The war in Ukraine has led to a food and economic crisis. Some countries hope to do well or find themselves given a new role. The Correspondents’ Club wonders whether India will become the world’s leading wheat exporter and whether Turkey can attract Western investment.
Will India be the planet’s new breadbasket?
Russia and Ukraine together account for a quarter of world wheat exports. From Africa to Asia, all the countries that depend on it have suffered in recent weeks. India has large stocks of wheat, and is preparing to increase its exports to compensate for the declines due to the war. Indeed, India is the second largest producer of wheat in the world, but exports very little, because the country needs it to feed its population. Indian wheat is also quite expensive. But the current shortages caused by the war have led to a significant increase in the world price, which makes Indian wheat competitive. The current harvest being very good, India has a surplus available for export.
Egypt, the world’s largest importer of this cereal, plans to buy at least one million tonnes of Indian wheat. Good news, although some details still need to be ironed out, warns Rajesh Jain Paharia, CEO of grain exporting company Unicorp: “Egypt will have to change certain phytosanitary standards, on pesticides for example, because Indian wheat does not meet these criteria.”
“Egypt is expected to buy two million tons this year, and Iraq, Jordan or Indonesia could buy three million from us. That should double India’s exports.”
Rajesh Jain Paharia, CEO of Unicorp
India could thus compensate for the declines in Russian and Ukrainian exports. A note from the US government estimates that this deficit will amount to seven million tonnes of wheat this year 2022. So if India manages to send an additional five million tonnes, the country could indeed compensate for most of these losses. India’s prime minister is already talking about saving southern countries from a likely famine, showing that New Delhi could start deploying wheat diplomacy in these times of crisis.
This weapon is to be handled with care because India is also the second largest consumer of wheat in the world, and the country must therefore ensure to keep huge stocks in case of crisis. During the last confinements, the government, for example, dipped into its reserves to offer cereals to the poorest, left without work. There is also another front to watch: US MPs have called on their government to sue India at the World Trade Organization for over-subsidizing New Delhi’s farmers. The United States is also looking to increase its wheat exports, and Washington could also use this weapon in this trade battle.
Turkey wants to attract foreign investment
A privileged intermediary between kyiv and Moscow, the Turkey of President Recep Tayyip Erdogan uses this position to bring about a return to favor with its Western allies but also to promote the assets of its economy to investors. Turkey presents itself as an alternative to Russia, deserted by European and American companies. A thesis that we began to hear as soon as the first sanctions against Russia were announced – at first quite discreetly, and today openly among Turkish leaders and in the media close to power. Recep Tayyip Erdogan even proclaimed that “the gates of his country [étaient] open” Western companies that had left Russia because of these sanctions.
Turkey highlights its advantages with its geographical position, its young and qualified workforce, its market of 85 million consumers, its membership of a customs union with the European Union, its industry well integrated into European production chains , or even its increasingly weak currency against the dollar and the euro, certainly synonymous with inflation for the Turks but with opportunities for foreign investors.
Turkey hopes to see its Turkish ambitions materialize as it desperately needs foreign direct investment. The latter have been falling since 2015 due to economic and political instability and lack of visibility for investors. The economist Mustafa Sönmez, like many of his colleagues, therefore believes that Turkey will not emerge economically from this conflict, on the contrary: “Turkey loses because of its deep integration into the global economy.says Mustafa Sönmez. We can even say that it is one of the economies which suffer the most from the war. First, because of its close economic ties with Russia and Ukraine. Second, because the war reinforced the image of a vulnerable and high-risk economy that Turkey already had. Its risk premium has increased further, the indicators are bad. All this does not attract foreign investors.”
The economist recalls that for the moment, the war has above all worsened inflation in Turkey – estimated at 61% over one year in March – partly because of the rise in the prices of energy and certain foodstuffs such as wheat, which Turkey imports massively from Russia and Ukraine. Experts also point out that one of the heaviest economic effects of the conflict will only be felt this summer. Turkey was hoping for up to ten million Russian and Ukrainian tourists to replenish its foreign currency reserves, thus restoring its currency, thus reducing inflation. It seems obvious today that only a small part of them will sunbathe this year on the Turkish Riviera.