While it remains unclear what impact Russia’s withdrawal from the Black Sea Grain Initiative (BSGI) will have on Lebanon’s food security, even modestly dramatic scenarios demand serious attention from aid actors and policymakers alike. Combined with another unexpected shock – such as India’s recent announcement of a ban on rice exports – Russia’s withdrawal from the BSGI may mark the beginning of an era of unprecedented food inflation and essential commodity volatility. The dynamic and unpredictable nature of the Ukraine war makes these scenarios more likely, each of which could have grave repercussions for Lebanon and the rest of the Middle East and North Africa (MENA) region.
It is not yet clear whether Russia’s decision to withdraw from the Black Sea Grain Initiative (BSGI) will lead to severe interruptions in Lebanon’s grain supply, although this scenario remains possible, necessitating contingency planning. What is more certain is that global food commodity prices will spike in the near to medium term, including wheat, a staple of the Lebanese diet. Higher wheat prices will likely increase the cost of state-subsidized and price-controlled bread bundles, which could have knock-on effects on Lebanon’s economic outlook and aid actors administering both in-kind food and cash assistance.
As has become a recurring theme throughout Lebanon’s overlapping crises, the impact of price increases and potential supply shocks will disproportionately affect Lebanon’s most vulnerable residents. Policy makers and aid practitioners should be aware of the fragility of Lebanese households’ access to wheat and wheat-based products and that Lebanon’s so-called “summer recovery” has done little to benefit vulnerable individuals. In fact, the illusion of recovery – premised upon a short-term inflow of foreign currency brought by tourists and returning expatriates – is dangerous because it masks larger structural issues that are likely to re-emerge as crisis points later in the year. Analysis suggesting that global wheat markets have already “priced in” the risk of the BSGI’s failure should also be regarded with skepticism. Further Russian escalation, such as the attacks on the Danube terminals and possible Ukrainian reprisals against Russian grain, bring new and unexpected risks to markets with inevitable upward price pressures.
By Crisis Analytics Team, Mercy Corps Lebanon
