The Lebanese are following the course of the Russian invasion of Ukraine with great anticipation and fear, despite their great distance from its military effects and security risks, as the country, which has been suffering for two years from the worst economic crisis in its history, is preparing for living repercussions no less dangerous than the impact of the war.
Signs of the bad effects of the Russian war on Ukraine began to loom in the near horizon of Lebanon, threatening a food security crisis that begins with the daily loaf of bread, and may not stop at an end, if the invasion is prolonged.
And in light of a financial collapse that led to the purchasing value of the Lebanese pound and its exchange rate against the dollar ($1 = 20,500 pounds), in addition to the total dependence of the Lebanese economy on imports to provide for its basic and secondary needs, the prices of goods, foodstuffs and services are directly linked to global markets, and the lives of the Lebanese are affected by less A change may occur. Hence, it becomes understandable why the hearts of the Lebanese became convulsed the morning after the Russian invasion, with which global stock exchanges opened with increases in the prices of basic materials, such as oil, gas, wheat and raw materials.
Wheat is the nearest misfortune
After the explosion of the port of Beirut on August 4, 2020, Lebanon lost among its losses, its strategic stockpile of wheat, after great damage was inflicted on the storage silos that removed them from service permanently after they were accommodating about 120 thousand tons.
Since then, the country’s governments have been unable to secure alternative storage places, as well as import sufficient quantities to compensate for the shortage in stock, so that during the past two years, reliance has remained on what the mills import directly from abroad and what they store in their warehouses of wheat.
Lebanon’s monthly need of wheat is approximately 50,000 tons.
In 2020, Lebanon imported more than 630,000 tons from Ukraine, which represented 80 percent of its annual consumer need, while it imported 15 percent from Russia and five percent from other countries. Last year, Lebanon imported 520,000 tons from Ukraine and the rest from Russia.
The stock of the mills in Lebanon today is not sufficient for more than one month, and it may reach a month and a half at the latest if the Banque du Liban completes its transfers to pay the price of all shipments of wheat that were requested by the Lebanese mills in the last period, and are still at sea.
According to press statements by the Lebanese Economy Minister, Amin Salam, the Lebanese government is seeking to reach agreements with several countries regarding importing wheat at reasonable prices to secure reserves of up to two months, in order to compensate for the disruption of wheat import operations from Ukraine, which Salam estimated at about 60 percent. of the country’s need.
Government efforts quickly reflected transfers from the Banque du Liban to a number of shipments of previously imported wheat, calculated from the volume of wheat reserves, in exchange for a new government approval to import 50,000 tons of wheat when needed and allocate funds for that, but the problem remains in the source and price in addition to the speed of delivery of supplies before the outage occurs.
According to the head of the Syndicate of Wheat Importers in Lebanon, Ahmed Hoteit, there will be no crisis in the short term if the government accelerates its procedures and anticipates the occurrence of the crisis, “As for the reality at present, Lebanon’s stock is very limited and does not exceed a month and a half if the Banque du Liban pays for it, in On the other hand, the export movement from Ukraine is completely stopped and the country’s ports are closed.”
In his interview with Al-Hurra, Hoteit added that Lebanon has multiple options, such as Romania, Serbia and Hungary at the present time, since the Black Sea region has not been completely closed. The second options are Europe, such as Germany and France, while the third option is the United States of America. And Argentina may need a longer time to secure the arrival of wheat, due to the shipping time from the American continent to Lebanon, “and therefore this option can be worked on in the long term, but in the short term, what is required will be an area closer to Lebanon.”
Government reassurances in the midst of a global crisis
Despite the official assurances issued by the Lebanese government, it does not seem that the solution to this crisis will be easy, as the war on Ukraine will leave global repercussions on the wheat market, whose prices rose on the first day of the invasion, 40 euros per ton on European stock exchanges, and 50 dollars on the American stock exchange. Which means, according to Hoteit, that “all countries that import their wheat from Ukraine will look for an alternative, while those who have sufficient stocks will prefer to keep their surplus rather than sell it in light of this crisis.”
For his part, the Director General of Cereals and Sugar Beets at the Lebanese Ministry of Economy, Grace Barbari, points out that Lebanon does not have the luxury of time or clear plans in terms of securing wheat stocks. The period needed to secure the alternative is much less, ranging between 10 and 15 days, “as it is not possible to risk waiting for the stock to run out permanently, and we must work to secure the shortage that occurs with each day of delay, which will necessitate a new search for sources to maintain the continuity of supplies, in Another crisis remained represented in the mechanism and place of storing wheat if it was brought in large quantities to Lebanon.”
