Food security
implications of the
Ukraine conflict

SAVINGLIVESCHANGINGLIVESMarch 2022

Contents1
Summary...................................................................................................................................4
Introduction..............................................................................................................................................................................4
Global grain markets in turmoil.............................................................................................................................................4
Upheaval in global energy markets......................................................................................................................................5
Repercussions for WFP operations.......................................................................................................................................5

Introduction..............................................................................................................................6
Russia invades Ukraine, triggering harsh economic sanctions........................................................................................6
Ripple effects for food security – and the world in a difficult place to brace them.......................................................7

Global grain markets in turmoil............................................................................................8
Russia and Ukraine are key players in global markets for staple food commodities...................................................8
Conflict disrupts Ukrainian and Russian exports................................................................................................................9
Food prices at record highs ...................................................................................................................................................9
Import-dependent countries first in line to feel food-security fallout of the conflict.................................................10

Upheaval in global energy markets....................................................................................12
Russia is a key player in the global oil market...................................................................................................................12
Further pressure on already elevated oil prices...............................................................................................................13
Russia is the world’s largest natural gas exporter ...........................................................................................................14
Price spikes in already volatile European gas markets....................................................................................................15
Turbulent energy markets come with repercussions for food security........................................................................16

Repercussions for WFP operations.....................................................................................17
The Ukraine conflict has both short and medium-term impacts...................................................................................17
An estimated US$23 million increase in monthly costs for food procurement...........................................................17
Surging energy prices further add to the cost of WFP operations ................................................................................17

Conclusions.............................................................................................................................18

1

Information accurate as of 9 March 2022.

Food security implications of the Ukraine conflict3

Summary
Introduction•

On 24 February 2022, Russia invaded Ukraine.

•

The international community has imposed sanctions
in response to the invasion. A key measure is thefreezing of the Russian Central Bank’s access to
its reserves in the EU, United Kingdom, UnitedStates, Canada, Switzerland and Japan; anotheris restrictions on financial institutions, including

risk of, debt distress, compared with 30 percent in2015. Despite sluggish economic growth, inflation
has been on the rise – and with it the risk ofstagflation.

Global grainmarkets in turmoil•

in global wheat and maize markets, ranging

cutting off access to SWIFT for selected Russianamong the top five exporters globally for bothbanks. In a recent escalation of the sanctions, thecommodities. Together, the two countries supply 30

United States, Canada and the United Kingdom

percent of wheat and 20 percent of maize to global

have banned Russian energy imports while themarkets. In addition, Russia and Ukraine are key

EU has pledged to end its dependence on Russian

exporters for sunflower oil and barley, accounting

gas. Sanctions so far exclude payments for foodfor more than three-quarters and one-third ofcommodities and fertilizer.
•

The sanctions are beginning to hit the Russian
economy hard. The Russian Central Bank has raised

supplies to international markets, respectively.
•

Russian grain deals, amidst uncertainty around

Russian rouble has lost nearly 40 percent of its
value against the US dollar within two weeks.

sanctions. An estimated 13.5 million tons of wheat

The main expected effect of the conflict on global

countries – 23 and 43 percent of their expectedfood security comes through the impact on global

exports in 2021/22.

grain and energy markets. International food andfuel prices have increased sharply since the onset

and 16 million tons of maize are frozen in the two•

first place. Amidst ships being hit by missiles, war

prices and, because of this, access to food. At therisk premia range in the hundreds of thousands ofsame time, grain and oil price hikes increase the

US dollars and have reached US$300,000 for somecost of WFP’s operations, reducing the ability totankers.

serve those in need just when it is most required.
Adding to the challenges, the Ukraine conflict does•

for wheat up by 28 percent on average within twoand supply chain issues have disrupted the global

weeks – US No 2 Soft Red Winter Wheat increased

economic recovery, while rising inflation andby 52 percent between 21 February and 7 March.

record debt constrain countries’ ability to address

FAO’s Food Price Index reached a new all-time highrenewed problems.
Poorer countries are struggling the most to recoverfrom the pandemic’s economic fallout, left behindby a lack of access to vaccines and lower capacity
to finance stimulus measures. About 60 percent of
low-income countries are currently in, or at highFood security implications of the Ukraine conflict

Movements in international grain prices reflect
these disruptions, with major export quotations

not happen in a vacuum. New COVID-19 variants•

Insurers demand high premia for vessels entering
the Black Sea, if willing to provide coverage in theof the conflict; this will ultimately affect local food•

The Russian military invasion has brought
shipments from Ukraine to a halt and paused

interest rates to a staggering 20 percent, while the•Both Ukraine and Russia are critical players

in February 2022.
-

Export disruptions in the Black Sea have immediate
implications for countries such as Egypt, which
heavily rely on grain imports from Russia andUkraine.

