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Tunisia among countries seeing major economic consequences from war in Ukraine

Soaring prices for imports of wheat, fuel and fertilizer threaten an economic and political toll

People wait in front of Mohamed Bouanane's subsidized bakery in Tunis on April 2. Tunisia relies heavily on Ukraine and Russia for wheat. (Amine Landoulsi for The Washington Post)

TUNIS — The big man wearing the Volvo Trucks baseball cap refused to take no for an answer when baker Mohamed Lounissi told him he was out of bread.

The last five baguettes resting on the counter belonged to another customer, a woman who had paid for them earlier in the day and would soon be returning to collect her order, Lounissi explained.

The man quickly grew agitated, pointing and reaching across the glass display case. “You have bread, but you don’t want to sell it to me,” he complained. “Give me bread or I’m calling the police!”

As Lounissi repeated that the bakery had exhausted its supply, the man pulled out his cellphone and summoned the authorities, a scene captured by the store’s security camera and later replayed for a journalist. When a police officer arrived, Lounissi explained the situation to him and the big man eventually stormed off without bread or satisfaction.

“I closed for 10 days because I didn’t have supplies and just reopened two days ago,” Lounissi said later. “Yesterday, people were fighting. They don’t want to wait.”

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The recent incident illustrates the mounting alarm over the availability of bread, Tunisians’ staple food, as the country grapples with economic fallout from a war occurring nearly 1,500 miles away in Ukraine. By blocking most grain and fertilizer exports from the Black Sea, the outbreak of European combat blindsided this nation of 12 million people and fueled a dramatic surge in global commodity prices.

In March alone, food costs rose by 13 percent, reaching their highest level since the United Nations began tracking them in 1990. A basket of commodities including cereals, meat and dairy products now costs 34 percent more than it did one year ago.

In the Russian invasion’s wake, President Biden and other world leaders are warning of food shortages, especially in the politically fragile nations of the Middle East and North Africa.

On Wednesday, the World Bank, International Monetary Fund, World Trade Organization and World Food Program issued a joint appeal for “urgent action” to address the looming crisis. World leaders must increase their nations’ crop production, refrain from hoarding supplies and provide financial aid and emergency food shipments to the poorest countries or risk inflaming “social tensions,” the agencies said.

Global economics correspondent David. J. Lynch visited Tunisia to see how the war in Ukraine is impacting food supply far from the battlefield. (Video: Casey Silvestri/The Washington Post)

Ukraine and Russia are essential suppliers of grain and fertilizer for dozens of countries in Africa and the Middle East, and account for 29 percent of global wheat exports. In sub-Saharan Africa, Somalia and Benin rely on Russia and Ukraine for all of their imported wheat. Lebanon, Egypt and Libya are almost as dependent.

The invasion’s impact will extend beyond this year’s harvest and beyond the developing world. Russia and ally Belarus provide about one-third of the nitrogen fertilizer used by European farmers and more than 22 percent of what’s spread on American crops, according to the International Food Policy Research Institute in Washington. Russia and Belarus also produce significant volumes of potassium for Brazil, central Africa and China.

Soaring prices for food and fertilizer this year will drive at least 40 million people into extreme poverty, living on the equivalent of $1.90 per day, according to the nonprofit Center for Global Development.

Tunisia is among the most vulnerable countries, relying on Ukraine and Russia for 56 percent of its annual wheat imports over the last five years, according to an analysis of U.N. data by Joseph Glauber, a senior research fellow at the International Food Policy Research Institute in Washington.

The war’s disruption of global agricultural trade collided with long-standing Tunisian financial ailments, widening a hole in the government budget, risking a public debt default and threatening the political stability of a rare Arab democracy.

“There will be a revolution coming soon,” said Youssef Cherif, director of Columbia Global Center in Tunis, a research-oriented offshoot of New York’s Columbia University. “All the preconditions are there … and I don’t think the people can stand the situation for long.”

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The government insists it has sufficient wheat stockpiles to last until the local crop is harvested in June. But the last ship from Ukraine docked here three days before the fighting began on Feb. 24, and bakeries like Lounissi’s already are having trouble securing sufficient supplies.

Without enough wheat or flour, bakeries in Tunis and elsewhere often run out of bread in the middle of the day. Tunisians generally eat bread with every meal and make daily trips to the bakery. They are not accustomed to waiting in lines of up to 100 people, now a frequent occurrence.

The war’s financial consequences extend beyond the wheat market.

Fertilizer companies like Carthage Horticulture are running short of the chemicals from Russia that are needed to maximize domestic crop yields. Ridha Sahbani, the store manager, said he has not received a shipment in six weeks. The government is promoting a liquid ammonia solution from Spain as an alternative, but it is twice as expensive, he said.

If Tunisian farmers later this year cannot obtain or afford enough fertilizer, next year’s wheat harvest could fall short. That would leave the government competing with other desperate buyers to import even more grain at a time when global supplies are likely to be tight and prices elevated. The dire outlook has many analysts warning of the potential for social unrest.

“In Tunisia, social peace is related to what you get in your stomach. Imagine if there is no bread,” said Faouzi Zayani, a member of the executive board of Synagri, an agricultural organization.

