Egypt caps bread prices as shockwaves of Ukraine war hit Middle East

Abu Dhabi, UAE(CNN) The war in Ukraine is only a month old, but its shockwaves are already being felt as far away as the Middle East, putting governments on edge as tensions simmer at home.

"This crisis may be significantly more severe than the coronavirus crisis," said Egyptian prime minister Mostafa Madbouly during a cabinet meeting Monday, referring to the economic impact of Russia's war in Ukraine.

Ukraine's neighbors have had more than three-and-a-half million refugees cross into their territories since Russia's late February invasion. But the impact of the war has extended much further afield, with global oil prices rising to almost-decade highs and grain prices soaring amid a shortage from a region that is often referred to as the breadbasket of Europe.

Particularly hit are Middle East countries that rely on both Russia and Ukraine, two of the world's top grain exporters, for the bulk of their grain imports.

For Egypt and other Middle Eastern nations grappling with the ripple effects of the war, that's a cause for concern. Just 10 years ago, revolutions across the region toppled longtime dictators partly because of a rise in the price of commodities. "Bread, freedom, social justice!" was among the most popular chants on the streets of Egypt during Arab Spring protests.

Food prices in Egypt rose 4.6% month-on-month in February, and core inflation rose to 7.2% year-on-year in from 6.3% in January. By the end of February, as the Russian military was mobilizing at Ukraine's border, global wheat prices jumped to their highest level since 2012.

In the three weeks since Russia's invasion of Ukraine, the price of unsubsidized bread in Egypt jumped by as much as 25% in some bakeries. Cairo on Monday fixed the price of unsubsidized bread to limit the inflationary impact.

Ukraine has banned the export of some grains to keep supplies for the domestic market. The nation's Black Sea ports also face a blockade by Russian forces, preventing grain exports.

Egypt is the world's largest buyer of wheat and approximately 80% its wheat imports came from Russia and Ukraine in 2021, according to Reuters.

"Food insecurity absolutely can result in greater political unrest," Lama Fakih, the Middle East and North Africa director at Human Rights Watch, told CNN. "These are a number of countries that have already been suffering from conflict [and] from political upheavals."

On Monday, the rights watchdog issued a report calling for regional governments to ensure that the conflict in Ukraine doesn't worsen the food crisis and warned them against removing or reducing food subsidies, as some had planned to do.

Discontent has already manifested in the form of a protest in Iraq, where a relatively small March 9 rally in the central city of Nasiriyah against a rise in food prices was attributed by the government to the Ukraine war. The government later announced a support package for citizens which included one-time grants to those in need and reviewing the ration card budget ahead of the Muslim fasting month of Ramadan.

"We are nearing the month of Ramadan and are worried about price increases," said Mohamed Ali, a 42-year-old Iraqi day laborer living in Baghdad. "There is an increase in most food prices, especially cooking oil."

Much of the region had already been suffering from poverty and food insecurity, but the war in Europe is only aggravating the situation, said Timothy Kaldas, a fellow at Cairo's Tahrir Institute for Middle East Policy.

"The 2011 [Egyptian] uprising came after a decade of rising levels of poverty," Kaldas told CNN. "And in 2019 when Egyptians protested in multiple cities across the country, the regime found that the people they arrested... were primarily driven by economic grievances."

On Monday, the Egyptian pound dropped 14% against the dollar after Russia's invasion of Ukraine prompted foreign investors to pull billions of dollars out of Egyptian treasury markets. The central bank also spiked overnight interest rates by one percentage point and the government announced a 130 billion Egyptian pound ($7.05 billion) economic relief package.

"Countries that are already suffering from widespread food insecurity are the ones that have been hardest hit," said Fakih, "And these include Yemen, Lebanon, and Syria."

The needs of Yemen, which is facing from one of the world's worst humanitarian crises, are reaching what Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator Martin Griffiths called "alarming heights." Yemen imports at least 27% of its wheat from Ukraine and 8% from Russia, said Human Rights Watch.

Lebanon last month said it had wheat reserves sufficient for only one month. It imports nearly 60% of its wheat from Ukraine.

Hend Zaki, a 38-year-old Egyptian mother-of-five who runs a food business from home, said she has lost clients since she raised her meal prices two weeks ago.

"I practically pay double now for everything," she told CNN. "We are greatly harmed ... there are some very poor people [here]."

With additional reporting from Adam Pourahmadi and Aqeel Najim, CNN

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