4-Beyond countries sourcing Black Sea grain, those

the repercussions for food security. In addition,

dependent on grain imports more broadly are theRussia is one of the world’s most importantfirst in line to experience domestic food price increases,

exporters of the three major groups of fertilizers –following rising prices on global grain markets.

nitrogen, phosphorus and potassium. Rising input

In more than 40 countries with WFP operations,costs in turn could impact the next season’s harvest,

imported cereals such as wheat and maize accountleading to elevated food prices in the longer run.

for 30 percent or more of dietary energy.

Upheaval in global
energy markets
•

•

•

•

procurement include expected cancellations or

oil and its second-largest exporter. Europe anddelays of WFP shipments from the port of Odessa.

China import around 60 percent and 20 percent ofThis will likely primarily affect West Africa, where theRussia’s oil, respectively.

cargo is needed for distributions from May onwards.

Russia is the largest natural gas exporter in the•surging global food prices; additional expenses

Russia’s natural gas imports, as 32 percent of theirfrom diversifying sourcing away from the Black Sea

total consumption is supplied by Russia.

region; and longer lead times when sourcing fromdestinations further afield.

Following the Russian invasion, crude oil prices•

from Ukraine are estimated to raise costs of WFP

have been highly volatile throughout the current

food procurement by around US$23 million per

heating season in Europe.

month, with Afghanistan, Ethiopia, Syria and Yemen
most affected because of their dependency on

Russia’s oil supply to global markets is severely

wheat. Such cost increases for wheat and pulse
procurement come on top of already surging foodprices since the onset of the COVID-19 pandemic.

and uncertainty about potential buyers reduced
traders’ willingness to order oil from Russian ports.

•

supply chain-related fuel costs including for ocean
freight, land transportation, aviation and WFP

The invasion has so far not severely disrupted

facilities. A conservative estimate for the impact on

Russian natural gas supply to Europe but the EU

transport costs, with all the uncertainty of future

has published plans to cut Russian gas supplies byoil-price developments, puts the increase at US$6

two-thirds in 2022.
High global energy prices can lead to increasing
food insecurity around the world. By pushingup local inflation, high costs of imported energy
reduce purchasing power and poor households’
access to food.
Soaring international fuel prices increase already-A surge in energy prices further escalates the costof WFP operations, both through food prices andWith global oil supply at its limits, Russian supply
disruptions could keep global oil prices elevated.

•

Wheat price increases and lack of pulses availability

significantly elevated European gas prices, whichsanctions on Russian oil exports, high shipping costs•

Medium-term effects will be rising costs due toworld. European countries heavily depend on

disrupted. Even before western countries imposed•

Short-term impacts of the Ukraine conflict on WFP

Russia is the world’s third-largest producer of crude

soared to a 14-year high. The conflict also•

Repercussions for
WFP operations

million per month.
•

While the full impact on WFP’s operational costs
will become clearer once we have gone out in themarket to source commodities, estimates point toincreases of US$29 million per month in the shortterm, through the combined effect of food and fuelprice hikes.

pressured global grain prices, thereby aggravating
Food security implications of the Ukraine conflict5

Introduction

Russia invades
Ukraine, triggeringharsh economic
sanctions
On 24 February 2022, Russia invaded Ukraine aftermonths of military build-up along the border. As
Russian forces advance and military action intensifies,
it is estimated that more than 2 million people havefled Ukraine into neighbouring countries. 2

In reaction to the invasion, western countries and allies
are imposing a growing host of sanctions on Russia.
Sanctions target individuals, including through freezingof assets and travel bans; banks and financial services;and companies and commercial transactions. A key
measure is the freezing of the Russian Central Bank’s
access to its reserves in the EU, United Kingdom,
United States, Canada, Switzerland and Japan. 3 Foreignbanks hold a substantial share of the Russian Central
Bank’s US$630 billion reserves, mainly US dollar, euro,
sterling and the yuan, as well as gold. Other sanctions
on the financial system have cut selected Russian

2

https://data2.unhcr.org/en/situations/ukraine3

https://www.japantimes.co.jp/news/2022/02/28/national/japan-russia-central-bank-sanctions/
https://ec.europa.eu/commission/presscorner/detail/en/fs_22_1402
https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-87386.html

Food security implications of the Ukraine conflict6

banks from the SWIFT payment system – thereby

international markets, they are likely to trickle down

effectively blocking import and export transactions

to domestic markets, especially in import-dependent– and hit banks with asset freezes or exclusion fromcountries, with implications for access to food for the4

foreign financial systems. In a recent escalation of themost vulnerable. At the same time, grain and oil pricesanctions, the United States, Canada and the United

hikes increase the cost of WFP’s operations, reducing

Kingdom have banned Russian energy imports while

the ability to serve those in need just when it is mostthe EU has pledged to end its dependence on Russian

required.

