CAIRO - 24 February 2022: The global economy woke up to a new blow after it was breathing a sigh of relief from the repercussions of the Coronavirus pandemic, which is the war between Russia and Ukraine, with the accompanying possibilities of imposing harsh sanctions on Russia, that immediately caused a rise in oil, gold and wheat, a decline in stocks, and a stumble in global trade.

 

Economists said that the conflict between Russia and Ukraine will have a negative impact on the global economy, especially in light of the negative impact of the Corona pandemic, as well as the global inflationary wave, which increased the prices of food and other commodities, adding that this negative impact would increase if the tension between Russia and Ukraine increased.

 

Economic expert and vice-president of the Arab Union for Social Development in the Arab Labor System of the League of Arab States for Economic Development, Ashraf Ghorab, said that the crisis between Ukraine and Russia will lead to a rise in global grain prices, especially wheat, and this will increase its price in the rest of the other importing countries. “Of course, it will negatively affect the prices of food commodities globally.”

 

He added that Ukraine is a major source of wheat, corn and barley in the world, and the lack of yellow maize imports will raise the prices of fodder in the countries of the world and thus raise meat prices, explaining that raising wheat prices globally due to the crisis will affect and pressure the Egyptian budget and increase the burdens by bearing the costs of the price increase.

 

Ghorab indicated that oil prices would rise much higher than $100 a barrel due to the war between Russia and Ukraine, explaining that an increase in its price would only benefit the producing countries, but would negatively affect the rest of the world, increasing the global inflationary wave, in addition to the slow movement of investments and global trade in general.

 

A researcher in international relations and political economy, Abu Bakr El-Deeb, stressed that Russia and Ukraine are major suppliers of wheat, corn, gas, minerals and other commodities to the world, and thus will harm many countries in Europe, Asia, the Middle East and Africa that depend on wheat and corn imported from Ukraine and Russian gas, and the disruption of natural gas supplies to factories and production, especially energy-intensive products such as fertilizers, which will negatively affect agriculture, and therefore prices will rise due to higher energy costs, and there will be a downturn in the international economy.

 

El-Deeb added that gold prices rose to their highest levels in a year, while oil prices exceeded $100 after the start of the Russian military operation in Ukraine. The price of a barrel of oil crossed the $100 threshold, settling at $103 for the first time in more than 7 years. It is expected that energy prices in general, and oil and gas in particular, will witness an accelerating rise with the escalation of the war, as well as the rise in wheat and barley prices, and the effects and repercussions will not only be on energy, but include gold and other metals, and the negative impact on financial markets.

 

Global Impacts

 

At a time when all the countries of the world will be affected by the war, the European Union - according to Abu Bakr El-Deeb - will be the most affected, especially Germany, the third in terms of being affected after Ukraine and Russia, which imports most of its natural gas needs from Russia, and therefore the cessation of that gas will stop the factories and production. Moreover, China is one of the biggest beneficiaries of the Ukrainian corn crisis.

 

El-Deeb said that with the start of the Russian invasion of Ukraine, the global economy was shocked, and commodity prices rose sharply in global markets, and there was a shortage of grain in the Arab countries and North Africa, and their prices rose, and thus a country like Lebanon imports 50% of its wheat needs from Ukraine.

 

Risks and opportunities for the Egyptian economy

 

“Egypt will of course be affected by these repercussions, and the greatest impact will be on food commodities, especially wheat, because most of the wheat imports are from Russia and Ukraine, praising the Egyptian government's rapid move these days to discuss importing wheat from 14 other countries to diversify wheat imports in case the crisis escalates between the two countries,” Ghorab added.

 

This is in addition to the existence of a strategic stockpile of wheat sufficient for 5 months, and the local production, which will start from mid-April, to increase the strategic stock to 9 months, he noted.

 

For his part, El-Deeb elaborated that in this context, the Egyptian government moved quickly to discuss importing wheat from 14 other countries to diversify wheat imports in the event the crisis escalates, in addition to having a strategic stockpile of wheat sufficient for 5 months, as well as raising the strategic stock of local production starting from mid-April to 9 months.

 

As for tourism, “This war will affect the flows of Russian and Ukrainian tourism because it will cause the Russian and Ukrainian tourist delegations which come to Egypt in large numbers, representing a large proportion of the Egyptian foreign delegations, to stop,” Ghorab noted.

 

Ghorab pointed out that raising energy prices globally opens the opportunity for Egypt to increase its exports of natural gas abroad, in addition to attracting more investments in the oil and gas sector to increase discoveries and production. In addition, the increased demand for oil will increase the traffic of ships transiting the Suez Canal.

 

In the event that Russian gas stops supplying Europe due to the Ukraine crisis, el-Deeb believes that Europe will have to search for an alternative. The most important of these alternatives is the Egyptian, Libyan, Algerian, intellectual, and perhaps American gas. Egypt’s quest to transform into a regional energy center will help, and thus Egyptian gas can play an important role in securing part of the energy needs of European countries, by exporting surplus gas through Egypt’s two gas liquefaction stations on the Mediterranean coast, in order to complement Egypt’s pivotal role in the region to enhance regional cooperation and continue to advance strategic partnerships.

 

According to the statements of the Ministry of Petroleum, the past three years witnessed a great development in the establishment of the East Mediterranean Gas Forum, starting with Egypt's proposal of the idea and ending with its establishment as an international organization in the eastern Mediterranean region, headquartered in Cairo.

 

He praised Egypt’s position in the petroleum industries sector, as the petroleum sector's exports amounted to $13 billion during 2021, adding that Egypt witnessed a major development renaissance through the implementation of giant projects, and from this standpoint, Egypt hosted this exhibition, which is the largest and most important international and regional gathering of the oil and gas industry in my region North Africa and the Mediterranean.

 

The energy shortage crisis for Europe represents an opportunity to put Egypt on the European energy map and secure part of Russian gas supplies. Egypt has the necessary capabilities to become one of the alternatives for energy in Europe due to the Ukrainian crisis in light of the important and vital role it plays in the East Mediterranean Gas Forum

 

He added that Libya has a strong opportunity to compensate for part of the Russian gas supplies to the European continent in the event of a war in Ukraine and the occurrence of a political, economic or even military conflict between Russia and the West, but this requires political stability and distance from conflicts in Libya, where Libya is characterized by large reserves, amounting to 54.6 trillion cubic feet, and ranks 21st globally, and in the event of political stability, these reserves can be raised with new discoveries.