Live updates: follow the latest news on Russia-Ukraine
Russia’s invasion of Ukraine has exacerbated food shortages in Africa and the Middle East, a US official said on Thursday.
Ukraine is one of the world’s leading exporters of wheat, corn and sunflower oil, but its production has come to a near standstill.
Farmers have had to abandon their tractors and take up arms, according to Ramin Toloui, assistant secretary for economic and business affairs in the Biden administration.
Additionally, he said Russian forces have destroyed grain silos and other critical infrastructure, severely hampering Ukraines ability to store and transport agricultural products.
Since the war started on February 24, Ukraine’s agricultural exports have been severely hampered.
With Russia blocking access to the country’s main ports in the Black Sea, grain exports were capped at 800,000 tons, down from an average of 5 million tons, according Ukraine’s Agricultural Ministry.
Ukraine’s inability to export grains has caused global prices to soar, with farmers worldwide weighing whether to change their planting patterns and grow more wheat this spring.
Russian President Vladimir “Putin’s actions are threatening vulnerable people in the Middle East and Africa with food scarcity or worse, starvation,” said Mr Toloui.
African and Middle Eastern countries rely on Russian fertiliser and Ukrainian grains to help feed their populations.
The shortages caused by the war are directly affecting these regions, he added.
President Joe Biden's administration has pledged $1 billion for those affected by the war in Ukraine.
The assistance covers critical needs such as safe drinking water, shelter and emergency food assistance, Mr Toloui said.
The US has also provided Ukraine with more than $1.7bn in military assistance since the war started.
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Four reasons global stock markets are falling right now
There are many factors worrying investors right now and triggering a rush out of stock markets. Here are four of the biggest:
1. Rising US interest rates
The US Federal Reserve has increased interest rates three times this year in a bid to prevent its buoyant economy from overheating. They now stand at between 2 and 2.25 per cent and markets are pencilling in three more rises next year.
Kim Catechis, manager of the Legg Mason Martin Currie Global Emerging Markets Fund, says US inflation is rising and the Fed will continue to raise rates in 2019. “With inflationary pressures growing, an increasing number of corporates are guiding profitability expectations downwards for 2018 and 2019, citing the negative impact of rising costs.”
At the same time as rates are rising, central bankers in the US and Europe have been ending quantitative easing, bringing the era of cheap money to an end.
2. Stronger dollar
High US rates have driven up the value of the dollar and bond yields, and this is putting pressure on emerging market countries that took advantage of low interest rates to run up trillions in dollar-denominated debt. They have also suffered capital outflows as international investors have switched to the US, driving markets lower. Omar Negyal, portfolio manager of the JP Morgan Global Emerging Markets Income Trust, says this looks like a buying opportunity. “Despite short-term volatility we remain positive about long-term prospects and profitability for emerging markets.”
3. Global trade war
Ritu Vohora, investment director at fund manager M&G, says markets fear that US President Donald Trump’s spat with China will escalate into a full-blown global trade war, with both sides suffering. “The US economy is robust enough to absorb higher input costs now, but this may not be the case as tariffs escalate. However, with a host of factors hitting investor sentiment, this is becoming a stock picker’s market.”
4. Eurozone uncertainty
Europe faces two challenges right now in the shape of Brexit and the new populist government in eurozone member Italy.
Chris Beauchamp, chief market analyst at IG, which has offices in Dubai, says the stand-off between between Rome and Brussels threatens to become much more serious. "As with Brexit, neither side appears willing to step back from the edge, threatening more trouble down the line.”
The European economy may also be slowing, Mr Beauchamp warns. “A four-year low in eurozone manufacturing confidence highlights the fact that producers see a bumpy road ahead, with US-EU trade talks remaining a major question-mark for exporters.”
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