gas. Sanctions so far exclude payments for foodcommodities and fertilizer. 5

Adding to the challenges, the Ukraine conflict does
not happen in a vacuum. New COVID-19 variants and

The Russian economy is already feeling the impact of

supply chain problems have disrupted the global

the sanctions. With the Central Bank severely limited

economic recovery, while rising inflation and record

in using its reserves to prop up the rouble, Russia’s

debt constrain countries’ abilities to address renewed

currency has lost nearly 40 percent of its value against

challenges. After working-hour losses equivalent to

the US dollar within two weeks since the Monday

258 million full-time jobs in 2020 and 125 million in

before the invasion.7 On 28 February, in an effort to2021, labour markets struggle to recover, with lost

stem the outward flow of capital, the Central Bank

working hours still estimated to reach the equivalent of

hiked its interest rates up from 9.5 to 20 percent and52 million full-time jobs in 2022.10

6

added capital controls for foreigners. 8 On 25 February,
the day after the invasion and before sanctions hadtaken effect, Russian inflation was already at 9.05
percent year-on-year – a figure that is almost certain to
climb significantly higher in the weeks ahead.9

Ripple effects forfood security – andthe world in a difficult
place to brace them

Poorer countries are struggling the most to recoverfrom the pandemic’s economic fallout, left behindby a lack of access to vaccines and lower capacity
to finance stimulus measures. About 60 percent of
low-income countries are currently in, or at high riskof, debt distress, compared with 30 percent in 2015.11
Despite sluggish economic growth, inflation has beenon the rise, stoking fear of stagflation. A total of 27
countries currently face annual food inflation of 15
percent or more, including five countries – Lebanon,
Venezuela, Sudan, Yemen (Internationally Recognized
Government) and Cuba – with three-digit rates. An
additional 20 countries have experienced food price

The conflict unfolds in one of the world’s

rises between 10 and 15 percent over the past year;

breadbaskets. In addition, Russia is among the world’s

and 45 countries between 5 and 10 percent.12

most important energy exporters. Global grain andenergy markets are in turmoil, reflected by sharp
price rises; while these increases are currently in

4

What sanctions have been imposed on Russia over Ukraine invasion? | Russia | The Guardian
https://www.bbc.com/news/world-europe-60125659

5

Just short of nuclear’: the latest financial sanctions will cripple Russia’s economy (theconversation.com)

6

Russia’s FX reserves slip from its grasp | Financial Times (ft.com), How Russian Sanctions Work - The Atlantic

7

https://tradingeconomics.com/russia/currency

8Bank of Russia Hikes Rates from 9.5 percent to 20 percent to Defend Ruble - Bloomberg

9https://www.reuters.com/business/finance/russian-inflation-accelerates-905-rouble-slips-2022-03-02/

10 https://www.ilo.org/global/research/global-reports/weso/trends2022/WCMS_834081/lang--en/index.htm
11 https://blogs.imf.org/2021/12/02/the-g20-common-framework-for-debt-treatments-must-be-stepped-up
12 WFP RAM, Prices & Currencies Monthly Update February 2022

Food security implications of the Ukraine conflict

7

Global grain markets in turmoil
Russia and Ukraine
are key players
in global markets
for staple foodcommodities

globally for both commodities (Figures 1 and 2).

Both Ukraine and Russia are major exporters of wheat

exports brings Ukraine and Russia’s joint share in theand maize, featuring among the top five exporters

For wheat, Ukrainian exports are forecast to reach
24 million tons in 2021/22, accounting for around
12 percent of the 193 million tons of wheat forecast
to be traded globally in 2021/22. Ukraine and Russia
together provide 30 percent of supplies to global
wheat markets. For maize, Ukraine is expected toexport 33 million tons over the 2021/22 marketing
year, 18 percent of the 186 million tons of maize tradedglobally. Adding Russia’s 4.5 million tons of maize
global maize market to 20 percent.13

FIGURE 1: Wheat exports in million tonnes in 2021/22 and change from previous year

FIGURE 2: Maize exports in million tonnes in 2021/22 and change from previous year

Source: http://www.amis-outlook.org/indicators/amis-crops-at-a-glance/en/

13 http://www.amis-outlook.org/indicators/amis-crops-at-a-glance/en/

Food security implications of the Ukraine conflict8

While question marks remain, the impact of theand cargo. The war-risk premium rate for seven days,

Ukraine conflict on global markets is likely to be moreestimated at 0.025 percent of insurance costs on

subdued for maize than for wheat; this is because of

the Monday before Russia’s invasion, has increased

better supplies in other exporting countries for maize

substantially, with ship insurers now quoting between

than for wheat, which can buffer potential shortfalls in

1 and 2 percent and up to 5 percent of insurance costs.

