Energy, food crisis: Who is to blame?
BEFORE discussing the world food crisis in relation to the Ukraine crisis, I will give a brief account of significant events that occurred in the last week. A lot has happened on the war front and across Europe, which changes the dynamics and the consequences of the conflict.
Last Friday, at least 40 Ukrainian prisoners of war (POWs) were killed and 84 others wounded in a strike on Yelenovka prison. Authorities in the Donetsk region put the death toll at 53.
Russia’s Defence ministry said Ukrainian forces “fired on the prison where members of the Azov battalion, captured at the Azovstal in Mariupol, are being held, using American projectiles from the HIMARS system”.
Russian state television broadcast footage of what they claimed were the charred barracks and the tangles of destroyed metal beds. Images of what appear to be human bodies were shown. Ukraine denied the bombing, counter accusing Russia of bombing the prison.
From a logical perspective, Russia had no motivation to bomb the prison. The POWs might have represented a liability in that they were testifying to the alleged war crimes they committed against Donbass civilians under the command of the Ukraine military.
Russia has invited the UN and the International Committee of the Red Cross (ICRC) to investigate the bombing.
On Saturday, while Russia was celebrating its Navy Day, a drone flew into the courtyard of the Naval fleet headquarters, blowing up and injuring five employees of the fleet headquarters, prompting officials to cancel festivities planned for Navy Day.
The attack was reported by Mikhail Razvozhayev, the head of the local Russian administration in Sevastopol in Crimea. Ukraine did not confirm involvement in the strike.
Tensions are high between Kosovo and Serbia after a series of administrative orders introduced by Pristina, which were the latest in a line of attempts to bring majority Serb areas under its full control.
One demand was that Serbs living in northern Kosovo should transition from Serbian plates to Kosovan plates and they should change their identity cards and obtain those of Kosovo.
A similar attempt caused protests last year, with Pristina eventually putting off the demand.
The government tried again this year, announcing that implementation would start on August 1. Another rule requires visitors from Serbia, including Serbs living in Kosovo without Kosovan documents, to get an extra document at the border.
The irony of the tensions is that US Secretary of State, Antony Blinken, was in Pristina on July 26 and met Prime Minister Kurti.
Elsewhere, tensions are rising between China and the US over the visit to Taiwan by US House Speaker, Nancy Pelosi, who arrived in Taipei on Tuesday.
Pelosi is the highest ranking US leader to visit Taipei in 25 years.
While the US argues that US congressmen and women visit Taiwan regularly, China argues that Pelosi ranks number three in the US government and that is a violation of China’s “one China policy”. China says it will take unprecedented measures to protect its sovereignty over Taiwan.
Causes of world energy, food crisis
Back to this week’s topic, I will discuss the current global energy and food shortages and the root causes thereof. There have been overwhelming claims by the West that Russia’s invasion of Ukraine is the cause of the food shortages worldwide.
US Secretary of State Antony Blinken accused Russia of causing food insecurity across the world by holding 20 million tonnes of grain hostage in Ukraine due to its invasion.
European Commission president Ursula von der Leyen also criticised Russia, pointing out that the food crisis was rooted in Russia’s “brutal, unjustified war”.
But are these claims the real cause of the world food crisis?
According to latest figures, Ukraine is the world’s fifth largest wheat producer and contributes slightly over 8% of world supplies. While this is important, it is not significant enough to become the major cause of shortages as the West would like the world to believe.
The unfavourable situation on the world's food market did not begin to take shape yesterday, or even from the moment Russia launched its operation in the Donbass and Ukraine.
Rising post-pandemic demand, droughts, high energy prices, confined food stocks, supply chain disruptions, taxes and export restrictions have stressed the food market and sent global inflation soaring.
Before Russia’s invasion of Ukraine, food insecurity was increasing around the world. Food prices have increased steeply over the last two years.
According to the World Food Programme (WFP), the number of people facing acute food insecurity more than tripled between 2017 and 2021 and could further increase by 17% to 323 million this year.
The surge in food prices since mid-2020 has been driven by factors such as the recovery in demand following the Covid-19 crisis, adverse weather impacts on supply, a growing number of trade restrictions on food products and rapidly soaring input costs, notably energy and fertilisers.
