Russia’s invasion of Ukraine in February 2022 caused energy markets to go haywire. As oil and gas prices skyrocketed, nuclear facilities across Europe saw their lifespan extended and the international coal trade revived. The present crisis is shifting understandings of energy security at the core of the international system. Much attention has been paid to the fallout for European and North American economies. In this piece, Dr. Harry Verhoeven, Senior Research Scholar with the Center on Global Energy Policy, answers questions about the implications for the world’s least developed countries (LDCs), especially those related to financing energy imports, local energy transitions, and food security. The Russia-Ukraine conflict is causing considerable short-term instability and leading to soaring prices of wheat, fertilizer, and other commodities, while laying bare deeper problems that require sustained attention.
How is energy security linked to food security and other crises in LDCs?
The economies of most LDCs depend heavily on imports of oil and, less frequently, gas and coal. Historically, rising energy prices have generated balance of payments crises and debt accumulation among these countries. In the decade prior to the COVID-19 pandemic, debt-to-GDP ratios rose considerably, and they have continued to rise since. Soaring energy bills induced by the Russia-Ukraine conflict are therefore coming at a particularly sensitive macro-economic moment as indebtedness stands at a fifty-year high. The International Monetary Fund and the World Bank are worried that the turmoil in energy markets and interest rate hikes in the US and Eurozone could cause an inflationary spiral and acute financial distress in LDCs. This is particularly concerning because debt and energy imports are directly connected to water, food, and climate in the world’s poorest states.
The worsening climate predicament is highlighting the tradeoffs that exist between water, food, and energy security—growing instability in one can quickly imperil another. The 2022 assessment of the Intergovernmental Panel on Climate Change emphasized that the countries most vulnerable to climatic changes are often LDCs, as currently illustrated by the record-breaking drought in Ethiopia, Kenya, and Somalia and increasingly deadly tropical cyclones in Madagascar, Malawi, and Mozambique. Most LDCs are low-savings economies that struggle to connect their populations to the grid, feed them sufficiently, and improve agricultural productivity, all of which are essential to bolstering their resilience to global warming. Increasing the amount of energy and water used in agriculture could, all other things being equal, help boost production per acre, but is typically costly and often simultaneously exacerbates water or energy shortages. For instance, arid states could double down on desalination plants to increase freshwater availability, but the bill for running such installations is frequently prohibitive if the energy must be imported. Similarly, retrieving groundwater to irrigate agricultural land not only risks depleting aquifers, but also usually requires diesel pumps for which imported fuel is an increasingly costly input. And while big dams might seem an ideal source of low-carbon, renewable energy at a time of dizzying oil and gas prices, they come with a colossal price tag, alter the chemistry of rivers, and block the natural replenishment of riparian lands with nutrients. Moreover, growing climatological variability is ironically leading to energy outages and disruptions in agricultural production as reservoirs stand empty for months or threaten to overflow, crippling LDCs and affecting even more advanced economies such as Mexico, South Africa, and Venezuela. Dilemmas over energy security induced by the Russia-Ukraine standoff thus cannot be approached in isolation from broader questions about climatic distress, water shortages, and the ability of hungry populations to feed themselves in LDCs.
Are turbulent global energy markets affecting energy transitions in LDCs?
For LDCs to respond to climatic changes effectively, they would need to prioritize at least three objectives: inclusive, participation-based adaptation to climate shocks; increasing aggregate energy consumption through low-carbon sources; and making clean, affordable energy more accessible. As the Russia-Ukraine conflict sends energy prices soaring, the latter two objectives are suffering. With government budgets in Europe and North America now shifting towards increased military expenditure, Western support for energy transitions in LDCs will likely tank. The US Congress, for instance, greenlighted a meagre $1 billion for 2022. This is especially disappointing in light of the enduring global failure to raise the $100 billion in climate finance for low-income countries that has been promised since 2009; according to the most generous estimates, assistance peaked in 2019 at around $80 billion, though civil society organizations suspect the real number is half that or less. Moreover, a renewed focus on hydrocarbons in rich, industrialized economies is undercutting climate-mitigation efforts, which will make adaptation in the most vulnerable LDCs harder still.
A handful of LDCs are hoping that soaring oil and gas prices will mean that stalled investments in hydrocarbons will resume: Mozambique has long trumpeted its potential as a world-class gas producer; Senegal intends to use its recently discovered oil and gas reserves to fast-track economic growth; and Angola has promised to instrumentalize higher oil prices to restructure its eye-watering debts. Yet most LDCs are net importers of energy and face balance of payment problems that challenge the imperative of climate-resilient adaptation and energy transitions.
There is another potential outcome of the Russia-Ukraine crisis that has been much less discussed. Western investors have started pulling capital out of Russia, indicating that meaningfully pursuing Environmental, Social, and Governance (ESG) objectives is incompatible with doing business in or lending money to Russia. For LDCs, this renewed attention to ESG is a double-edged sword. On the one hand, it could spell greater interest in decarbonization and adaptation initiatives in the Global South. But as investors reassess long-standing organizational practices outside the West and associated reputational risks, they will be even more skeptical of committing to controversial, difficult, or hard-to-monitor projects in LDCs, especially at a time when global interest rates are likely to rise. The tightening of ESG criteria to counter criticisms of greenwashing might thus ironically lead to less money being available to ensure low-carbon energy access to the world’s poorest.
Are the Russia-Ukraine conflagration and soaring energy costs derailing efforts to end global hunger?
Uncertainty in energy markets over new supply and demand patterns is already raising the cost of producing food in LDCs. In addition, because Russia is the world’s largest provider of fertilizer and together with Ukraine produces circa one quarter of all wheat on the planet, the conflict between these two states has raised the prices of imported wheat and fertilizer, doubling them in states like Ethiopia. Policy-makers have begun speaking of a “global food crisis,” and the need to ensure international trade continues with the least possible interruptions in the form of export bans and speculative hoarding. Yet while trade disruptions should not be underestimated, from the standpoint of beleaguered populations in LDCs a food crisis is not around the corner but well underway.
Since 2014, the number of undernourished people globally has been increasing by more than 10 million annually. Even before COVID-19, close to 700 million humans were unable to acquire enough food to meet the daily minimum dietary energy requirements; the pandemic pushed more than 120 million additional people into situations where hunger could kill them in the near future. This despite record levels of total world food production.
The discrepancy between rising supply and growing hunger underlines the fact that increased global production is not the answer and that today’s geopolitics of energy are not causing the crisis but merely amplifying it. Decades of donors and international financial institutions pushing the increased integration of the Global South into global financial systems and commodity trades has generated ambivalent—and often outright disempowering—results, especially for the poorest within these states. The close imbrication of carbon in the global political economy has led to rising energy production but also deepened hunger: LDCs such as Angola, Chad, South Sudan, and Sudan that have become hydrocarbon producers for international markets have increasingly come to rely on a combination of “emergency” food aid and the importation of cheap wheat and other staples from international markets, despite their rich traditions of cultivating local food grains. This transition has directly contributed to the neglect of local agricultural producers and the destabilization of consumption patterns. In rural areas and growing slums, it has also rendered millions of citizens increasingly hungry and vulnerable to food and energy price shocks. Most of these people are women, who are still the main producers of crops in most LDCs yet are most susceptible to water, energy, and food insecurity, whether induced by climate, conflict, or geopolitical turbulence.
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