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| President Volodymyr Zelenskyy leading Ukraine's war against Putin's aggression |
First, there is the issue of food insecurity. The MENA region and much of Africa is highly dependent on Russia and Ukraine which produce roughly 30% of the world’s wheat, a grain critical to the diet of millions of people and one that helps prevent starvation.
In North Africa, Ukraine War Strains Economies Weakened by Pandemic
Egypt, for example, has been having problems feeding its ever-growing population for many decades. Already food prices are high and the lack of wheat imports from Russia and Ukraine will only increase prices still further. What is highly disturbing is that rising wheat process may lead to serious problems for the poor in Egypt and many other nations.
Second, there is the increased tension between the major Arab oil producing countries in the MENA region, especially Saudi Arabia and the United Arab Emirates, and the US and European Union. The West’s stringent sanctions regime has made it much harder for Russia to not only export its oil and natural gas but to sustain the financing of its energy industry given its inability to access foreign currency. Investors always fears of the economic consequences war. The reduction of Russian oil and natural gas exports, however limited, still is forcing the price of oil and natural gas to skyrocket.
In natural gas production, Qatar has stepped in willingly to try and meet rising global demand to offset cuts in Russian natural gas to Europe, whether as a result of sanctions or Putin’s decisions to reduce the flow. However, both Saudi Arabia and, initially, the UAE have refused to increase production which they both could do quickly.
What is especially disturbing is that leaders of Saudi Arabia and the UAE refused to take telephone calls from President Joe Biden. Not only was this an insult to the US president, but it demonstrated how the US and the West can no longer depend on these two powerful oil-producing countries to sacrifice profits when it comes to global security.
Saudi, Emirati Leaders Decline Calls with Biden during Ukraine Crisis
However, today we learned that the UAE has agreed to increase oil production outside the OPEC+ agreement with Russia. Putin shrewdly pushed this agreement prior to the invasion of Ukraine in an effort to prevent Saudi Arabia and the UAE – which have spare capacity (2 million barrels/day and one million barrels/per day respectively) – from filling the gap if Russian oil was sanctioned.
If Saudi Arabia, which indicated it was disturbed not to have been informed of the UAE decision before it was announced, thinks that partnering with Russia (and China) offers a better option than its traditional alliance with the United States and Europe, then Muhammad Bin Salman and the Saudi leadership are very foolish indeed. Russia is led by an unpredictable leader, as his strategically disastrous miscalculation of the invasion of Ukraine demonstrates.
China is a global economic power which is still constrained in its technological growth by a highly authoritarian and likewise unpredictable regime. In nether Russia or China, does the rule of law exercise much influence. Further, the Saudi and Arab Gulf economies are highly intertwined with American banks, investment firms and corporations. To jeopardize these ties makes no sense.
A third area of impact is less visible but may play a greater role in the coming days and weeks. There have been reports that Putin is trying to recruit Syrian fighters from Bashar al-Asad’s regime. These fighters have been involved in urban warfare against radical Islamists in Syria. Using foreign fighters like these could cut Russian troop losses which are already estimated to be 12,000 killed and over 30,000 wounded. In Putin's view, instead of having troops in body bags returned to Russia, have them go to Syria and other MENA region allies.
Other candidates for Putin’s recruitment strategy could be Iran, Iraq and Lebanon. Iranian troops, who are part of the Islamic Revolutionary Guard Corps (IRGC), could join the mercenaries brought to the battlefield in Ukraine to augment Russian forces. In Iraq, there has been a not inconsiderable public support for Putin’s invasion of Ukraine from militias (al-Hashad al-Shacbi) which support Iran. Posters of Putin haven been seen in parts of Baghdad and elsewhere. Finally, Lebanon’s Hizballah might also send forces to fight in Ukraine.
Ukraine war highlights internal divides in Mideast nations
Needless to say, fighters participating in Ukraine’s war with Russia will further contribute to political polarization and instability in the Middle East. Because the fighters would be overwhelmingly Alawites or Shica, this development would frighten Sunni Arab countries such as Egypt, Jordan, Saudi Arabia and the Arab Gulf states. Their response would be to use sectarian rhetoric to prop up their social base in their respective countries.
Fourth, there is the possible global impact of Russia’s inability to service its foreign debt. According to most projections, it will default on its foreign debt in April and beyond. The impact of Russia's default will be to frighten foreign investors, especially those with exposure to emerging market countries, such as Brazil, India, China and, in the Middle East, Egypt and Turkey, and withdraw their funding for projects in these countries.
The lack of Foreign Direct Investment (FDI), which many emerging market countries have depended on, will only further erode their economic development. Thus, we see that the international sanctions, historically the most stringent on a country the size of Russia, are not only directly affecting Putin’s regime, but having an economic impact far beyond the Ukraine war.
Finally, there is the strong inventive which Putin’s invasion has sparked for European countries to switch their energy supplies from dependence on Russia. While natural gas will no doubt play a longer term role in Europe’s energy needs, the reduction of oil imports will speed up as governments ramp up building wind and solar energy farms and use financial incentives to foster their citizens to switch from combustion vehicles to electric cars.
This means a decline in demand for oil from MENA region oil producers such as Saudi Arabia, Iran, Iraq, Libya and the Arab Gulf states. Because most analysts have believed that demand for oil wouldn't experience a serious decline before 2030, the huge mistake Putin made by invading Ukraine may actually be to speed up the transition to renewable sources of energy, thereby reducing revenues to Russia and Middle East oil producers.
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