The war in Ukraine has led to a food and economic crisis. Some countries hope to do well or get a new role. The Correspondents Club questions whether India will become the world’s largest wheat exporter and whether Turkey can attract Western investment.
Is India going to be the planet’s new breadbasket?
Russia and Ukraine together account for a quarter of global 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 offset the declines caused by the war. India is indeed the second largest producer of wheat in the world but exports very little as 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, making Indian wheat competitive. Because the current harvest is very good, India has a surplus available for export.
Egypt, the world’s largest importer of this grain, plans to buy at least one million tons of Indian wheat. Good news, though some details still need to be ironed out, warns Rajesh Jain Paharia, CEO of grain export company Unicorp: “Egypt will have to change certain phytosanitary standards, for example in the field of pesticides, 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 decline in Russian and Ukrainian exports. A US government note estimates that this shortfall will reach seven million tons of wheat by 2022 this year. So if India manages to send another five million tons, it could indeed offset most of these losses. India’s prime minister is already talking about saving southern countries from probable famine, showing New Delhi could turn to wheat diplomacy in these times of crisis.
This weapon must be handled with care, as India is also the world’s second largest consumer of wheat and must therefore ensure that it maintains huge stocks in the event of a crisis. For example, during the latest incarcerations, the government used its reserves to offer grain to the poorest who were out of work. There’s another front to watch, too: US MPs have called on their government to sue India at the World Trade Organization over subsidizing farmers in New Delhi. The United States also wants to increase its wheat exports and Washington could also use this weapon in this trade battle.
Turkey wants to attract foreign investment
President Recep Tayyip Erdogan’s Turkey, a privileged intermediary between Kiev and Moscow, is using 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, abandoned by European and American companies. A statement we started hearing as soon as the first sanctions against Russia were announced – very discreetly at first, 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 emphasizes its advantages with its geographical location, its young and qualified workforce, its market of 85 million consumers, its membership of a customs union with the European Union, its industry that is well integrated in the European production chains, or even its increasingly weak emerging currency against the dollar and the euro, which for the Turks is certainly synonymous with inflation, but with opportunities for foreign investors.
Turkey hopes to see its Turkish ambitions become a reality as it urgently needs foreign direct investment. The latter have been declining since 2015 due to economic and political instability and lack of visibility to investors. The economist Mustafa Sönmez therefore believes, like many of his colleagues, that Turkey will not get out of this conflict economically, on the contrary: “Turkey is losing because of its deep integration into the global economy.says Mustafa Sönmez. We could even say that it is one of the economies most affected by the war. Firstly, because of the close economic ties with Russia and Ukraine. Second, because the war reinforced the image of a fragile and risky economy that Turkey already had. The risk premium has increased further, the indicators are bad. All this does not attract foreign investors.”
The economist recalls that at the moment the war has mainly increased inflation in Turkey – estimated in March at 61% over a year – partly due to the rise in the prices of energy and certain foodstuffs such as wheat, which Turkey imports en masse from Russia. and Ukraine. Experts also point out that one of the worst economic effects of the conflict will not be felt until this summer. Turkey hoped for ten million Russian and Ukrainian tourists to replenish its foreign exchange reserves and thus restore its currency and reduce inflation. It seems clear today that only a small fraction of them will be basking on the Turkish Riviera this year.