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Ukraine war triggers oil and political shocks

Fuel and commodity price hikes hit Egypt and Sudan hard but could benefit Algeria, Angola and Nigeria

Two weeks after Russia's invasion of Ukraine, the economic fall-out is sweeping across Africa. President Abdel Fattah el Sisi's government in Egypt appears the most vulnerable in the first wave of economic shocks, closely followed by its ally, Gen Abdel Fattah al Burhan's junta in Sudan (AC Vol 63 No 5, Alliances come under heavy fireHow Putin revived Moscow's reach & Moscow invasion strains bilateral ties).

Both countries are dependent on wheat and vegetable oil imports from Russia and Ukraine. Before the invasion, Sisi and Burhan were trying to manage spiralling increases in food prices. It is top priority for both men. Their predecessors, Hosni Mubarak and Omer Ahmed Hassan el Beshir, were toppled in rebellions triggered by rocketing bread prices.

Egypt is the world's biggest importer of wheat and one of ten biggest importers of sunflower seeds. Cairo's foreign exchange reserves are over US$40 billion, which will come under pressure as the government has to finance subsidies on fuel and essential commodities for 105 million citizens after two years of pandemic economics.

Sudan's generals face still greater challenges as mass protests against the junta have continued across the country. Khartoum's foreign reserves have crashed to under $3bn this month and are under growing pressure from the threat of renewed sanctions against the junta after the mass killing of pro-democracy activists. 

The trip to Moscow by Mohamed Hamdan Dagalo 'Hemeti', deputy leader of Sudan's junta, while Russia's invasion of Ukraine was under way, further alienated the United States and European Union members, as did Hemeti's subsequent public offer of a naval base to Moscow on the Red Sea.

We hear that Hemeti's offer of the naval base was seen as tactically inept by some top military officers who have been trying to discreetly open channels with western countries to pre-empt a new round of sanctions. Their concerns were reinforced by warnings from Saudi Arabia, which would not welcome an expansion of Russian naval power in the Red Sea. 

For now, with oil prices topping $130 a barrel, the Ukraine crisis offers a short-term, perhaps longer, opportunity to Africa's biggest oil and gas producers. Algeria and Nigeria have already opened talks with EU importing countries about sharply increasing gas production, delivered both by pipeline and by liquefied natural gas.

State oil company officials in Abuja and Luanda are sounding out investors to upgrade oil production urgently in the light of US support for sanctions on Russian oil exports. Due to a lack of investment, production in both countries has slumped to well under 2m barrels a day. With fast-track investment both countries could add another million barrels per day.

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