Every Recent Oil and Food Price Shock Bears Putin’s Fingerprints

Russia is a pivotal actor in global markets—and its president is willing to destabilize them for political gain.

By , a senior fellow at the Peterson Institute for International Economics.
Two people walking on the side walk in Red Square are framed by ears of wheat in the foreground.
Two people walking on the side walk in Red Square are framed by ears of wheat in the foreground.
Pedestrians walk past an art installation featuring ears of wheat on the edge of the Red Square in central Moscow on Aug. 27. ALEXANDER NEMENOV/AFP via Getty Images

The current global food and oil price crisis, proximately triggered by the war in Ukraine, is the third such crisis in 15 years. Before 2008, there had not been a similar crisis in over three decades. These increasingly common twin crises pose compounding challenges, not just for food- and fuel-import-dependent countries but also for food-exporting developing and middle-income countries. But they also raise a deeper question: Why are concurrent food and oil price shocks occurring so frequently in the 21st century?

The answer is complicated. But one government’s actions have been critical in precipitating or contributing to all three 21st-century crises: Russia’s. Under President Vladimir Putin, Russia’s 21st-century emergence as a pivotal actor in both global food and fuel markets—and Putin’s willingness to destabilize these markets for political gain—have caused or exacerbated these recurrent crises.

Prior to the 1990s, global food and oil prices were essentially uncorrelated. Prices for oil could spike—as they did in 1979—without a corresponding increase in food prices. Since 1990, though, global prices for food and oil have been much more highly correlated.

The current global food and oil price crisis, proximately triggered by the war in Ukraine, is the third such crisis in 15 years. Before 2008, there had not been a similar crisis in over three decades. These increasingly common twin crises pose compounding challenges, not just for food- and fuel-import-dependent countries but also for food-exporting developing and middle-income countries. But they also raise a deeper question: Why are concurrent food and oil price shocks occurring so frequently in the 21st century?

The answer is complicated. But one government’s actions have been critical in precipitating or contributing to all three 21st-century crises: Russia’s. Under President Vladimir Putin, Russia’s 21st-century emergence as a pivotal actor in both global food and fuel markets—and Putin’s willingness to destabilize these markets for political gain—have caused or exacerbated these recurrent crises.

Prior to the 1990s, global food and oil prices were essentially uncorrelated. Prices for oil could spike—as they did in 1979—without a corresponding increase in food prices. Since 1990, though, global prices for food and oil have been much more highly correlated.

Beginning in the 1990s, a variety of structural changes to the global economy led prices for many commodities to become increasingly intercorrelated. The collapse of the Soviet Union and the Council for Mutual Economic Assistance—the Soviet-led trading system linking communist and socialist economies in Europe, Cuba, and Vietnam—integrated the former Soviet states’ food and fuel exports into a common global market. Meanwhile, China’s rapid economic rise led to a voracious appetite for both food and energy imports.

In the 21st century, climate change, expansionary monetary policies in major economies, increasing financialization of commodity markets, conversion of land for biofuel production, the continued spread of energy-intensive industrial agricultural techniques, and changes in buffer stock policies—the practice of maintaining large physical reserves of grain to “buffer” supply disruptions—in the United States and European Union all have exerted upward pressure on prices.

But price spikes, marked by rapid price increases, are poorly explained by comparatively slow-moving structural changes.

Prior to the Ukraine war, Russia had emerged as the world’s largest exporter of oil and second-largest exporter of crude petroleum, as well as the world’s largest exporter of wheat and second-largest of cereals (wheat, maize, and rice, along with more minor grains such as barley and sorghum). Both positions guarantee that Russia’s behavior will have outsized impacts on prices. And since food and fuel are both necessities and are viewed as explicit or implicit entitlements—meaning citizens will expect their governments to address high prices or scarcity related to these items—the ability to manipulate food and fuel prices can confer significant strategic leverage to exporting countries.

By themselves, these positions would not necessarily be worrisome. But when these market positions are combined with ambitious, highly revisionist policy goals like those of Putin’s Russia, they can be weaponized. With respect to oil, international relations scholars call this phenomenon “petro-aggression.” Even when food and fuel exports aren’t weaponized, autocratic leaders often resort to policies—such as export bans in times of high prices—that push prices for banned commodities higher. And Russian policy responses have been key in all three recent food and fuel prices crises.