exports from the Black Sea.14

This translates into hundreds of thousands of US

Wheat and maize are not the only agriculturalcommodities for which Russia and Ukraine are key
players on global markets. Together, the two countries
also export about three-quarters of sunflower oil andone-third of barley supplies.15

Conflict disrupts
Ukrainian andRussian exports
Military operations can make it difficult to movecrops, both within and out of the country. Ukraine’s
military suspended commercial shipping at its ports
after the invasion.16 At the same time, uncertainty
around sanctions – which do not yet restrict seaborne
trade – has led to many shipping companies putting
dealings with Russian entities on hold, and to somebanks refusing the issuance of letters of trade tocover Russian shipments from Black Sea ports.17 With
Ukrainian ports closed and Russian grain deals on
pause, 13.5 million tons of wheat and 16 million tons ofmaize are currently frozen in Russia and Ukraine.18
Furthermore, rising insurance premia are pushingup the costs for grain shipments from the Black Sea.
Shipping companies pay both war-risk insurance andan additional premium for entering high-risk areas,
with rates depending on destination, value of ship

dollars, if insurers are willing to provide coverage in thefirst place amidst vessels being hit by missiles.19 War
risk premia have hit US$300,000 for some voyages. 20
As parts of the Sea of Azov and the northern Black Sea,
including all Ukrainian ports, have been designated as“Warlike Operations Areas”, seafarer unions and theiremployers agreed on extra pay, benefits and granting
the right to refuse to sail – further pushing up shipping
costs. 21

Food prices at record
highs
The wheat sub-index of the International Grains
Council’s Grains and Oilseeds Index, a measure ofchanges in major export quotations for wheat aroundthe world, has risen by 28 percent within two weeks(21 February to 7 March). Individual quotations hiked
up even further; US No. 2 Soft Red Winter wheat
gained a startling 52 percent over the same period(Figure 3). The Index’s maize sub-index followed
closely, gaining 17 percent from the Monday before theinvasion (21 February) until 7 March (Figure 4).
These price hikes happen at a time when food prices
are already at record levels; they had pushed FAO’s
Food Price Index, a measure of the monthly change ininternational prices of a basket of food commodities,
to a new all-time high in February 2022. 22

14 http://www.amis-outlook.org/news/detail/en/c/1155451/; AMIS webinar on 22 February 2022
15 https://gro-intelligence.com/insights/impact-of-the-russia-ukraine-conflict-on-global-agriculture-by-the-numbers
16 https://www.reuters.com/world/europe/russia-halts-vessel-movement-azov-sea-black-sea-open-2022-02-24/
17 https://lloydslist.maritimeintelligence.informa.com/LL1139986/Shipping-shuns-Russia-risk-as-sanctions-fuel-rocketing-rates
18 https://raboresearchagricommodities.libsyn.com/high-go-prices-will-shrink-chinas-imports-and-demand
19 https://www.reuters.com/business/insurance-costs-shipping-through-black-sea-soar-2022-02-25/
https://lloydslist.maritimeintelligence.informa.com/LL1139986/Shipping-shuns-Russia-risk-as-sanctions-fuel-rocketing-rates
https://www.insurancebusinessmag.com/uk/business-news/insurers-react-as-ships-shelled-in-black-sea-326856.aspx
https://lloydslist.maritimeintelligence.informa.com/LL1139981/Ships-hit-by-missiles-as-Ukraine-forces-defend-Odessa-and-Mariupol
20 https://lloydslist.maritimeintelligence.informa.com/LL1139986/Shipping-shuns-Russia-risk-as-sanctions-fuel-rocketing-rates
21 https://lloydslist.maritimeintelligence.informa.com/LL1140035/Northern-Black-Sea-designated-as-warlike-area-to-aid-seafarers
22 https://www.fao.org/newsroom/detail/fao-food-price-index-rises-to-record-high-in-february/en

Food security implications of the Ukraine conflict

9

FIGURE 3: Wheat prices (US$ per ton)

Source: https://www.igc.int/en/
markets/marketinfo-prices.
aspx?cropparam=Wheat

FIGURE 4: Maize prices (US$ per ton)

Source: https://www.igc.int/en/markets/marketinfo-prices.aspx?cropparam=Maize

Looking back in history – namely the period between

Sea wheat – to be harvested in July to September – andOctober 1914 and February 1915, when the Ottoman

for how long export channels will be blocked. 24

Empire blockaded the Dardanelles Strait, therebyof grain-market ramifications at this point comes with

Import-dependent
countries first in line
to feel food-security
fallout of the conflicta very high degree of uncertainty. Implications for