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Tunisia also relies on foreign oil producers for almost half of its needs. So triple-digit oil prices are rippling through the economy, contributing to increasing consumer price inflation.

Hammami Transport, a trucking company that delivers shoes, apparel, furniture and other goods throughout Tunisia, feels the pinch from rising diesel fuel prices.

“It costs a lot for us — 500 dinars [almost $170] extra each month,” said Mousa Darmoul, who manages the Tunis depot. “If it keeps going up, we’ll have to lay off workers.”

The government heavily subsidizes the cost of bread in a bid to maintain social stability. So consumers pay a flat 200 milims — or roughly 7 cents at the official exchange rate — for each freshly baked baguette. (Unsubsidized private bakeries like Lounissi’s charge 250 milims.)

Since the 2011 Arab Spring protests, which began in Tunis, the Tunisian economy has grown on average by a paltry 1 percent annually, according to the World Bank. With limited job opportunities for young people, the government has tried to maintain social peace by putting people on the public payroll. That’s driven the civil service salary bill to among the highest in the world and saddled Tunisia with a ballooning debt.

As the Ukraine war began, Tunisia was still recovering from its worst economic downturn since achieving independence from France in 1956. The pandemic slashed output in 2020 by more than 8 percent.

Along with creating higher commodity costs, the war is hurting Tunisia’s exports to Europe and depressing its tourism business. Russian tourists, who came by the thousands to enjoy the country’s Mediterranean beaches, are staying home, while the famed Roman ruins at Dougga on a recent day saw more grazing sheep than paying customers.

Even before the war, the government’s finances were in crisis. In December, six ships loaded with grain arrived at the port of Sfax and were not unloaded for weeks as Tunisian authorities scrounged for the necessary cash.

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The economy, already suffering from high inflation and unemployment, is headed for more of both. And the political climate is stormy, too. President Kais Saied last month dissolved the parliament, eight months after he dismissed his prime minister and invoked emergency powers.

As the war drives up the cost of the food, fuel and fertilizer that Tunisia imports, it is presenting Saied’s government with a dilemma. Wheat prices have settled about 30 percent above prewar levels. Russian fertilizer prices began rising late last year and are now more than triple their long-run average. And oil prices that top $100 a barrel are well above the $75 figure Tunisian budget writers assumed for this year.

The higher costs could add more than $1.5 billion to Tunisia’s subsidy bill and its need for outside financial help, economists said. The country is unable to raise money in global financial markets. Fitch Ratings recently downgraded Tunisia to “CCC,” a sign that the country’s defaulting on its debt for the first time is “a real possibility.”

The government is negotiating with the International Monetary Fund for financial help expected to total several billion dollars in return for sweeping economic reforms, including deep cuts in the subsidies that keep bread and fuel cheap — and the country calm.

Tunisian leaders have begun increasing fuel costs by 3 percent each month. But prospects for securing agreement from the country’s main labor union for more-comprehensive cuts remain uncertain.

The government is also haunted by a December 1983 episode when it announced plans to double the price of bread, triggering 10 days of riots across the country that killed more than 100 people and forced officials to reverse course.

“They can reduce the subsidy on some items, anything else, but not bread,” said Mohamed Bouanane, who runs a government-subsidized bakery. “They can’t increase the price by even 10 milims. The authorities are afraid to raise the price!”

The grocery kiosk in the impoverished village of Henchir Khlil, about a 40-minute drive south of Tunis, normally opens for business at 5 a.m. and doesn’t close until 8 p.m. But several times recently, it’s been shuttered for hours each day as grocer Salah Dhaw, 70, hunts for the wheat, flour and cooking oil he needs to stock his little store.

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Until recently, those supplies came from a warehouse in the nearby town of Mornag. But lately, the warehouse has been running short of cooking oil and flour. Dhaw said he has written to a local government official, beseeching him to increase the quota for the Mornag warehouse.

On a recent visit, Dhaw found stacked on the concrete floor of the warehouse only 100 bags of semolina flour, which is made from imported durum wheat and used to make pasta and couscous — not nearly enough for the 270 area groceries. The proprietor, Walid Khalfawi, said he also had been able to obtain only 80 12-bottle crates of cooking oil.

“I’m under a lot of pressure from people coming and asking me for oil and semolina. They come to me and complain and say, ‘We’re dying of hunger,’ ” Dhaw said, speaking at the warehouse.

During a late afternoon visit to his village the next day, the pressure was evident. Around 5 p.m., when Dhaw opened the shutters on his kiosk, his neighbors thronged the counter, only to find that he had again been unsuccessful.

Mabrouka Trabelsi, a mother of three, wanted cooking oil. She had left her empty bottles at the store earlier in the day for Dhaw to fill, hoping that he would obtain fresh supplies. The lack of oil had forced her to substitute butter, which is much more expensive.

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“It’s not just oil,” she said, complaining of the shortages. “It’s other items. Sometimes, it’s sugar. Sometimes, it’s rice. The necessary things we need for our daily lives.”

