The MED This Week newsletter provides expert analysis and informed insights on the MENA region’s most significant issues and trends, bringing together unique opinions on the topic and reliable foresight on possible future scenarios. Today, we place the spotlight on the first anniversary of Russia’s invasion of Ukraine, focusing on the geopolitical and socioeconomic implications of the war for the Middle East and North Africa.
This week marks the first anniversary of Russia’s full-scale invasion of Ukraine, a world-changing event. The effects of the war in Ukraine have heavily impacted the Middle East and North Africa (MENA) region. In geopolitical terms, throughout 2022, governments in the area were shaped by an overall need to balance among shifting alignments. The conflict has de facto brought to the surface dynamics that have been underway for some time in the MENA, namely the increased diversification of partnerships, as well as the consolidation of relations with international players (Russia, China) in both the strategic-military and economic-energy domain. This ‘diversification process’ is epitomised by the Gulf Cooperation Council states’ foreign policy agenda. Gulf countries, which have traditionally relied on Washington in the security field, over the past few years sought to assert their autonomy by deepening their ties with Russia and China, seeing Moscow as a crucial actor in an increasingly multipolar world. The Russian war on Ukraine has also upended global energy markets, but the MENA remains a pivotal area. As gas exploration and production have intensified throughout the Mediterranean region, those left behind in the race to market will likely smoulder resentment. From a socioeconomic perspective, the conflict in Eastern Europe has affected the MENA in several ways, primarily through the substantial surge in food and energy prices and disruptions of the global supply chains. However, the impact of the war on these countries has been different, with oil (and food) importers primarily hit by the conflict’s economic shockwaves. Even though food prices have receded to pre-war levels, exposure to trade disruptions remains a constant concern in this import-dependent region. Against this backdrop, food security challenges may be just around the corner if not tackled efficiently.
The experts of the ISPI MED network react to the impact of the Ukraine war on the MENA region.
The Gulf states’ neutral stance toward the conflict is indicative of their quest for higher independence and diversified relations
“The extent to which Gulf Arab monarchies have embraced relatively neutral positions toward the war illustrates their growing independence from Washington and determination to assert their autonomy. In this increasingly multipolar world, and within a context of open questions surrounding the US’ longer-term commitments to the Gulf, the foreign policies of GCC states, especially Saudi Arabia and the UAE, have been geared toward diversifying trade and security relations in ways that guarantee higher levels of independence. In practice, this entails strengthening ties with various global actors that are adversaries and rivals of each other, including the US on one side and Russia and China on the other. That being said, while Gulf monarchies have come to view Moscow as an increasingly important pole in a more multipolar system, no GCC state has thought – even before the Russian invasion of Ukraine – that Moscow could realistically replace Washington as a security guarantor. Besides, the Kremlin’s performance in the Ukraine war has reaffirmed GCC states’ assessments that weapons sourced from Moscow are no match to those from NATO countries.”
Giorgio Cafiero, CEO and Founder, Gulf State Analytics
Türkiye and its president have benefited from the war, but will they continue walking a diplomatic tightrope?
“One year after the start of the war, Türkiye continues to play a delicate balancing act between Russia and Ukraine, leveraging on good relations with both. While Ankara condemned the Russian invasion, it tried to capitalise on a broker role. So far, Ankara’s uneasy mediation concretely resulted in the celebrated “grain deal”. It also gave Türkiye renewed prestige at the international level, after years of regional isolation and strains with Western partners. Additionally, President Recep Tayyip Erdoğan received a boost to regain some domestic consensus ahead of the May elections. Furthermore, Ankara’s non-compliance with international sanctions against Russia strengthened bilateral economic and energy cooperation with Moscow. Not only was Türkiye ready to fill the vacuum in exports that grew by 38%, compared to the previous year, but it also benefited from money transfer from the Russian state-owned company Rosatom to construct a $20 billion nuclear power plant on the country’s Mediterranean coast. However, facing mounting US and EU pressures over enforcing sanctions as well as substantial economic costs for reconstruction after the earthquake, it remains to be seen how long Türkiye can continue to balance its stance in the conflict.”
