Oil and threatened food security
Today, debate in the West remains largely focused on energy security and decreased dependence on foreign oil, but in the Middle East, an equally threatening crisis looms in a shortage of food and water. Ahead of the Agricultural and Applied Economics Association & CAES Joint Annual Meeting (4-6 August 2013 in Washington, D.C.), we present a brief excerpt from Eckart Woertz’s Oil for Food: The Global Food Crisis in the Middle East.
The deeply ingrained sensitivity about food self-sufficiency in the Arab world is reminiscent of the discourse about energy independence in the West. Historic precedence informs the threat perception. Dependence on food imports during WWII was fragile. An embargo-happy US politicized food trade in the 1970s. Domestic agro-lobbies in the Middle East also like to sing the praises of self-reliance in order to defend subsidies and access to scarce resources like water.
During the global food crisis of 2008, food prices skyrocketed and food exporters announced export restrictions. As a result, agricultural investments have moved to center stage of strategic considerations in the Middle East. Privileged access to food production is seen as a cornerstone of food security, if not at home for reasons of limited water resources and arable land, then at least in countries that are geographically close and beckon with established political and cultural ties like Sudan and Pakistan. If “drill baby drill” is regarded as a panacea for the energy challenge by some in the US, “plant baby plant” is the rallying cry of an equally convinced crowd in the Middle East.
Water scarcity has also rendered self-sufficiency but a dream. Since the 1970s, the Middle East as a whole cannot grow its required food supplies from renewable water resources anymore. Extremely water-scarce parts of it like Israel, Palestine, and desert Libya lost this ability in the 1950s already. So did the Gulf countries. Their recourse to mining of fossil water aquifers is unsustainable and the day of reckoning is drawing closer. Saudi Arabia has decided to phase out its subsidized wheat production by 2016. Groundwater depletion is an even more pressing issue in the Middle East than contentious cross-border sharing of surface water along the Nile, Euphrates, Tigris, and Jordan. As agriculture consumes around 80% of water, the easiest way to save it is to reduce agricultural production and direct scarce water resources to more urgent or more valuable uses in the residential, industrial, and service sectors.
The perception of Gulf countries is one of threatened food security. With oil prices above $100 per barrel, rising food prices in the wake of the global food crisis were easy for them to stomach. They did not face the same challenges like their poor cousins in the rest of the Arab world. Their balances of payments were not stretched and they had the means to intervene in local food markets to stabilize prices. However, the export restrictions imposed by food exporters like Argentina, Russia, India, and Vietnam had an immense psychological impact. Gulf countries now face the specter that someday they might not be able to secure enough food imports at any price, even if their pockets are lined with petrodollars. This has reinforced the impression that food security is too important to be left to markets. Meanwhile, the political realities of the Arab food security debate have prompted approaches that are unsustainable and expensive.
The oil-for-food trade-off will be a determining factor for Middle East food security over the coming decades. Oil and gas revenues supply the bulk of the foreign currency that finances the growing food imports of the region, not only in the Gulf countries, but also in other exporter nations like Algeria, Libya, Iraq, Iran, the two Sudans, and Yemen. Furthermore, oil revenues reach the poorer neighbors of the Gulf countries indirectly in the form of aid, investments, and remittances by expatriate workers. They affect balance of payments and import options.
Oil and gas are also indispensable input factors of modern, globalized agriculture, which has grown dramatically since WWII and the Green Revolution in the 1960s. Mechanization, irrigation, and distribution networks need fuel. Nitrogen fertilizer from natural gas is crucial to feed 7 billion people. Other links between oil and food include the economics of biofuels and the impact of pollution and climate change on agricultural production capacity. The Middle East does not only play a prominent role in global oil markets as producer but also in global food markets as consumer. It imports already 1/3 of globally traded cereals.
International farmland investments are at the heart of the global food security challenge and put the Middle East in the spotlight of overlapping global crises in food, finance, and energy. Foreign agro-investments in poor countries that are food net importers like Sudan, Ethiopia, Pakistan, or the Philippines are controversial. They might compromise these countries’ domestic food security and infringe upon customary land rights of smallholders and pastoralists. There is an urgent need to structure investments with consideration of such stakeholders. Given the amount of publicity that Gulf land investments have attracted, two things are striking: (1) five years after their announcement few projects have been implemented; and (2) very little is known about the Middle East investors themselves. An increasing number of academic studies focus on the target countries. Less work has been done on the sources of investment. As far as they figure, accounts are based on secondary sources in English-speaking media that often take inflated numbers about land investments at face value. Why have Gulf countries started to undertake such investments? What role does their political economy of food play and what capacity constraints do they face? Why do they mistrust international markets? What geopolitical implications are behind the current investment drive? And why has there been such a gap between announcements and actual realization of projects?
Eckart Woertz is senior researcher at the Barcelona Centre for International Affairs (CIDOB). Formerly he was a visiting fellow at Princeton University, director of economic studies at the Gulf Research Center in Dubai, and worked for banks in Germany and the United Arab Emirates. He is the author of Oil for Food: The Global Food Crisis in the Middle East.
The Agricultural and Applied Economics Association & CAES Joint Annual Meeting will take place 4-6 August 2013 in Washington, D.C. Oxford University Press publishes Applied Economic Perspectives and Policy (AEPP) on behalf of Agricultural and Applied Economics Association. AEPP aims to present high-quality research in a forum that is informative to a broad audience of agricultural and applied economists, including those both inside and outside academia, and those who are not specialists in the subject matter of the articles.