The recent Russian invasion of Ukraine is having a disruptive impact on the MENA region. Aside from its geopolitical consequences, the war will have an economic impact on the region in various ways.
Russia and Ukraine are two of the world’s top grain exporters. The escalation of the war will certainly affect wheat production and exports. The Russian invasion 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. This will potentially have repercussions on low-income households and social stability.
Some countries, such as Qatar, could on the other hand benefit from cuts in Russian gas supplies to Europe, increasing gas exports. However, the Qataris said they currently do not have the capacity to increase their gas production.
The consequences of the war are very complicated and have pushed most MENA countries to refrain from clarifying their position until very recently, when the UN General Assembly voted on whether to condemn the Russian invasion of Ukraine on March 3. The MENA countries’ hesitant stance, especially before the UN General Assembly resolution, stems not from bets placed on either camp, but stems rather from striking a balance between, on the one hand, an expected Russian military victory (despite fierce Ukrainian resistance) and, on the other, an expected Western economic and financial victory (despite Russia’s capabilities and manoeuvres).
Regardless of the (non-binding) UN resolution, it is clear that the war has brought strategic shifts for many MENA countries. The GCC countries, for example, have been redefining US engagement in the area. Egypt and Israel have favoured not fully condemning the attack, keeping the door partially open for future cooperation with Russia on energy, food, military equipment trade and other projects. The same applies for North African countries including Algeria, Libya, Morocco and Tunisia. On the other hand, Syria is standing firmly with Moscow, basically on geopolitical calculations; the same calculations that prompted Russia to prevent the Syrian regime from falling in the Western-backed Arab Spring uprising.
Turkey voted to condemn the Russian invasion of Ukraine in the UN General Assembly. The geographically sensitive position of Turkey between East and West, its long ties with both camps and especially with its economic cooperation with Moscow, have pushed Ankara to carefully balance its different interests and to avoid angering the Russians with any sort of escalation. Russia is Turkey’s main gas supplier, covering 33% of its total imports. The gas cut will represent a problem for Ankara, which will have to search for more expensive options. But at the same time, the country is aware that it must present its stance within the consensus of NATO, in which Turkey is a member. In order to avoid playing an influential part in the US and EU sanctions against Russia, it chose to close the Bosporus and the Dardanelles Straits to warships and said that such a move was not intended to be against Russia but rather designed to preserve the security of the Black Sea region. It is also true that Ankara is in desperate need of Western economic assistance to help the recovery of its ailing economy.
The United Arab Emirates voted to condemn the Russian invasion of Ukraine in the UN General Assembly. The country has been pursuing a non-aligned posture in the crisis, a position explained by the country’s attempt to preserve economic bonds and diversified alliances with partners including the US, Russia, China, and India. The vote for the non-binding UN General Assembly resolution will not affect the UAE strategy of keeping its cooperation with all parties, but it is not clear whether this strategy can remain intact when economic sanctions on Russia begin to affect the entire GCC region.
Despite the UAE desire to keep its relations with Russia to at least an “acceptable” level, the US defence of the Gulf country against recent attacks by the Yemeni Houthi group (together with Russian silence on the matter) has also played a role in the UAE decision not to escalate tensions with the US and to vote against the Russian invasion of Ukraine in the General Assembly.
After days of silence, Saudi Arabia voted to condemn the Russian invasion of Ukraine in the UN General Assembly. The Saudi position is so important given its large oil capacities amid a potential crisis in energy markets that will affect almost every country, especially those of Europe.
Riyadh has been trying to strike a balance between its political interests and the benefits it is currently enjoying from record-high oil prices. The Saudis welcome the OPEC+ decision that targets increases of 400,000 barrels per day (bpd) each month.
Despite the Saudi vote in the UN General Assembly, it is clear that the Saudis would prefer not to show a hostile attitude towards Moscow and would prefer to end the crisis as soon as possible to preserve their trade and military stakes in both camps. This was obvious when Saudi Crown Prince Mohamed Bin Salman showed the readiness of his country to act as a mediator in the Russian-Ukrainian crisis after he received phone calls from both leaders on Thursday.
The Israelis voted to condemn the Russian invasion of Ukraine in the UN General Assembly. The move was expected as Tel Aviv is keen to preserve its deep alliance with the US and the West, which is also linked to ideology and liberal Western values. On the other hand, the Israelis do not want to escalate their position to show aggressiveness toward Russian interests in the region, especially in Syria where both Israel and Iran depend on Moscow to enhance their power. It won’t be a surprise if the Israelis actively engage in mediation attempts between the two adversaries, but the question will be the extent to which the Russians can accept such attempts, given the long strategic partnership between Tel Aviv and Washington.
Egypt voted to condemn the Russian aggression on Ukraine. The position raises challenging questions on the 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.
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 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 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 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 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.
Algeria abstained from the vote on the Russian aggression on Ukraine in the UN General Assembly. The North African county wanted to balance its interests. It believes it won the Western camp by showing its readiness to supply the EU with extra gas through the Transmed pipeline amid the Ukraine crisis, but it also does not want to lose the Russian side. Algeria is Russia’s ally in Africa, and Moscow is the first provider of arms and military equipment to Algiers.
Algeria accounts for about 11% of Europe’s gas imports. Algerian LNG can also be transported via tankers. Existing liquefaction plants are only operating at 50-60% of capacity.
Sudan abstained from the vote on Russian aggression on Ukraine in the UN General Assembly. Sudan prefered not to lose the Russians, as the two countries have signed cooperation agreements, especially on military and economic projects.
In recent years, Russia has sought a geopolitical return to Africa through Sudan, especially in the military field, and through energy projects. Two years ago, the two countries signed a seven-year military cooperation agreement. Moscow is also an arms supplier for the Sudanese security forces, which have been in confrontation with a number of liberal forces recently.
Russia has also showed support for Sudan when Khartoum was still under US sanctions for state-sponsored terrorism.