America’s quantitative easing
Food shortages emerged during the pandemic measures when the developed countries printed vast sums of money.
The Federal Reserve Bank of America drastically accelerated its quantitative easing (money printing).
According to 80% of all US dollars in existence were printed in the last 22 months, from US$4 trillion in January 2020 to US$20 trillion by October 2021.
This is equivalent to what was printed over the past 40 years. The Eurozone also printed €2,5 trillion (US$2,54 trillion) in the same period.
The money, funded from budget deficits, was released into the world economy and used to buy food supplies from the global markets.
Previously the US was a net food exporter but they are now a net food importer. The US imported US$17 billion more food than it exported.
The developed countries bought most of the food on the world markets using the printed money and blocked off their food problems to the detriment of the developing countries. They did the same with Covid-19 vaccines, which they stocked and vaccinated their citizens.
This left the entire developing world without food and vaccines. This was the consequence of monopoly reserve currencies, the dollar and the euro.
While the West blames Russia’s operation in Ukraine for the food shortages, their own actions have exacerbated the shortages which they had caused during the Covid-19 pandemic.
The West has said that Russia’s invasion of Ukraine has hampered the export of wheat and other grains from Ukraine because it has blockaded the Azov and Black seas.
Moscow has denied responsibility for the disruption, blaming Ukraine for refusing to remove mines it has installed around its harbours.
Russia said it was ready to allow cargo ships passage through the Black sea, if Ukraine de-mined its ports. A deal brokered by Turkey and the UN between Russia
and Ukraine, has opened grain shipments, with the first cargo ship, registered in Sierra Leone, The Razani, leaving Odessa with 20 000 tonnes of wheat destined for Lebanon last Monday.
Russia also argues that its grain exports are being hampered by sanctions imposed by the West, following its operation in Ukraine.
While grain and fertilisers were not placed under sanctions, Russia argues that its financial payment systems through Swift have been sanctioned and any transactions involving such exports is not possible.
It also stated that its vessels are banned from European ports and sea waters, making it difficult to transport the grains and fertilisers.
Speculating on wheat
Russia has said it will export to countries in Africa, Asia and the Middle East that need grain and fertilisers directly without going through Western markets.
Indian Foreign Minister Subrahmanyam Jaishankar, in an interview with Globesec Bratislava Forum in Slovakia, stated that India exported seven million tonnes in 2021 to the world markets.
But this year they saw that there was a run for their wheat by international traders based out of Singapore, Dubai and other Western markets, who were speculating on the wheat, with low income countries like Bangladesh, Sri Lanka, Yemen and Sudan being squeezed out as speculative prices went up.
As a result, India stopped selling wheat to the speculative markets and now supplies directly to the specific countries desperately in need.
Jaishankar emphasised that India was doing its best to prevent developed countries from monopolising food supply like they did when they monopolised vaccines.
When asked why India is siding with Russia and buying oil from Russia when it’s under sanctions, Jaishankar elucidated that Europe must grow out of its mentality that its problems are the world’s problems, yet the world’s problems are not its problems.
He said Europe must begin to treat other countries as sovereign states with the right to determine their own foreign policies.
Jaishankar retorted that forcing other countries to choose a side in a conflict is a construct they are used to imposing on the world and it no longer applies going forward.
Consequences of Western sanctions
The West created the energy crisis when they sanctioned Russia’s gas and oil without calculating the global consequences.
The US sanctioned Iran and Venezuela, which are important oil suppliers, and sanctioning Russia was only going to cause shortages and price hikes.
Access to gas is the foundation of fertiliser manufacturing, and fertiliser companies in Europe had to shut down due to sanctions on Russia, thus worsening the already dire fertiliser shortage facing the world.
Now, the rising costs of fuel, fertiliser, and wheat, driven by inflation and shortages are fuelling the hunger crisis and creating the potential for mass starvation across hunger hotspots in multiple nations around the world, according to United Nations agencies.
While the world’s energy and food crisis is partially exacerbated by the Ukraine crisis, the West’s actions are responsible for the global crisis.