Several Middle Eastern, northern and sub-Saharanglobal food supplies will depend on the duration of theAfrican, as well as South Asian, countries areinvasion, how this will impact the production of Black

contingent on wheat imports from Russia and Ukraine

cutting Black Sea wheat exports worth 22 percent of
total supplies off international markets – it seems likelythat today’s prices could keep rising. Loss of access to
the Black Sea in 1914 triggered a 45 percent increase in
Chicago Board of Trade wheat prices. 23
However, given the evolving situation, any estimate

23 https://research.rabobank.com/far/en/sectors/grains-oilseeds/when-black-sea-wheat-is-caught-in-conflict.html
24 http://www.amis-outlook.org/news/detail/en/c/1155457/

Food security implications of the Ukraine conflict

10

(Table 1). In Egypt, the biggest importer of bothbread since 1988. 25 Ukraine has only completed half

Russian and Ukrainian wheat, higher wheat-priceof this season’s wheat exports to Libya so far. A loss

forecasts are expected to add US$763 million to theof the remaining wheat exports from Ukraine would

country’s already hefty US$3.2 billion bread-subsidies

leave Libya with 30 percent less wheat than needed tobill this year. This has led Prime Minister Madbouly tocover domestic consumption. 26

announce plans for the first price increase of a loaf of

TABLE 1: Top 15 importers of Ukrainian wheat (left) and Russian wheat (right) in 2020
COUNTRY
Egypt
Indonesia
Bangladesh
Pakistan
TurkeyTunisia
MoroccoYemen
LebanonPhilippines
Thailand
Libya
Malaysia
Spain
Republic of Korea

IMPORTS

COUNTRY

3.08
2.72
1.51
1.24
1.00
0.98
0.95
0.71
0.67
0.63
0.56
0.55
0.40
0.37
0.32

Egypt

(million tons)

TurkeyBangladesh
Azerbaijan
Sudan
Pakistan
Nigeria
Yemen
Tanzania
United Arab Emirates
Kenya
Georgia
Philippines
South Africa
IsraelIMPORTS(million tons)

8.25
7.90
1.94
1.39
1.33
1.17
1.00
0.80
0.70
0.67
0.60
0.59
0.55
0.55
0.54

Source: FAOSTAT

Beyond countries sourcing grain from the Blackcountries. Higher import bills can transmit into higher

Sea region, those dependent on grain imports

prices for local food. This in turn limits access to food,more generally are likely to experience increases in

especially for already poor populations. In more thandomestic food prices, following rising prices on global

40 countries with WFP operations, imported cereals

grain markets. Increasing international prices forsuch as wheat and maize account for 30 percent orbasic staple foods especially hurt import-dependent

more of dietary energy. 27

25 https://www.telegraph.co.uk/global-health/climate-and-people/russian-invasion-risks-pushing-families-across-middle-east-north/
26 https://www.apk-inform.com/en/news/1525404
27 Based on FAOSTAT data for cereal import dependency ratios and dietary energy from cereals for 2016 to 2018.

Food security implications of the Ukraine conflict11

Upheaval in global energy markets

Russia is a key player
in the global oil market

2019, Russia exported crude oil and refined petroleum

After the United States and Saudi Arabia, Russia issystem. 30 Another 20 percent is shipped to China by

worth US$189 billion, which was around 47 percent
of its total exports. 29 Sixty percent of Russia’s oil isexported to Europe, most of it via its Druzhba pipeline
pipeline and seaborne routes. 31 In 2019, other major

the third-largest producer of crude oil in the world.

importers were South Korea, Turkey, Japan, Belarus

Exporting 4.62 million barrels of crude oil per day, it
was the second-largest exporter in 2020 (Figure 5). In
28

and the United States (in order of quantity imported). 32

FIGURE 5: Largest crude oil exporters in 2020 (million barrels per day)
Saudi Arabia
RussiaIraq
United States of America
CanadaNorwayNigeria
Kazakhstan
BrazilMexicoAngolaUnited Kingdom
Azerbaijan
Kuw ait
Algeria
Source: JODI 2022

0,00

6,66

4,62

1,50
1,45
1,42
1,40
1,20
1,11
0,73
0,50
0,45
0,33
1,00

2,00

3,43
3,17
3,04

3,00

4,00

5,00

6,00

7,00

28 https://www.iea.org/reports/russian-supplies-to-global-energy-markets
29 https://oec.world/en/profile/country/rus
30 https://www.iea.org/reports/russian-supplies-to-global-energy-markets
31 https://www.iea.org/reports/russian-supplies-to-global-energy-markets
32 https://wits.worldbank.org/

