The war in Ukraine has the cost of bread skyrocketing in places like the Middle East
ARI SHAPIRO, HOST:
Countries in the Middle East import a lot of their food from Ukraine and Russia. The cost of that food has been rising. And now with the war in Ukraine, inflation has gotten even worse. NPR's Peter Granitz reports people in the Mideast and their leaders are anxious about how high prices could go and the problems that could bring.
PETER GRANITZ, BYLINE: Waddah Chehade's family's business runs four grocery store brands in Lebanon and has more than a thousand employees. Before Russia's February attack in Ukraine, paying those workers was his highest expense. That has changed, he said when we called him.
WADDAH CHEHADE: The expense of diesel jumped from 3% of sales to 9% of our sales.
GRANITZ: Now it costs 30% more for the generator power that keeps the lights on and produce fresh. That and the increased cost of shipping has forced Chehade to raise prices between 5- and 10%. He says his stores see the same amount of shoppers, but they're spending about 10% less. They're cutting back on extras and the unnecessary items and buying up staples, like cooking oil.
CHEHADE: Today, the supplies are so limited, the demand is getting higher. Because people are afraid to lose these main commodities, they are stocking in their houses. And I am afraid that if we continue, the supply will go down more and more and the demand will go up more and more, which for sure will make the prices go crazy.
GRANITZ: Lebanon, like Turkey and Egypt, imports more than 70% of its wheat from Ukraine and Russia, says Dina Saleh, with the U.N.'s International Fund for Agricultural Development. She says global food prices could rise as much as 20% because of the invasion.
DINA SALEH: Ending the conflict now is the only solution to avert a global food crisis, and a protracted conflict will be catastrophic for the world's poorest people.
GRANITZ: In Egypt, the government is trying to fight inflation by raising interest rates, just like in the United States. The government has also devalued its currency and ordered local wheat growers to sell inside the country before exporting, says Mirette Mabrouk, an analyst at the Middle East Institute in Washington.
MIRETTE MABROUK: The government I think is bending over backwards to try and make sure that consumers don't really get it in the neck because if that happens, then you're looking at unrest. There's a difference between being deeply unhappy and being so unhappy that you're going to march out and say, we've had enough.
GRANITZ: Bread has a special place in Egyptian life. Indeed, the word for bread in the local Arabic is life. For more than three decades, the government has subsidized it for tens of millions of people.
MABROUK: To the poorest people, bread makes a difference between starving and not. So bread is a political litmus test, if you like.
GRANITZ: But the subsidies cost a lot of money, says Abu Dhabi Commercial Bank chief economist Monica Malik. And weaker governments, such as those in Yemen or Syria, don't have those options. Malik says the invasion poses a problem many governments have rarely dealt with.
MONICA MALIK: It's not so easy for governments to deal with this inflationary spike up because it is as a result of supply shortages. It's not so much demand-led.
GRANITZ: Malik expects it'll take years to recover from the price spikes throughout the economy. And the longer the crisis drags on, the more worried she is about hunger because Ukraine and Russia will be unable to export the food the world needs.
MALIK: The harvests for next year are not going to be planted, or a small amount is going to be planted. Global demand is just not going to be fully met. Countries like Egypt are looking more and more to India, Europe, et cetera. All the countries that depended on Russian and Ukrainian wheat are going to look elsewhere.
GRANITZ: But those new sources are more expensive.
Peter Granitz, NPR News, Amman.
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