The Russian Invasion of Ukraine – A new Impetus for Morocco’s politico-economic Aspirations
The Russian invasion of Ukraine continues to nurture the fear of a global food supply shortage, especially with regard to grain-based nutrition. Russia is the world's largest wheat exporter, with Ukraine following in 5th position. Together, they constitute the breadbasket for a host of highly import-dependent emerging economies, many of whom are in the Middle East and North Africa (MENA). For the latter, the ramifications of wheat shortages are particularly dire since bread and other grain-based foods make up the primary caloric intake for vast parts of their populations. In Morocco, for instance, wheat consumption per capita (288 kg) is four times higher than the global average. Shortages would thus lead to immediate and devastating effects.
A closer look at recent food consumption price hikes reveals: The Kingdom of Morocco is suffering considerably less on a comparative, regional scale (8.6% increase compared to 13.6% in Algeria and 24.8% in Egypt). Ranking 12th in the world with regards to wheat importation, roughly a fifth of which comes from Ukraine and Russia, Morocco is nevertheless facing difficult economic decisions. An extension of the five-month national wheat reserve policy, export restrictions for domestic grain, as well as the abolishment of customs duties on wheat and other essential goods have thus coined the recent Moroccan trade policy. Aggravating the circumstances, Morocco's southern industrial agriculture is now facing severe droughts. The United States Foreign Agricultural Service (FAS) has projected a drop of up to 70% in domestic Moroccan wheat harvests for 2022. All things considered, the Kingdom will thus need to buy significantly more wheat at significantly higher market prices, and all of that largely without two of its traditionally biggest trade partners.
Replacing wheat supply shortages from Ukraine and Russia is a major challenge for Moroccan trade diplomacy. Especially since regional competition is at a record high, many agricultural nations such as India – the world’s biggest wheat producer – are restricting exportation in light of the globally unstable supply situation. Mediated by the Arab-Brazil Chamber of Commerce, many MENA states such as Egypt, Sudan, Saudi Arabia, and Morocco are now turning towards Brazil for much-needed import diversification. About half of Brazil’s exported grain is currently consumed in the region, and Morocco’s wheat imports from Brazil have spiked by a record of 632% compared to the previous year. In light of such efforts, Morocco is likely to circumvent major wheat shortages down the road. According to the latest statistics of the International Food Policy Research Institute (IFPRI), only 15.4% of all imported calories in Morocco are subject to sanctions or restrictions, compared to 33.75% in Tunisia, 46.19% in Lebanon, and a whopping 54.22% in Egypt. Famine is thus no likely scenario in Morocco.
A very real threat, however, is the financial burden imposed by skyrocketing global market prices. While petrol and other essential goods prices are hurting Moroccan consumer wallets directly, bread prices have remained rather stable. As in many MENA states, generous government subsidies on wheat absorb much of the current price hikes. These systems of artificial price control have so far shielded-off lower-class consumers across the region from financial ruin – and governments from the expected political turmoil traditionally accompanying bread price increases. The Moroccan Office National Interprofessionel des Céréals et Légumineuses (ONICL) observes wheat prices and artificially locks them between 260 and 280 USD per ton, maintaining a reference price of 1.2 MAD (ca. 0.11 Euro) per loaf. A system barely worth mentioning in times of normal world market prices, wheat subsidization has already drained Moroccan state revenues by over 3 billion MAD (ca. 284 Mio Euro) in the first four months of 2022. It is precisely the combination of persistently high world market prices and domestic crop losses due to drought that entail potentially destabilizing macroeconomic ramifications for a Morocco that is already traditionally highly dependent on good agricultural harvests. Yet one solution to counter eroding state revenues is buried in the sands of the disputed territory of the Sahara.
Fertilizers – Morocco’s New, Old Key Industry
In the shadow of a globally securitized food supply situation, the availability of agricultural fertilizers is becoming a salient economic and strategic issue. To date, Russia is heading global fertilizer production, supplying (together with Belarus) about 40% of all potash salts. Russian fertilizers are not subject to sanctions, but the sanctions against finance and logistics are resulting in noticeable shortages and price hikes in the fertilizer trade. Furthermore, fertilizer production is highly energy-intensive, and the current petrol prices are in part to blame for global fertilizer prices quadrupling since Russia’s invasion of Ukraine. But much unlike the grim prospects of a global food crisis, a fertilizer crisis could emerge as quite the windfall for phosphate-rich Morocco.
For decades, Morocco has been heavily invested in phosphate mining and industrial, agricultural fertilizer production. Its state-owned Office Chérifien des Phosphates (OCP) sits on an estimated 70% of the world's phosphate reserves and coins the global phosphate trade with a 54% market share in Africa, 41% in Europe, and 46% in South America. About a quarter of Moroccan export value is generated by OCP, and this figure is bound to rise soon, with OCP announcing steep production increases for 2023 and beyond. Unsurprisingly, a considerable share of such export increases will go precisely to the country that proved itself such a reliable source for quick-fix wheat importation: Brazil. In an interesting turn of events, Moroccan fertilizer supplies might now save indigenous reserves in Brazil's Amazon rainforest from highly controversial emergency legislation to access domestic fertilizer salts.
The upper echelons of Morocco’s politico-economic leadership know that ramping up domestic fertilizer production might kill the proverbial two birds with one stone. Not only are fertilizer exports a way to mitigate eroding state revenues due to wheat subsidies, but they furthermore entail an unprecedented potential for Moroccan geopolitical appreciation. After all, phosphate as a catalyst for Moroccan hegemonic aspirations in North-west Africa is by no means a new approach. The Kingdom has made good use of its resources in its southern backyard and established somewhat lopsided economic relations with a number of West and East African states by maintaining fertilizer factories dependent on Moroccan phosphate abroad. With the recently announced fertilizer plant in Sao Luis, Brazil, one might further witness the commencement of a cautious superregional Moroccan self-conscience.
However, for this phosphate offensive of Morocco to be translated into a sustainable economic policy strategy, the Kingdom must find a solution to the dependence of domestic phosphate production on fossil fuels. Up to date, phosphate fertilizers are produced almost exclusively using crude oil as an energy source. At current oil prices, however, the net yields from production are dwindling even in phosphate-rich Morocco. Instead, future Moroccan dominance of the fertilizer market depends on how well the Kingdom succeeds in tapping its enormous potential for renewable energies and replacing imported fossil energy with green hydrogen. In an interesting turn of events, the Russian invasion of Ukraine has thus added an auspicious economic and geopolitical dimension to the transition to a green economy for the self-declared climate-pioneer Morocco.
Damian Berger is a fellow of the Friedrich Naumann Foundation in Rabat, Morocco. He analyses political and economic issues of the Maghreb region and heads a student-led think tank on MENA politics. He is finishing his postgraduate degree in Political Economy of the Middle East and North Africa at King’s College London.