Three months after the escalation of the conflict in Ukraine, Sri Lanka defaulted on its debts, the government fell in the face of a mass uprising, and the president fled the country.
The link between Sri Lanka’s troubles and a conflict some 4,000 miles away was not immediately obvious. But the timing was no coincidence. Russia and Sri Lanka were in fact linked by global supply chains. Sri Lanka had borrowed excessively (in our 2021 Political Risk in Renewables report, Sri Lanka had been flagged as a country likely to suffer a debt crisis). International tourist arrivals, a key foreign exchange earner for Sri Lanka, had collapsed during the pandemic. And an ill-timed effort to adopt environmentally-friendly fertilizers had sapped the output of the country’s agricultural sector. But most notably, Russia and Sri Lanka were linked by the global energy supply chain.
The conflict in Ukraine then sent global food and energy prices surging. The Sri Lankan government subsidizes the price consumers pay at the pump for petrol. The additional costs would have broken the budget, but when the president tried to remove the subsidies, he found himself with an uprising on his hands, and protesters occupied the presidential residence.
Russia plays a key role in world energy supplies. Ukraine, Russia, and Belarus, taken together, are even more central to the global food supply chain, including not only direct production of wheat and edible oils but also agricultural inputs such as fertilizer.
The shock to global energy markets from the conflict in Ukraine contributed to social unrest in 92 countries in 2022, perhaps most dramatically Sri Lanka and Haiti;1 the shock to global food supplies from the conflict contributed to further unrest and a global food crisis that helped to push Ghana into sovereign default and Egypt and Pakistan into international bailouts. These crises came at a moment when political leaders were already focussed on the security of supply of vital goods in the wake of the pandemic.
How have such shocks reshaped the global food and beverage supply chain? Can agribusiness, commodities trading, and food and beverage companies manage the associated political risks? What risks will companies face if the world food crisis resurges in 2023? What political risk perils might be lurking ‘under the radar’?
The full report can be downloaded below. We sincerely thank the Oxford Analytica contributors who authored the essays, but most of all we thank the expert panel of executives who guided the research for their time and insights.
1 BBC News "Fuel protests gripping more than 90 countries"
|The new political risks in the global food and beverage supply chain
In this webinar we explore how the food and beverage sector are managing the new political risk landscape and predict what new risks might be on the horizon.
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