As for Barbari, it is not yet possible to predict the extent to which Lebanon and its food security will be affected by what is happening in Ukraine, but there are other options before Lebanon today other than Ukraine. We have the option of Romania, just as we used to import from Kazakhstan in the past and all of these are nearby countries. The Indian ambassador also offered to secure wheat to Lebanon, and there are other directions such as France, America and Canada.”
Currently, the Lebanese government is preparing a book of conditions, in which we present the specifications of the required wheat, the time required to secure it, and the price, to be decided according to the offers received, according to what Barbari confirms, who believes that “the situation is very exceptional, but our reassurance to people is due to the fact that we are aware of the problem and are working to solve it, Therefore, there is no need for people to panic, especially that their fear will be reflected in a rush to buy bread, and if the stock will suffice for five weeks, it may end in a week or two, so we call on people not to fear until the solution has arrived with the introduction of new ships.
As for prices, which represent the core of the Lebanese citizen’s attention today, the head of the wheat importers syndicate says that the quantities present in the market today should not change in price until a month, given that the wheat in the mills today was bought at the old prices, “unless something happened.” Changes in fuel prices, especially the price of diesel, and this is due to the change in the price of oil globally, in addition to the dollar exchange rate, which would affect the prices of bread as well, and the longer the war in Ukraine will last, the more and more prices are affected.”
With regard to Lebanon’s production of wheat, Barbari says that the wheat grown in Lebanon “is not suitable in its quality to the production of Lebanese bread or soft bread, because it is hard wheat used in the manufacture of bulgur and pasta, and for this reason it is customary to export what Lebanon grows of wheat, and that All annual production does not exceed 50,000 tons, which represents Lebanon’s need for one month, not more.
Wheat is not alone
The volume of Lebanon’s imports from Ukraine is about half a billion dollars annually, and while wheat enjoys the largest share of trade exchange between the two countries, Lebanon imports from Ukraine many other types of grain, amounting to about 50 percent of the total volume of import, such as corn and barley, which are used in The production of fodder for animals, which threatens the agricultural sectors with repercussions as well, especially since Ukraine has a large livestock market in Lebanon, in addition to a major dependence on Ukrainian vegetable oils.
According to the Syndicate of Food Importers in Lebanon, Hani Al-Bohsali, Lebanon imports 100,000 tons of oils per year, distributed in sunflower, corn, soybean and canola oils, 90,000 tons of which are sunflower oils.
In his interview with Al-Hurra, he points out that 60 percent of the sunflower oil in Lebanon comes from Ukraine, 30 percent from Russia, and 10 percent is distributed to Turkey, Egypt and Saudi Arabia.
“From here, we can see the magnitude of the crisis that is approaching,” according to Al-Bohsali, “Ukraine is currently suspended from exporting, while Russia will face problems in the SWIFT system, which will disrupt the import process from it.”
Even the national industries for foodstuffs, which some are betting on for compensation, depend in their production on raw and raw materials from abroad. Lebanon does not grow corn and sunflowers to press and make oil, for example, “therefore, the problem includes both national and imported industries.”
Al-Bohsali points out that there are pre-orders, stored and manufactured goods that are coming in shipment, and there are ready-made orders in factories waiting to be supplied. “The problem is that today we do not receive an answer from factories in Ukraine, and this is understandable because of the ongoing war there, but it is reassuring that the stocks of oils, grains and others have not been damaged yet. And therefore it all depends on the calm situation in Ukraine so that the trade movement will return to its previous era.”
There is no alternative yet
While the government is striving to search for alternatives to wheat, Al-Bohsali warns that there are currently no alternatives to importing oils or raw materials for their production, adding, “The alternative is to go to Turkey, Egypt and Saudi Arabia. Today, Saudi Arabia is not an option for import due to the diplomatic crisis with Lebanon, and Turkey and Egypt, in turn, buy crude from Ukraine and therefore the crisis is not limited to Lebanon, but rather a global problem that we are affected by.”
Al-Bohsali asserts that there are great difficulties in compensating for the shortfall in imports from Ukraine, “but to not anticipate matters, we are still in the early days of the Ukrainian crisis and changes may occur in the current reality if the war ends quickly, and if the war continues for a longer period, the problem will not remain in Oil, wheat or foodstuffs only, the prices of fuel and oil globally will be affected and reflected on us.”
Al-Bohsali concludes by warning that the current crisis comes at the gates of the month of Ramadan, which is witnessing significant increases in the volume of food consumption, especially grains and oils. So we are facing a global supply crisis, and we have no choice but to wait and see where things turn out in Ukraine.”