World Bank: War in Ukraine Raising Risks for MENA

The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
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World Bank: War in Ukraine Raising Risks for MENA

The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)
The World Bank Group building is viewed on an empty street in Washington, D.C., US, April 13, 2020. (AFP Photo)

The war in Ukraine has "multiplied risks" for the Middle East and North Africa's poorer countries by raising food and energy prices, the World Bank said Thursday, warning of potential social unrest.

In its latest update to its MENA growth forecast, the development lender said inflationary pressures set off by Covid-19 "are likely to be exacerbated" by Russia's invasion.

"The threat of Covid-19 variants remains and the war in Ukraine has multiplied risks, particularly for the poor," the World Bank's MENA vice president, Ferid Belhaj, said in the report, titled "Reality Check".

World Bank president David Malpass said this week that the Russian war on Ukraine has started a chain reaction in the global economy, pushing energy and food prices higher, exacerbating debt concerns and potentially worsening poverty and hunger.

"Rising food prices may have far-reaching effects beyond increasing food insecurity," said the report, adding: "Historically in MENA, increases in bread prices have... contributed to increased social unrest and conflict.

"This link between food prices, conflict and low growth poses a serious concern for the humanitarian crisis in fragile, conflict and violence-affected states in MENA," it said.

Ukraine is a key source of grain, while Russia is a major producer of energy and fertilizer needed for agriculture. The MENA region is heavily dependent on wheat supplies from both countries.

According to the report, inflation in Gulf countries is expected to reach 3.0 percent this year compared to 1.2 percent in 2021, and will rise to 3.7 percent in oil-importing countries from 1.4 percent last year.

"For some oil importers, food subsidies would be hard to maintain due to limited resources," while "rising oil prices could delay reforms", the report said.

Despite that, the World Bank forecasts that economic growth in the region will be 5.2 percent in 2022, the fastest rate since 2016.

"The region as a whole is buoyed by oil" and is doing "much better" than any other in the world, lead economist for the MENA region Daniel Lederman told AFP in an interview.

However, the expected growth is "insufficient and uneven".

"Insufficient because a large number of economies in the MENA region will still be poor in terms of their GDP per capita relative to where they were in 2019 in the eve of the pandemic," he said.

And "uneven because the faster (recovering) economies for 2022 are expected to be oil exporters, but oil importers are expected to suffer".

Lederman urged greater transparency from MENA governments regarding their economic data, citing this as a factor behind previously overoptimistic forecasts.

"Published research in leading economic journals in the world indicate that overly optimistic and imprecise forecasts are associated with debt and financial vulnerabilities, higher probability of financial crises and even economic contractions in the near future," he said.



US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
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US Treasury Targets Russia's Gazprombank with New Sanctions

FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo
FILE PHOTO: A bronze seal for the Department of the Treasury is shown at the US Treasury building in Washington, US, January 20, 2023. REUTERS/Kevin Lamarque/File Photo

The United States imposed new sanctions on Russia's Gazprombank on Thursday, the Treasury Department said, as President Joe Biden steps up actions to punish Moscow for its invasion of Ukraine before he leaves office in January.
The move, which wields the department's most powerful sanctions tool, effectively kicks Gazprombank out of the US banking system, bans its trade with Americans and freezes its US assets, Reuters reported.
Gazprombank is one of Russia's largest banks and is partially owned by Kremlin-owned gas company Gazprom. Since Russia's invasion in February 2022, Ukraine has been urging the US to impose more sanctions on the bank, which receives payments for natural gas from Gazprom's customers in Europe.
The fresh sanctions come days after the Biden administration allowed Kyiv to use US ATACMS missiles to strike Russian territory. On Tuesday, Ukraine fired the weapons, the longest range missiles Washington has supplied for such attacks on Russia, on the war's 1,000th day.
The Treasury also imposed sanctions on 50 small-to-medium Russian banks to curtail the country's connections to the international financial system and prevent it from abusing it to pay for technology and equipment needed for the war. It warned that foreign financial institutions that maintain correspondent relationships with the targeted banks "entails significant sanctions risk."
"This sweeping action will make it harder for the Kremlin to evade US sanctions and fund and equip its military," Treasury Secretary Janet Yellen said. "We will continue to take decisive steps against any financial channels Russia uses to support its illegal and unprovoked war in Ukraine."
Gazprombank said Washington's latest move would not affect its operations. The Russian embassy in Washington did not respond to requests for comment.
Along with the sanctions, Treasury also issued two new general licenses authorizing US entities to wind down transactions involving Gazprombank, among other financial institutions, and to take steps to divest from debt or equity issued by Gazprombank.
Gazprombank is a conduit for Russia to purchase military materiel in its war against Ukraine, the Treasury said. The Russian government also uses the bank to pay its soldiers, including for combat bonuses, and to compensate the families of its soldiers killed in the war.
The administration believes the new sanctions improve Ukraine's position on the battlefield and ability to achieve a just peace, a source familiar with the matter said.
COLLATERAL IMPACT
While Gazprombank has been on the administration's radar for years, it has been seen as a last resort because of its focus on energy and the desire to avoid collateral impact on Europe, a Washington-based trade lawyer said.
"I think that the current administration is trying to put as much pressure and add as many sanctions as possible prior to January 20th to make it harder for the next administration to unwind," said the lawyer, Douglas Jacobson.
Officials in Slovakia and Hungary said they were studying the impacts of the new US sanctions.
Trump would have the power to remove the sanctions, which were imposed under an executive order by Biden, if he wants to take a different stance, Jacobson said.
After Russia's invasion in 2022, the Treasury placed debt and equity restrictions on 13 Russian firms, including Gazprombank, Sberbank and the Russian Agricultural Bank.
The US Treasury has also worked to provide Ukraine with funds from windfall proceeds of frozen Russian assets.