Hormuz Strait in The Checkered Ceasefire
Re-opening the Strait of Hormuz would bring vital relief for many economies, but developing countries will continue to grapple with increased food and fuel costs, according to a new UN report released on Tuesday.
Following the shaky ceasefire in the US and Israeli war with Iran, commercial shipping through the strait quickly began to rebound in mid-June, but has slowed in recent days as Washington and Tehran have exchanged strikes in the region.
Iran has reportedly rejected an effort by France and Oman to remove mines from the strait and safeguard international trade as well as a suggestion by the UN’s International Maritime Organization (IMO) to open a new shipping lane off the coast of Oman.
While the report from the UN Trade and Development agency (UNCTAD) expects oil shipments to recover, it warns that freight contracts, supply chains and food systems would take longer to adjust and that high food costs could contribute to acute malnutrition in developing countries.
Vulnerable economies bear the brunt
Higher energy prices fuel higher transport costs, agricultural costs and inflation, which increases food prices long after the initial shock, UNCTAD noted.
Small island countries like Cabo Verde and Micronesia depend heavily on food and oil imports, which creates a “dual exposure” to shocks, making them especially vulnerable to price increases, UNCTAD said.
The agency estimated that 61 vulnerable economies are exposed to both oil and cereal import shocks.
Developing countries and small island States also tend to have tighter public finances and therefore less ability to absorb shocks, according to UNCTAD.
If these countries face difficulties mobilising resources, a heavy debt servicing burden, a drop in remittances or a decline in international aid, trade shocks could affect small nations even more.
Impact on food security
Beyond economic impacts, UNCTAD warned that although it is necessary to fully re-open the strait, food production risks remain.
Even short periods of unaffordable food in import-dependent countries can have lasting consequences for child wasting, meaning that a child has a low weight-for-height.
As real food prices increase by five per cent, the risk of child wasting increases by 15 per cent for poor children and 26 per cent for children of rural, landless poor households.
The report called for greater international support to help countries manage higher import costs, cushion food and fuel price shocks and strengthen their ability to cope with future trade disruptions.
“These shocks will be felt for many months, with developing countries bearing the heaviest impacts. I call on all parties to honour the ceasefire and redouble efforts,” UN Secretary-General António Guterres said. UN News
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