Food security implications of the Ukraine conflict

12

Further pressureon already elevatedoil prices
Global crude oil prices were at a very high level before
the Russian invasion, after increasing by 50 percent
in 2021 amidst demand during recovery from the
COVID-19 pandemic combined with limited supply.
Despite OPEC+ gradually relaxing output cuts from
2020, total supply remained below the targets. The
main reasons for countries not reaching their targets
were ongoing uncertainties in the market (e.g. new
COVID-19 variants) as well as lack of capacity andaccidental outages in African oil-producing countries
such as Libya, Nigeria, Angola, Congo and Equatorial
Guinea. 33

oil prices, was up by 20 percent (4 March) comparedto the Monday before the conflict (Figure 8). In a first
response to surging oil prices, Member States of theInternational Energy Agency agreed to release 60
million barrels of their strategic oil reserves. 34
Even though there are no direct sanctions on
Russian oil exports, supply is severely disrupted. 35
Companies involved in trading Russian oil from theBlack Sea have suspended most of their businesses
due to uncertainties about potential future sanctions.
Additionally, many insurers ceased offering coveragefor vessels entering the Black Sea or, if available,
insurances are being sold with extremely highpremia. 36 Two of the top five Russian oil terminals,
Novorossiysk and Tuapse, are located in the Black
Sea. 37 Freight costs for Russian oil trading have also
spiked for vessels shipping from Baltic Sea ports. Dueto the reduced willingness of traders to purchase

With expectations of Russian supply disruptions after

Russia’s Urals crude, it sold at a record discount to

the invasion, prices soared to a 14-year high. The

Brent crude, Europe’s most important crude oil, at

OPEC Basket price, an index for member countries’

US$11.60 per barrel (3 March). 38

FIGURE 6: OPEC Basket price (US dollar per barrel)

Source: OPEC 2022

33 https://www.reuters.com/business/energy/oil-prices-could-hit-100-demand-outstrips-supply-analysts-say-2022-01-12/
https://www.reuters.com/business/energy/opec-oil-output-boost-december-again-undershoots-target-2022-01-06/
34 https://www.iea.org/news/iea-member-countries-to-make-60-million-barrels-of-oil-available-following-russia-s-invasion-of-ukraine
35 https://www.reuters.com/business/energy/oil-jumps-3-choked-russian-supply-trade-finance-dries-up-2022-03-02/
36 https://www.insurancebusinessmag.com/uk/business-news/insurers-react-as-ships-shelled-in-black-sea-326856.aspx
37 https://seanews.ru/en/2020/07/29/en-top-5-russian-terminals-oil-products-throughput-in-h1-2020/
38 https://www.reuters.com/business/energy/russian-oil-buyers-struggle-with-payments-vessels-bp-annuls-loadings-traders-2022-02-28/

Food security implications of the Ukraine conflict13

agreed to keep to their gradually increasing targets

Russia is the world’s
largest natural gas
exporterand to not significantly expand supply in response to

Having the largest proven gas reserves, Russia is thethe conflict. 40

biggest supplier to world markets. 43 In 2019, Russia

With the global oil supply at its limit, further disruptionof Russian oil supply could have a strong effect on
prices. Large Middle Eastern producers would havecapacities to supply more oil in the short run. 39
However, in a meeting on 2 March, OPEC+ countries

exported natural gas worth US$26 billion, aroundThe sanctions by western countries are expected to

6.5 percent of its total exports. 44 A total of 78 percent

reduce Russia’s oil production in the long run. Major

of its exports are shipped to Europe via pipelines. 45

western oil companies have reduced their investments

In 2021, European countries imported 32 percent ofin joint ventures or announced the selling of their

their gas from Russia. 46

Russian operations. 41 Due to the size of the sanctions
and the large impact on the rouble, Russia could
respond to the sanctions by putting an export ban on
its commodities – with large economic impacts on theworld and Europe in particular. However, this would
inflict huge damage on Russia too, as it would cut off
one of the country’s last financial lifelines. 42

FIGURE 7: Largest natural gas exports in 2019 (billion cubic metres)
Russia256

United States

132

Qatar

127

Norway110

Australia

100

Canada76

Netherlands

43

Al geria

43

Turkmenistan

38

Malaysia

36

Source: EIA 2022

0

50

100

150

2 00

2 50

300

39 https://abcnews.go.com/US/wireStory/opec-allies-weigh-oil-output-amid-high-prices-83199968
40 https://www.nytimes.com/2022/03/02/business/oil-prices-opec.html
41 https://www.reuters.com/business/bp-exit-opens-new-front-wests-campaign-against-russia-2022-02-27/
42 https://theconversation.com/just-short-of-nuclear-the-latest-financial-sanctions-will-cripple-russias-economy-178000
43 https://www.reuters.com/markets/asia/gazproms-gas-exports-up-2021-likely-misses-target-europe-2022-01-02/
44 https://oec.world/en/profile/country/rus
45 https://oec.world/en/profile/country/rus
https://www.iea.org/reports/russian-supplies-to-global-energy-markets
46 https://www.iea.org/reports/russian-supplies-to-global-energy-markets

