Rob Bailey

The era of cheap food is over. International food prices have spiked repeatedly in recent years – first during the 2008 global food price crisis which saw prices of key agricultural commodities more than double, then again in 2011 following a heat wave in the Black Sea breadbasket, and once more in 2012 after the worst drought to hit the US Midwest in half a century. What is more, this volatility is around a higher price level. At the time of writing, the UN Food and Agriculture Organization’s International Food Price Index is almost twice as high as a decade ago.

The outlook is for more of the same. Prices are expected to remain high and volatile as global demand growth continues to outstrip supply and food stocks struggle to recover. Biofuel policies make a bad situation worse. And as climate change gathers pace, bad harvests become more likely.

This is bad news for food importing countries, and few are as dependent on imports as those of the Gulf Cooperation Council (GCC) – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, among which imports typically account for 80 to 90 percent of food needs. Should GCC governments be worried? The short answer is yes, though not for the reasons you might expect.

Despite GCC import dependence, high international food prices do not pose an immediate threat to food security. Wealthy populations can afford the price rises. This is in stark contrast to the situation in many of the Gulf countries’ poorer neighbours, where high food prices can quickly lead to unrest. The 2011 price spike for example, and its impact on the major wheat importing countries of North Africa such as Egypt, Tunisia and Morocco, has been identified as a precursor of the wider social, political and economic grievances that became the ‘Arab Spring’.

The problem for GCC governments is not that people cannot pay more for their food, but the risk that they will not. Gulf populations are extremely reluctant to accept higher prices, and so governments have responded with a range of ad hoc measures to placate potentially restive populations. These include food subsidies, price controls and wage increases; these have worked, but have not been cheap. Social spending among GCC countries rose sharply, first after the 2008 food crisis, and again after the 2011 price spike and ‘Arab Spring’. In consequence, governments need higher oil revenues to cover their spending. The government of Saudi Arabia now requires an international oil price above US$ 85 per barrel to break even compared to US$ 37 in 2008. Bahrain needs over US$ 100 per barrel.

GCC states are – for the most part – still in the black, but they are vulnerable to a fall in oil prices. Nor can they indefinitely pursue higher oil prices without choking off international demand. The long-term food security of the GCC therefore requires governments to contain ballooning social expenditures, diversify their economies and broaden their revenue base.

The most significant threat to GCC food security relates not to food prices, but food supply – that, for a period, governments will not be able to secure sufficient supplies of food at any price. The Gulf countries are surrounded by a series of maritime ‘choke points’ – busy, narrow passages vulnerable to disruption or closure. Nearly all food imports must pass through at least one.

Most vital is the Suez Canal in Egypt, which militants last year tried to block by firing rocket propelled grenades at a transiting container ship. Over 80 percent of wheat and coarse grains imports pass through the canal en route from North America, South America, Europe or the Black Sea. Nearly half of this must then pass through the Strait of Hormuz on its way to ports within the Persian Gulf. This critical waterway also receives 80 percent of rice imports from India and Pakistan. It is periodically threatened with closure by Iran, the last occasion in 2012 in response to sanctions from the international community.

The worst case scenario for the GCC is some form of regional conflict that closes multiple choke points for a sustained period. Preparedness for such a contingency probably explains government decisions to build strategic cereal reserves approaching or exceeding a year’s supply for example. GCC governments could also enhance security of supply by investing in a regional network of deep-sea ports on the Red Sea and Arabian Sea coasts, linked through a regional railway and strategically located silos. This would diversify the region’s import infrastructure away from the vulnerable Persian Gulf and provide governments with more routing options should maritime choke points be disrupted or closed. Realizing this opportunity would require enhanced cooperation between governments however.

For governments in the region, the most beguiling food security objective is that of self-sufficiency. However it remains elusive, as the Gulf countries’ long but inefficacious history of agricultural support demonstrates. Saudi Arabia’s abortive wheat programme is estimated to have cost US$ 5 billion a year in subsidies at its peak. But a collapsing water table has forced the government to begin phasing out wheat production. Pressure on aquifers has continued however, as farmers have switched to the production of forage crops for the Kingdom’s subsidized dairy herds. Agriculture typically accounts for somewhere between 80 and 90 percent of water use in the Gulf – almost monopolizing a desperately scarce resource that could be employed far more productively elsewhere. The attraction of self-sufficiency is understandable, but hard ecological constraints and poor economics seem to render it unachievable in practice.

Rob Bailey is Acting Research Director, Energy, Environment and Resources, Chatham House. This commentary is based upon the author’s Chatham House briefing paper ‘Edible Oil: Food Security in the Gulf’.