Valeria Talbot, Head MENA Centre, ISPI
The war has fueled major changes in the energy sector
“The Russian war on Ukraine has upended global energy markets, spurring investments into renewable energy, accelerating national infrastructure plans and a flurry of industrial policy in Europe and the United States. While accelerating a transition to renewables, the war has also profoundly disrupted oil markets and threatened energy security. Energy insecurity has meant higher hydrocarbon prices, creating inflationary pressure, which is then mediated by higher interest rates, raising borrowing costs and slowing economic growth. In the MENA region, this dynamic has translated into pressure to devalue currencies and a sharp hit to citizens’ savings and purchasing power. A threat to Russian oil production – even as Russian oil exports continue under a price cap from the G7 – raises questions on the transparency of deliveries, re-exports and the market’s ability to anticipate changes in oil’s quantity and price. Indeed, oil markets are in disarray, with traditional trade partnerships with Middle Eastern exporters shaken as cheaper Russian oil finds buyers in India and China, pitting the energy needs of developing economies against the political demands of the West. Besides, for Gulf oil exporters, accommodating Russia as part of OPEC+ is a means to manage supply to sustain revenue, but it further irritates relations with the United States. The war has also made gas markets more dynamic and attractive to new investments, especially in the Eastern Mediterranean and North Africa. The race for gas creates new political opportunities between Israel and its neighbours and links Gulf investment more closely to gas projects abroad and consumers in Europe. However, these political openings are also sources of tension, for example, between Algeria and Morocco and Cyprus and Turkey. As gas exploration and new production ramps up throughout the Mediterranean region, those left behind in the race to market will have grievances. There is a limited window of opportunity to meet expected gas demand in Europe, as renewable power generation and tax policies on carbon will eventually lower demand. In this context, those who miss this window of opportunity may resent neighbours who reap the early benefits of shared gas resources.”
Karen E. Young, Senior Research Scholar, Columbia University Centre on Global Energy Policy
The socioeconomic aftershocks of the conflict are felt mainly by oil-importing countries
“The war in Ukraine has had various consequences on the global stage. The most immediate ones have been the rise in energy prices and the interruption of grain supplies that led to global food inflation. The Middle East and North Africa region has been affected by both. While the impact is felt widely across the area, unsurprisingly, the low- and middle-income oil-importing countries have faced more significant challenges. On the one hand, middle- and low-income households are paying a heavy toll for the rise of global energy and food prices; on the other, the respective governments, whose budgets have been under substantial pressure of subsidy bills, are also presented with additional stress tests. Against this backdrop, the military cooperation between Iran and Russia, combined with Iran’s nuclear ambitions, is imposing a new set of security risks with potential spill over effects across the region.”
Sara Baazoubandi, Associate Research Fellow, ISPI
Wheat prices have returned to pre-war levels, but food security remains a looming threat
“Wheat supplies from Russia and Ukraine have captured an increasing market share in the Middle East and North Africa (MENA) over the past two decades. Their quality and protein content is lower, but they are cheaper, and in terms of logistics, they are close to the region. The market share of the two countries has been particularly high in Egypt, Sudan and Lebanon. Saudi Arabia is a major importer of barley from the Black Sea region for its livestock industry, primarily sheep. When Russia invaded Ukraine, there were initial spikes in the markets for grains and sunflower oil. They have receded in the meantime; wheat prices, for example, are back at pre-war levels, but the vulnerability to trade disruptions remains a constant concern in the import-dependent MENA. As it does not have a sufficient amount of water to plant enough food, the region needs to manage this dependency by diversifying supplies, storage solutions, and food diplomacy.”
Eckart Woertz, Director, Institute for Middle East Studies, GIGA
This week’s MED This Week has been edited by Lorenzo Fruganti