The Ukraine War's Domino Effect on the Middle East: Geopolitics, Energy, and Food

Since February 24, 2022, Russia's invasion of Ukraine has triggered a wide range of consequences on the global stage. In the Middle East and North Africa (MENA) region, its impact has most prominently been felt within the domains of fluctuating alignments, energy and food security, and economic stability. According to the International Crisis Group, solidarity with Russia has been voiced by the Iranian and Syrian governments, as well as by Hezbollah in Lebanon and the Houthis in Yemen. Meanwhile, many countries in the MENA region, particularly the Gulf nations, who are allies of the United States, have adopted a neutral stance in response to the Russian aggression in Ukraine in order to diversify their foreign relations and safeguard their own economic and geopolitical interests. In the current context of a shifting multipolar world, nations are exercising caution when it comes to their alignments in order to avoid provoking major superpowers while positioning themselves in a favorable place to negotiate with all of them — the United States, China, and to some extent, Russia.

For instance, the United Arab Emirates (UAE) has adopted a balancing stance on the war. Following Russia’s invasion of Ukraine on February 24, the UAE abstained from voting on a draft resolution condemning the invasion at the United Nations Security Council (UNSC). However, in a shift of position on March 2, the UAE voted in favor of a United National General Assembly (UNGA) resolution denouncing the invasion and “encouraging all parties to resort to diplomatic action.” Although a UNGA resolution has political weight and conveys a message to the international community, it lacks the legally binding authority of a UNSC resolution. Hence, as Andreas Krieg, an associate professor at the School of Security Studies at King’s College London, pointed out, the UAE was likely to adopt a more symbolic UNGA resolution as it was “less likely to antagonize Russia” in contrast to a legally binding UNSC resolution.

Moscow’s recent economic isolation and debilitated position, as a result of the multifold Western-imposed sanctions that have disrupted Russia's production capabilities and led to a widening budget deficit, have forced Russia to rely on trade with Turkey and Iran, eroding its international standing. Similar to the UAE, Turkey is currently adopting a balancing act, though not between the West and Russia, but between Russia and Ukraine. This is particularly exemplified in the celebrated ‘grain deal,’ officially known as the Black Sea Grain Initiative (BSGI), brokered by the United Nations and Turkey in July of last year – a deal that exported nearly 33 million tons of grain from Ukrainian ports, but has since faltered due to the Kremlin’s refusal to renew the agreement. Additionally, since the invasion of Ukraine, Russian-Iranian relations have been growing, marked by Iran providing military support to Russia, such as drones. This development has raised questions regarding the Iran nuclear agreement, also referred to as the Joint Comprehensive Plan of Action (JCPOA), in which Russia played a constructive role by encouraging Iran's compliance. The growing alliance between Russia and Iran raises concerns about how it could increase tensions with the West and how it might influence Iran’s decision to renew the JCPOA.

Perhaps the most immediate and prominent effects have been the significant surge in energy prices and the disruption of grain supplies. Regarding energy prices, the Gulf Cooperation Council (GCC) nations, which include Saudi Arabia, Kuwait, Oman, Bahrain, Qatar, and the UAE, alongside the oil-exporting nation of Iraq, have benefited from the war due to their substantial petroleum reserves, accounting for more than 40% of global reserves. Since the war in Ukraine, the West’s sanctions on Russia, and the cutoff of Russian oil and gas, energy prices have been soaring. Notably, this came at a time when the global economy had not yet fully recovered from the impact of COVID-19 and when the benchmark Brent crude oil price plummeted to as low as $22 per barrel in March 2020. During the first week of March 2022, following Russia’s invasion of Ukraine, the price of oil peaked at $125 per barrel – a number that has since receded but remains far above the pre-war average of $70 per barrel. As one of the world’s biggest hydrocarbon producers, GCC countries experienced a remarkable 7.3% increase in their Gross Domestic Product (GDP) in 2022. However, due to a global economic slowdown and reduced earnings from oil and gas exports, economic growth is expected to slow down to 2.5% in 2023 for the GCC, as projected by the World Bank. 

The Gulf nations undoubtedly welcome the surge in oil prices. However, for low to middle-income oil-importing countries like Lebanon, Syria, and Yemen, which rely heavily on financial assistance, the escalating oil prices have become a source of significant concern. The war has caused a profound disruption in oil markets, posing a significant threat to these countries’ energy security and leaving them vulnerable to economic shocks. The inflationary pressures initially triggered by the pandemic have been further exacerbated by the Ukraine War, a situation worsened by currency depreciation in several MENA countries. An example is the Egyptian Pound, which was devalued by 17% against the dollar in 2022. Inflation, interest rates, and debt have increased, resulting in a slowdown in the region's economic growth and putting pressure on citizens’ savings and purchasing power. While specific data on the GDP per capita of low to middle-income oil-importing countries is pending update, the World Bank anticipates that economic growth in the broader MENA region is expected to slow down in 2023, with an expected rate of 3% after growing 5.8% in 2022. This deceleration can be attributed to persistently high inflation and rising food prices.

Consequently, the high energy costs have added pressure to food and fertilizer prices, affecting agricultural production and contributing to a surge in global food inflation. Russia and Ukraine, two of the world’s top grain exporters, collectively account for approximately 34% of global wheat, 17% of maize, and 73% of sunflower oil exports. Furthermore, Russia is a major exporter of nitrogen and potash fertilizers, representing 15% and 33% of global trade, respectively. Since the onset of the war, global prices for wheat and maize have sharply increased by 35%, and access to Russian fertilizers has diminished, profoundly impacting the MENA region – a highly import-dependent region. The region already has some of the highest levels of food insecurity in the world, and while it is true that food prices have receded to pre-war levels, attributed mainly to the BSGI, a global food crisis persists. Should the crisis be prolonged, food insecurity and the current halt of the BSGI could deepen humanitarian crises, reinforce inequalities, elevate poverty rates, and cause social unrest in Arab nations. Such destabilization in the region may create a strategic opportunity for increased influence, particularly from nations such as China.

In light of the current Ukraine-related food crisis, low to middle-income oil-importing countries are more vulnerable. Among these nations, Egypt and Lebanon stand out as particularly concerning due to their heavy reliance on grain imports from Russia and Ukraine, accounting for more than 80% of their overall imports. These nations are facing a double burden, struggling with internal economic turmoil, making it even more challenging to confront the current food crisis. 

Egypt, the world’s largest wheat importer, with over 13 million tons of wheat imported annually, remains vulnerable to greater political and social unrest, given the large portion of its population that relies on government-subsidized bread. Rising wheat prices will make the subsidy more costly. Hence, if the Egyptian government is unable to accommodate its budget to subsidize the cost of bread for more than 60 million Egyptians annually in the long term, which accounts for nearly half of Egypt’s total population, a consumption reduction may be necessary. Lebanon, on the other hand, stands at risk of famine due to its near economic collapse, in addition to the catastrophic loss of about four-fifths of its storage capacity in the 2020 Beirut port blast, destroying the country’s main grain silos. Similar to Egypt, grain is among the few commodities still subsidized in Lebanon. An unstable economic situation and increased food insecurity could spark social discontent in the country. It is important to recognize that while the Ukraine-related food crisis is likely to exacerbate food insecurity in the MENA region, the situation is likely to worsen in the coming decades due to climate change and water scarcity, which could cause regional tensions, as already witnessed between Egypt and Ethiopia.