A Bitter Blow: Russia Halts It's Sugar and Grain Exports to the Eurasian Economic Union
Mar 24, 2022
On March 10, the Russian government announced a ban on grain and sugar exports to Eurasian Economic Union (EAEU) members. The ban applies to Armenia, Belarus, Kazakhstan, and Kyrgyzstan and includes wheat, rye, barley, corn, and sugar. Grain and sugar restrictions will be in effect until June 30 and August 31, respectively. It is presently unknown if the ban will be renewed.
According to the Russian Economic Development Ministry, the decision was made to "ensure the country's food security and to safeguard the domestic market." The ministry also noted that "EAEU members have already purchased the required amounts duty-free for the current season."
Russia is the world's leading exporter of wheat and sunflower oil. Together, Ukraine and Russia cover a quarter of global wheat demand. These countries are also major exporters of barley. Market disruptions in these commodity exports have created great uncertainty and threaten food security in the Eurasian region and the world.
Nonetheless, regional state officials urge the public not to be alarmed. Georgy Avetisyan, head of the food safety inspection of Armenia, stated that there will be no problems with food security in Armenia and that the national reserves can last two to three months. Kazakhstan's government voiced a similar claim, assuring the populace that there is no need for concern about food security. The agriculture ministry stated that current wheat reserves are sufficient to meet domestic demand until the next harvest and that sugar reserves are adequate to meet demand for three months. Boobek Azhikeyev, Kyrgyzstan's emergency minister, also asserted that the nation has enough flour, vegetable oil, and sugar.
However, given present purchasing tempos, some of these countries might run out of their commodity reserves sooner than projected. Unsurprisingly, the ban has already created fears of food shortages and led to panic-buying, pushing up prices. Sugar reportedly became 50 percent more expensive in Bishkek supermarkets. Since the beginning of March, sugar prices in Uzbekistan and Tajikistan have risen by 33 and 15 percent respectively. Kazakhstan's President Kassym-Jomart Tokayev warned that food prices in the country were set to "reach absolute records" in the near future.
The region is largely reliant on Russian sugar deliveries, and finding other sources could prove a challenge for the Caspian countries. For instance, two-thirds of sugar consumed in Kazakhstan is imported, with Russia accounting for half of the supplies. Similarly, Russia produced 97.4 percent of Armenia's sugar imports in 2020.
The grain ban has negative implications. Kazakhstan and Armenia are expected to be least affected by the grain ban. Although Russia and Ukraine are the largest agricultural suppliers to Armenia, the country's grain self-sufficiency rate is over 70 percent. Kazakhstan is ranked in the top 10 wheat producers in the world, and is forecast to export more than 7 million metric tons this season. Russia's ban, however, could have a trickle-down effect on Kyrgyzstan and Uzbekistan, where around 90 percent of wheat and wheat-flour imports are from Kazakhstan and Russia.
Kazakhstan is the wild card. If the Kazakh government chooses to restrict wheat exports to moderate domestic prices, Uzbekistan and Kyrgyzstan could find themselves in a difficult position, unable to import either Russian or Kazakhstani wheat and flour to fulfill domestic demand, at least until mid-summer.
Environmental factors could further hinder food security in the region. Last year, Central Asian nations suffered one of the worst prolonged droughts in 30 years, resulting in poor grain harvests and significant animal die-offs. That year, the grain harvest in Kazakhstan was about a quarter below average, prompting the region to turn to Russian grain. Thus, Kazakhstan's grain imports from Russia went up 77 percent from the year before. Similar trends were observed in Uzbekistan and Kyrgyzstan. If similar environmental conditions occur in 2022, the effects of the ban will be more severe.
Prices are projected to rise more than they already have if the Caspian region imports grain from countries other than Russia. Other important players in the grain market, such as Canada, the United States, France, and Australia, are geographically distant from the region, making it logistically challenging to purchase their commodities.