North African Energy Market Analyis: Libya
On the 3rd of July, Khalifa Haftar, head of the Libyan National Army, threatened to use armed force unless the politically fragmented country could agree on a mechanism for the “fair” distribution of oil revenues. The deadline set by the military leader is 31 August (today). The potential for another civil war is high and this will have large implications for major commodity markets like crude oil as well as natural gas. The intervention of regional and extra-regional powers further complicates Libya’s chaotic political situation, with different countries backing opposing governments.
Read here for London Politica’s latest report on the situation in Libya, a collaborative analysis from team members from Global Commodities and MENA Watch research programmes.
Solidarity Lanes and Import Bans: The Dichotomy of Ukrainian Agricultural Exports in Eastern Europe
In mid April, five eastern EU nations – Poland, Hungary, Slovakia, Romania and Bulgaria – threatened or implemented unilateral import bans on Ukrainian grain and other food products to protect their agricultural sectors. After two weeks at the bargaining table, these European Union (EU) nations struck a deal with the European Commission (EC). In return for dropping their unilateral bans, the EC adopted exceptional and temporary preventative measures on certain Ukrainian imports under the Autonomous Trade Measures Regulation. Under these import restrictions, four agricultural products – staple grains like wheat and maize, as well as rapeseed and sunflower seed – originating from Ukraine can only enter the aforementioned European nations if they are in transit to other countries. In addition to these restrictions, which are in effect from 2 May 2023 to 5 June 2023, the EC is providing €9.77 million to Bulgaria, €15.93 million to Hungary, €39.33 million to Poland, €29.73 million to Romania and €5.24 million to Slovakia to alleviate the downward price pressures proliferating within their agriculture industries.
In response to Russia’s invasion of Ukraine and the Black Sea Blockade, the EC established EU-Ukraine Solidarity Lanes, which are alternate transport routes within the EU facilitating the export of Ukrainian agricultural products. The United Nations-brokered Black Sea Grain Initiative – which lifted this blockade and was recently extended for two months on May 17 – has been unstable and unreliable. Consequently, these solidarity lanes have faced an increasing influx of Ukrainian agricultural products. While these trade routes represent a lifeline for war-stricken Ukraine, they exerted immense pressure on eastern European agricultural markets. Rather than simply transiting through these five ‘frontline’ nations, Ukrainian grain flooded their markets, creating a supply glut that jeopardised their domestic farmers' livelihoods (See Figure 1). Prices plummeted while supply skyrocketed. With the summer harvest ahead, the situation reached a tipping point, hence the threats and enactments of unilateral bans.
Figure 1. Imports of Cereals into Frontline Member States. Graph and data produced by the EC’s Directorate-General Taxation and Customs Union’s Surveillance System.
While protectionist sentiment sprouted from within the EU, it rapidly spread; calls to unilaterally ban Ukrainian grain imports emerged and gained traction within Moldova, Ukraine’s south-western neighbour. Specifically, the Moldovan Agriculture Minister proposed a plan to apply the EC’s measures while the farmers union released a statement calling for an import ban, citing a shortage in storage capacity for its summer grain harvest set to arrive in roughly one month. Alexander Slusari, the head of the Farmers’ Power Association, stated the following: “If Moldova does not restrict grain imports from Ukraine with its stocks of 10 million tonnes, it will be deposited in Moldovan silos and we will face a problem when we do not have storage for the new harvest.”
While this initial knee-jerk reaction within Moldova has dissipated largely due to retaliatory threats from Ukraine, the Moldovan affair and the ‘frontline fives’ import bans affirm the growing sentiment and empowerment within eastern Europe to abandon Kyiv when it is most in need. As Ukrainian Deputy Minister Olga Stefanishyna has stated, the “flow of Ukrainian agro-export is a matter of survival for the Ukrainian economy” amidst the full-scale Russian war of aggression. Due to the fragility of the Black Sea deal and the preventive measures’ looming June 5 expiry date, the EC should consider further financial or legislative measures to appease these agitated EU nations and ensure the flow of Ukrainian grain goes unchecked.