Inside the tiny grocery, a barren room illuminated by a single bare bulb overhead, the shelves held eggs, cookies, canned tomatoes and soda. Many of Dhaw’s customers buy on credit, leaving him with more IOUs than dinars. He pulled open a wooden drawer to reveal the lonely handful of coins inside.

Among the villagers, there was a drumbeat of chatter about their daily bread. A bakery that normally delivers here had not done so for three days.

Fraj Werhemmi said he went to Mornag recently looking for bread, but made the mistake of stopping for coffee at a cafe near another bakery.

By the time he’d finished his drink, the bakery had run out of loaves.

“Now I have to take my coffee to stand in the line. I can’t even sit and drink anymore!” he said. “When I watch the news, they show oil going into bottles and semolina going into boxes and they say everything is available. Then when I go to the store the next morning, I find nothing.”

Neighbor Moncef Allagui chimed in: “I went to seven bakeries last Sunday and didn’t find any bread. Some already had closed for lack of semolina and others just ran out.”

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Multiple explanations have been offered for the shortages, including panic buying by consumers and diversion of products by corrupt officials. Months of deterioration in the government’s financial health coupled with the interruption of normal trade with Ukraine and Russia has given Tunisians reason to fear that the situation will get worse.

“Instead of taking two pieces of bread, they take four or five. They are ready to fight each other for flour,” said Ahmed Yahyaoui, who operates a bakery in the working-class Ettadamon neighborhood of Tunis. “People are afraid there might be a crisis soon.”

Bakeries and mills divert some subsidized wheat supplies for sale to livestock farmers, according to an individual familiar with the situation who spoke on the condition of anonymity to discuss illegal practices. Farmers who otherwise would pay 1,000 dinars (about $335) per ton of corn or soybeans to feed their animals can substitute the subsidized wheat, which costs just 420 dinars (about $140), the individual said.

Others point to the profitable smuggling trade that runs from Tunisian milling facilities and warehouses to the coastal town of Ben Guerdane and into neighboring Libya.

Unscrupulous Tunisian executives resell subsidized wheat or flour in Libya for a multiple of its original price. A mill can report that a bakery bought 200 bags of flour, but deliver only 100 of them while diverting the rest to the black market.

Lounissi, the baker who argued with the man in the Volvo cap, said he has resorted to paying bribes to obtain scarce supplies. A 20-kilogram (44-pound) bag of flour should cost 14 dinars, or roughly $4.68. But on the black market, it can fetch 20 dinars, or about $6.72, he said.

“It’s better to buy it for 20 than to close the bakery,” he said.

Bechir Kthiri, head of the government’s Office of Cereals, which is responsible for imports of wheat and barley, said the country’s stockpile is sufficient for the three months until the domestic harvest comes in.

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Amid reports that the government has struggled to pay for some imported wheat, Kthiri acknowledged that some payments have been late. But he played down the significance of the delays, saying they had lasted for only 10 days and affected a handful of ships.

No vessel had returned to its port of origin without being unloaded, he said, rejecting talk that some ships had sailed home empty-handed. Kthiri blamed the government’s opponents for exaggerating the difficulties.

“Nobody can deny that the financial situation in Tunisia is tough,” he said. “There are always some people trying to take political advantage of what’s going on.”

Indeed, the capital echoes with talk that the government has been juggling its accounts to keep pace with the more costly imports.

Tunisia’s domestic harvest depends on farmers like Anis Ferchichi. A former schoolteacher, he began in 2009 raising wheat and colza, which yields a cooking oil. At first, he managed to eke out a profit from the 135 acres he leased from the government in the town of Medjez el Bab. The past five years, however, have seen only losses.

This year, he had trouble obtaining enough fertilizer. Diammonium phosphate, which Tunisia imports from Russia, was in short supply. And bureaucracy stymied his efforts to obtain ammonium nitrate, which has explosive properties and is subject to government controls.

To purchase the nitrate, farmers must first obtain approval from the local office of the national guard, an internal security force. But that office does not open until 8 a.m., three hours after the agricultural supply depot starts work.

“When I go to register my name to get my quota, they say, ‘No, the shipment needs to come first.’ When it comes, they say, ‘It’s already sold out.’ A big farmer has filled his truck,” Ferchichi complained.

The results can be seen in his field. Just 90 days from harvest, his wheat is only half as tall as the crop on an adjacent plot belonging to a wealthier farmer.

Ferchichi’s costs are rising, too, as a consequence of the war. Higher fuel prices raise the hourly rental tab for harvesting equipment to 160 dinars (about $54) from 130 (about $43) last year.

His 15-year contract with the government still has two years to run. But in his frustration, Ferchichi is thinking of converting his farm into a campground or surrendering it to the authorities and returning to the classroom.

“I prefer to give them back the land and receive a salary again. I’m looking for an alternative,” he said.

After all his work, Ferchichi does not want to concede defeat. But to plant a new crop at the end of the year, he will need more fertilizer than he managed to find this year. And paying for it will require going deeper into debt.

“I’m 41 years old and I’m still renting a house. My brother lives abroad and he’s helping me, and my sister in Germany is helping me, as well,” he said. “ … It’s like I have the enemy behind me and the sea in front of me.”

Ahmed Ellali contributed to this report.

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