks on Iran’s nuclear program.

Like Russia, Iran opposes the expansion of NATO’s borders to the east and the deployment of NATO and US forces in Eastern Europe or any other area around Iran. Iran could meet part of Europe’s need for imported gas however the country is aware it will not be able to completely replace Russia’s export to Europe in the short term. However, this could affect the nuclear talks in Vienna despite Iran’s efforts to isolate the Ukrainian conflict from this matter. Although Russia doesn’t seem interested in undermining the Joint Comprehensive Plan of Action as a whole, prolonging the negotiations may be in Russia’s best interests because it would give it influence over the West, while the U.S. and its allies in Vienna are eager to move fast to seal a deal with Iran.

Conclusion

Ultimately, the invasion of Ukraine will continue to have severe effects on all the Middle Eastern and North African countries. The dependence that several states have on Ukraine and Russia not only at the food level but in terms of partnership and strategic relationships that keep the status quo in the region, could experience important changes that will mark the future of these countries. Serious issues such as the Iran nuclear problem or the fragile game power in some areas of influence in Syria could be triggered and turn into a more complicated scenario that will challenge relationships with the US and Europe. The humanitarian crisis due to the lack of food and oil is severely deteriorating the quality of life of many populations to the point of aggravating the already dramatic situation of starvation in countries like Yemen. The economic insecurity, the devaluation of the coin, and the high prices are the current consequences that this war is having in the MENA region. If the war turns into a long-protracted conflict could generate a worsening of the already severe problems in this region and social unrest could extend in those countries where the social situation is extreme.