Regarding the current crisis, the case for direct Russian culpability is open-and-shut: Against a backdrop of already high global food prices and rising oil prices, Putin’s invasion of Ukraine—itself a large wheat exporter—sent oil and food prices even higher. The price effects have been amplified by Western sanctions, but those policy responses would obviously not have occurred absent the invasion.

With respect to the 2010-2011 spike, the case is less obvious but still compelling. In July 2010, the International Monetary Fund food price index sat at 102.4, just 5 percent higher than its 21st-century average. Then, on Aug. 5, the Russian government announced a complete export ban on wheat and several other minor grains in response to drought and wildfires in major growing regions. By January 2011, global prices had climbed by nearly 25 percent, with particularly disastrous consequences for importing countries in the Middle East.

The Arab Spring protests—in part motivated by grievances over high food prices—then engulfed the region, including significant oil exporters Libya and Syria. These political crises pushed oil prices to record levels. Incidentally, the export ban did little to deflate domestic food prices in Russia but did goose then-Russian President Dmitry Medvedev’s and Putin’s approval ratings, which was arguably their most intended effect.

Of the three crises, the case is weakest for 2007-2008. The food crisis was already underway in January 2008 when Russia imposed a 40 percent export tax on wheat for exports outside of the Eurasian Economic Community (EAEC), the organization that eventually formed the basis for its customs union. A month later, Russia extended the tax to cover exports within the EAEC to avoid reexport through Kazakhstan and Belarus. In subsequent months, prices climbed higher. That year’s oil price crisis had already peaked and was abating when Russia launched its 2008 invasion of Georgia. Unlike the Ukraine conflict, the Georgian conflict was short-lived (less than two weeks total) and had a negligible effect on prices.

Russia was not alone in pursuing food export restrictions in either 2007-2008 or 2010-2011. Especially in the first period, it was a standard part of the policy response playbook, used by Argentina, Indonesia, and Ukraine, among others. Nor were its invasions of Georgia and Ukraine—and the U.S. and EU response thereto—the only factors driving higher food and oil prices. Indeed, both invasions can be viewed as a partial consequence—not just a cause—of high oil prices. But Russia’s pivotal positions in these markets mean Putin’s bully- and beggar-thy-neighbor policy responses land differently than the same policies pursued by rulers in less central economies or those who are less inclined to invade their neighbors.

The long-term outlook for Russia’s role as linchpin of global food and energy markets is mixed. As global energy systems transition away from fossil fuels, the country’s vast oil and gas reserves will become wasting assets. Russia has made only token investments in solar and wind energy. Despite the country’s extensive network of rivers, hydropower is comparatively underdeveloped. As its energy reserves decline in value, so will its influence over global energy markets and attendant ability to use energy as both a shield and a sword.

However, the opposite is true of Russia’s agricultural potential. Climate change is increasing its stock of arable land and leading to longer growing seasons as many countries in the global south will experience declining yields and will become more, rather than less, dependent on global commodity markets to satisfy their food needs.

In the near term, however, Russia will remain globally pivotal unless other, more reliable countries increase their production and exports. The U.S. CHIPS Act and Inflation Reduction Act are intended to both boost the U.S. economy and build supply chain resilience to avoid being dependent on Chinese and other East Asian semiconductor and renewable energy producers. Large investments in expanding agricultural capacity and maintaining buffer stocks—one of the best hedges against price spikes and volatility—are warranted on similar grounds.

Russia is not solely to blame for the recurrent food and fuel price crises of the 21st century. But the war in Ukraine has removed all doubt as to whether Russia can be counted on as a reliable, responsible actor in global markets, and Russia’s actions have global consequences. The future of global energy and food security cannot be left in its hands.

Cullen Hendrix is a senior fellow at the Peterson Institute for International Economics, nonresident senior research fellow at the Center for Climate & Security, and professor at the University of Denver. Twitter: @cullenhendrix

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