Food security implications of the Ukraine conflict14

Price spikes inalready volatile
European gas
markets

to the European market in the fourth quarter of 2021
and first quarter of 2022. European storage sites
were therefore not filled to adequate levels. 49 To
compensate for reduced delivery during the heating
season, Algeria, Azerbaijan and Norway increased
their pipeline supplies and the United States supplied
additional LNG to Europe. 50
Ukraine’s invasion caused large European gas price

Unlike the global oil market, gas markets are lessspikes. The EU hub’s gas price (Dutch TTF) soared to a

integrated, and prices do not necessarily have thesame dynamics at each of the global hubs. 47 As mostof Russia’s gas is exported to Europe, the largest
impact on prices is expected in the European market.
However, to become less dependent on Russian gas,
Europe is already sourcing from other suppliers, which
will affect other market hubs and ultimately drive up
their prices as well.

new all-time high of €199 per megawatt-hour on themorning of 3 March. 51 In comparison, the US natural
gas futures price responded less strongly (Figure 8).
According to the Russian News Agency Interfax, gas
supply for Europe via the pipelines passing throughUkraine has continued as usual since the invasion. 52
According to network data, 53 Russian natural gas has

FIGURE 8: EU and US natural gas prices(Euro per megawatt-hour and US dollar per million British thermal units)
200
180
160
140
120
100
80
60
40
20
0

7

EUR per MWh

5
4
3
2

USD per MMBtu

6

1

3/
1/
20
21
4/
1/
20
21
5/
1/
20
21
6/
1/
20
21
7/
1/
20
21
8/
1/
20
21
9/
1/
20
21
10
/1
/2
02
1
11
/1
/2
02
1
12
/1
/2
02
1
1/
1/
20
22
2/
1/
20
22
3/
1/
20
22

0

Source: Trading Economics 2022

EU

European gas-price volatility has been high since
September 2021, when prices soared due to a strong
recovery of demand as well as tighter-than-expectedsupply. 48 Additionally, Russia has reduced gas supplies

USbeen shipped to Europe since the start of the invasion.
Gazprombank, which handles the payments for gas
exports from Russia, is not included in the sanctions
currently. 54

47 https://www.oxfordenergy.org/wpcms/wp-content/uploads/2020/04/Insight-68-A-Comparative-History-of-Oil-and-Gas-Markets-and-Prices.pdf
48 https://www.iea.org/news/statement-on-recent-developments-in-natural-gas-and-electricity-markets
49 https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/natural-gas/021622-europe-now-on-safe-side-for-gas-supplies-this-winter-vonder-leyen
50 https://www.iea.org/reports/russian-supplies-to-global-energy-markets
51 https://tradingeconomics.com/commodity/eu-natural-gas
52 https://interfax.com/newsroom/top-stories/74311/
53 https://www.reuters.com/business/energy/yamal-europe-gas-pipeline-reverts-reverse-mode-after-some-westbound-flows-2022-02-27/
https://www.reuters.com/business/energy/russian-gas-flows-via-yamal-pipeline-germany-decline-sharply-data-2022-03-03/
54 https://www.ft.com/content/1bce0494-6242-461b-bfe2-9501e7d88ab1

Food security implications of the Ukraine conflict15

Turbulent energy
markets come withrepercussions forfood security

pandemic, companies and households increased their

Energy-price dynamics affect food prices throughinflation can significantly reduce access to food,various channels. Fuel is an important input forthereby driving up food insecurity.

agricultural production; increasing fuel costs therefore
have an impact on farmgate prices. Similarly, as
energy is necessary for food processing, high prices
further add to the cost of households’ diets. Higher
fuel prices also imply increasing transport costs, which
can further add to the upward pressure on the cost ofimporting food; the cost of transporting local food to
consumer markets can also increase.

demand for petroleum, causing a spike in gas andenergy prices. Around half of the record inflation rates
recorded in late 2021/early 2022 were attributed tosoaring energy prices. 55 When incomes stay constant,rising overall price-levels hollow out the purchasing
power of households. Especially in developing
countries, where food expenditure shares are large,

Moreover, natural gas is an important input inproducing nitrogen-based fertilizers.56 Higher gas prices
can therefore push already elevated fertilizer prices
up.57 Additionally, Russia is one of the world’s mostimportant exporters for the three major groups offertilizers – nitrogen, phosphorus and potassium.58
A disruption in Russian supplies to global markets could
cause even further fertilizer price increases. Rising input

