Some glimmers of good news are coming out of Ukraine these days with cargo ships finally cruising through the Black Sea.
At least 18 vessels loaded with grain have left Ukraine in the past two weeks — a likely sign that global cooperation can work to ease trade, even in an active war zone.
But navigating through ports blocked by mines and military vessels is not easy. There are also new accusations that Russia is smuggling grain from Ukraine's occupied territories.
Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said that she is not surprised the shipments are happening since a lot of groundwork has gone into this.
"Remember, the UN secretary-general, Turkey and others had worked with Russia and Ukraine to make this happen," she said. “So these are very good signs. We are cautiously optimistic and hope this will continue, but we are not past the worst."
The World’s Marco Werman spoke to Okonjo-Iweala about the shipments, the slowdown in global trade and how it's contributing to world hunger.
Marco Werman: At least 18 shiploads of grain have left Ukraine, as I said. Can you give us your assessment of what that volume really represents? Does it begin to meet the needs of hungry people, especially in low-income countries?
Ngozi Okonjo-Iweala: It's definitely making a difference. If you look at what is happening to price of grain, for instance, the FAO (Food and Agricultural Organization) Cereal Price Index has dropped by almost 12% in July compared to June, and the vegetable oil price index has dropped by 19%. So, that means that cereal prices, vegetable oil prices, both essentials, are coming down. But they are still well above their levels in July of 2021. It's good to see that the shipment left for the port of Djibouti destined for consumers in Ethiopia. And we hope within two weeks, they will begin to get access. And their other shipments that will benefit people in Africa. So, this is promising.
As you well know, it's not just about ships getting to their destination. At the same time, there's been drought across Europe, add to that just the sheer tumult of war in Ukraine, plus a strong dollar and inflation. Do you think that's going to mean that some countries just won't be able to get all the food that their people need?
It means that there are significant risks because we have 345 million people in 82 countries who are facing food insecurity, with 50 million people, according to the World Food Program, who are on the edge of famine. But continuing to see the ships leaving is really the most important indicator. We have droughts, and climate change is a big problem, but I think alleviating the pressure from the war in Ukraine will be very, very significant.
With the deal that allowed some of that Ukrainian grain to leave ports, there were parallel stipulations that allowed Russia to export some goods that had been targeted under the Western sanctions regime. What has that part of the deal to open Ukraine's ports meant actually for Russian exports?
Let's put it this way. As you know, the Black Sea region, Russia, Ukraine and Belarus, are very significant with respect to agriculture. And that means that also agricultural inputs like fertilizer. So, the fact that Russia is also able to export fertilizer to nations that need it helps because you've got to think not only of this immediate food crisis, getting food to people, but also how are they going to grow food for next year. And African countries have the capacity to grow their own food. But if they don't get access to inputs like fertilizer, then yields will be significantly down. Even agricultural powerhouses like Brazil need this access.
What do we know about these accusations that Russia is smuggling Ukrainian grain out of occupied territories?
It's very difficult for me to actually comment on this particular issue. I think that has to be left to people on the ground who can monitor these kinds of movements.
Director-General, 25 million tons of grain are still stuck in Ukrainian warehouses. Can any of that and much of that get to those who need it before it spoils?
I would certainly hope so, Marco. We've had 20 million tons of grain in warehouses. We have another 25 million tons to be harvested. And so it would be a really huge shame for the world if this grain is allowed to spoil when we have hundreds of millions of hungry people in the world.
What has the war in Ukraine meant for global trade?
More than 25% of wheat exports for the world, vegetable oil, and other agricultural products come from this region. So, whilst it may look like the impact on total world trade is not that much, but the impact on a very important sector of trade — food and agriculture — is heavy. You have seen the IMF (International Monetary Fund) and the World Bank downgrade their forecasts for world growth. We've also done the same with respect to world trade. They still have rationing of gas in Europe. All of these have huge implications for trade and for people who are going hungry in the world.
If we can shine a little light on some optimistic news, there does seem to be at least a slight global trade rebound in recent months. Some of the supply chain problems seem to be easing. Ships are starting to move again. But how can that rebound be made more inclusive so it benefits both high and low-income countries?
There are some signs of supply chain easing. We've seen the cost of shipping freight drop by as much as 70% on some routes. And we've also seen the time it takes to ship freight from China to the US West Coast, for instance, declining from about 113 days at the start of this year to about 95 days now. So these are good signs. But we've still got the issue of China's zero-COVID policy, which could lead to further supplier shutdowns. We've got gas shortages in Europe, and this winter could lead to this slowing down of industrial production there. You've seen the New York Fed note that supply chain pressures remain at historically high levels, with which we agree. So, yes, there are glimmers of hope, but we are on a knife edge in terms of the potential risks that could upset this.
This interview has been lightly edited and condensed for clarity.