After Russia’s invasion of Ukraine on Thursday, Feb. 24, 2022, countries such as Europe and the U.S. continued to impose sanctions against Moscow. However, those sanctions tend to ignore essential energy products such as oil and wheat, which heavily affect the world economy and daily lives. China stood by the sidelines because it had already purchased a large amount of food.
The Russia-Ukraine war started, and European and American countries took turns to sanction Russia.
On February 25, the U.S. announced it would freeze the assets of Russian President Vladimir Putin and Foreign Minister Sergei Lavrov. The European Union and the U.K. took similar steps.
E.U. foreign ministers met in Brussels and unanimously agreed to freeze Putin and Lavrov’s property and bank accounts as part of broader sanctions targeting Russia’s banks, oil refineries, and defense industries.
On February 25, British Prime Minister Boris Johnson called on countries to kick Russia out of SWIFT (Society for Worldwide Interbank Financial Telecommunication) to inflict extreme pain on Moscow.
However, no sanction measures consider key energy products and agricultural products.
Russia and Ukraine occupy a relatively high proportion in the international grain market. The Observatory of Economic Complexity (OEC) data showed that Russia was the world’s top exporter of wheat in 2019, gaining 8.14 billion dollars in sales, accounting for 18% of the world’s supply. Ukraine was the 5th largest wheat exporter, making up 7% of total exports worldwide.
Since then, Russia still maintained its dominance in the global wheat market.
This year, according to Reuters, Ukraine is predicted to account for 12% of global wheat exports, 16% for corn, 18% for barley, and 19% for rapeseed.
The impact of the Russia-Ukraine war on the international grain market is mainly concentrated on wheat, which together accounts for about 30% of global wheat exports.
Due to the dietary habits of countries around the world, wheat is the only food that can be used to make the world’s staple food. Whether it is pasta in China and East Asia, bread in Europe and the U.S., or pancakes in the Middle East, wheat is inseparable, and there is even a saying that if you control wheat, you can control the world.
Central banks have accelerated money printing and strengthened inflation expectations to prevent the economic downturn in response to the COVID-19 epidemic. As a result, speculative demand and advanced hoarding demand have increased, which has led to rising food prices. Fueled by finance, the inflation of grain exporting countries has grown, and grain prices have risen rapidly. While grain importing countries have depreciated their exchange rates, their ability to earn foreign exchange has declined, inflation has deteriorated, and their purchasing power has decreased.
Affected by the war, the prices of agricultural futures such as corn, wheat, soybean meal, and soybean oil have been surging.
In a response to the war, Chinese Communist Party’s Foreign Minister Wang Yi said, “China respects each country’s sovereignty and territorial integrity.” According to NPR, Wang Yi added that, “At the same time, we also see the Ukraine problem has a complex and particular historical state of affairs, and we understand Russia’s reasonable concern on security issues.”
He also highlighted that Chinese regime preferred “dialogue and negotiation” rather than the military to deal with tensions. He said, “China’s position is to thoroughly cast aside a Cold War mentality.”
In the press conference on February 24, Foreign Ministry Spokesperson Hua Chunying showed the same attitude that, “China consistently and firmly uphold the purposes and principles of the U.N. Charter and basic norms governing international relations, firmly safeguard its sovereignty, security and territorial integrity, and firmly defend international equity and justice.”
However, Chinese customs on Feb. 24 eased restrictions on Russian wheat imports, a move that may solve China’s food supply problems and lessen the impact of sanctions on Russia by European and American countries. The most striking feature is that the notification was made public by China’s General Administration of Customs only hours after Russian soldiers started a broad-based attack on Ukraine.
At the end of last year, CCTV, the official media of China, cited statistics from the Bureau of Statistics as saying, “my country has achieved another bumper harvest of grain throughout the year, achieving a bumper harvest for 18 consecutive years of grain production.”
The data from the customs agency shows that from January to December 2021, about 165 million tons of grain were imported, a rise of 25.273 million tons or 18.7% year-on-year.
According to data calculated by the U.S. Department of Agriculture, by February 2022, China’s grain stocks will account for 69%, 60%, and 51% of the global stockpile of corn, rice, and wheat, respectively. All figures have increased by 20% in the past decade.