Energy is also an input for most other consumer

costs, in turn, affect the next season’s harvest, leading

goods and services. In 2021, when the world economy

to elevated food prices in the longer run.

recovered from the slowdown caused by the COVID-19

55 https://www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/high_inflation.en.html
56 https://www.ifpri.org/blog/how-will-russias-invasion-ukraine-affect-global-food-security
57 https://gro-intelligence.com/insights/impact-of-the-russia-ukraine-conflict-on-global-agriculture-by-the-numbers
58 https://gro-intelligence.com/insights/impact-of-the-russia-ukraine-conflict-on-global-agriculture-by-the-numbers

Food security implications of the Ukraine conflict16

Repercussions for WFP operations

59

The Ukraine conflicthas both shortand medium-term
impacts

Sourcing of pulses for WFP operations also heavily

Through its impact on grain exports, the Ukraine

resulting in longer delivery times. Such cost increases

conflict impacts WFP procurement both in the short-

for wheat and pulse procurement come on top of theand the medium-term. Short-term repercussions on

impact already caused by the pandemic, which has

pipelines include the expected cancellation or delay ofseen global food prices rise by 36 percent since 2019.

WFP split pea and barley shipments from the port ofOdessa. This is likely to primarily affect West African
operations, where the cargo is needed for distributionsin May and onwards. Medium-term effects on WFP
operations come through rising costs of operations
due to surging prices for basic staple commodities
on international markets; additional expenses fromdiversifying sourcing away from the Black Sea region;and longer lead times when sourcing from destinations

depends on Ukrainian exports. A third of WFP’s supplyof yellow split peas originated from the Black Sea
in 2021, reaching a wide range of operations in all
regions, especially sub-Saharan Africa. Diversifying
pulse procurement in case of unavailability from
Ukraine will likely increase overall logistics costs byapproximately US$3 million per month, as well as

Surging energy
prices further add
to the cost of WFP
operations

farther afield.13

The rise in energy prices further escalates the cost ofAn estimated US$23
million increase inmonthly costs forfood procurement

chain-related fuel costs, including for ocean freight,

Ukraine and the wider Black Sea area were the sourceof over half of the wheat grain for WFP operationsin 2021. While Ukraine is not a significant source of
wheat flour for WFP, major suppliers – Turkey, Egypt
and Jordan – depend on Black Sea wheat imports to
produce flour. Consequently, WFP’s most-affected
operations will likely be those most dependent on
wheat and wheat flour – Afghanistan, Ethiopia, Syria
and Yemen. Given the steep market price increases
since the Ukraine conflict, the total additional cost

WFP operations, both through food prices and supply
land transportation, aviation and WFP facilities. A
first conservative estimate for the impact on WFP’s
transport costs, with all the uncertainty of future oilprice developments, puts the increase at US$6 million
per month.
Together with additional costs through diversificationof sourcing for pulses and higher global wheat prices,
WFP operations are estimated to become US$29
million more expensive per month in the short term,
through the combined effect of food and fuel pricehikes. While estimated cost changes can provide some
guidance, the full cost implications of developments
will become clearer once WFP has identified the bestalternative options to source commodities, which
includes potential changes in the overall mix ofcommodities.

for these operations combined could be over US$20
million per month, assuming wheat prices stay at theircurrent elevated levels.

59 Based on presentation by WFP’s Supply Chain Division, Ukraine conflict – analysis of potential ripple effect on other operations

Food security implications of the Ukraine conflict

17

Conclusions
The Russian invasion on 24 February 2022 not onlyaround them will strongly disrupt trade activities.

has major implications for food security in Ukraine;This has thrown global food and energy markets intowith both countries being key players in global foodturmoil, pushing already high prices up even further.

markets and Russia’s role in global energy markets,

These increases, once passed on to domestic markets,the conflict risks increasing food insecurity in many

will limit access to food. They will simultaneously

places around the world. Besides the conflict itself,

increase operational costs for WFP, constraining its

which mostly affects Ukraine’s imports and exports,

response at a time when it is most needed.

international sanctions on Russia and uncertainties

Food security implications of the Ukraine conflict18

Photo credits
Cover: A woman at a reception centre in Hala
Kijowska, Poland, after fleeing from her home in
Nikopol, Ukraine, with her daughter.
WFP/Marco Frattini
Page 6: Empty shelves in a grocery store in Kyiv,
Ukraine. WFP/Shutterstock/Drop of Light
Page 12: WFP food parcels are unloaded from a truck,
ready for distribution in Orlovske, Ukraine.
WFP/Deborah Nguyen
Page 16: A child has a drink at the KorczowaKrakovets border crossing between Poland andUkraine. WFP/Marco Frattini

Food security implications of the Ukraine conflict19

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