If neglected, the Cura Annonae will be the utter ruin of the state”. Emperor Tiberius ran the Roman Empire for a quarter of a century, between AD 14 to 37. Having served in the Roman army into modern-day Iran, he knew the Middle East region all too well. Notably, he was also a sourcing and supply chain practitioner.
Out of necessity. Survival, really. About 200,000 of Rome’s adult male citizens, in a city of 1 million were eligible for a government programme which doled out free or subsidised grain, and later bread, through a programme called Cura Annonae, (i.e.) in the care of a goddess by that name. Grain came from Egypt, mainly, and with it came social peace. And while the title of ‘Prefect’ is rare nowadays for supply chain managers, it was then bestowed along with sweeping powers, to get the grains to Rome.
Against the backdrop of a raging conflict, the deal signed between Turkish President Recep Tayyip Erdogan and UN chief Antonio Guterres on July 22, 2022 in Istanbul was a turning point of global consequence and successfully managed to broker a deal between Ukraine and the Russian Federation. At the heart of the deal is the reopening of exports of grains and fertilisers to the rest of the world, something that combat operations and sanctions had effectively ground to a halt. Ships, ports, cranes and logistics hubs cautiously came alive again.
This happened not a moment too soon. Already 30 percent of the global population lives in areas with a Self Sufficiency Ratio (SSR) below 80 percent. This is the ratio of domestic production to consumption, based on the Food and Agriculture Organisation (FAO) basket that accounts for all edible substitute products for grains, based on protein content. That means every fifth day, over 2 billion people depend on imports for their minimum food intake.
Another 49 percent of the world rely on trade along sprawling supply chains. The lack of fertilisers, mainly from Russia, would amplify the effects across geographies, time, and harvests for 18-24 months to follow, at a minimum. A closer look at the fragility in sustenance of that 80 percent of the world’s population brings into focus several underlying dependencies that are still not making headline news, but shape their fundamentals.
For starters, the July 22nd agreement was the first time that Russia and Ukraine came to an agreement since the start of the conflict. Russian Defense Minister Sergei Shoigu and Ukrainian Infrastructure Minister Oleksandr Kubrakov decided to sign separate mirroring agreements with the UN and Turkey respectively, instead of directly with one another due to political necessity. But the countries signing an agreement at all was a monumental achievement.
The agreement had nothing to do with peace, regrettably, and was centred on the trade of commodities.
The sourcing, trading, and supply chain of food commodities was the only slated agenda point capable of bringing the conflicting parties to the table in five months. The potential fallout of the global food trade collapsing made world leaders in conflict step in, to fix supply chain issues, before they could even countenance meeting their counterparts on any other topic.
Supply chains of global commodities should permeate the strategic planning of foreign affairs at the highest governmental level. Their nature poses monumental risks that can mature into pre-eminent opportunities for virtuous policy making and impactful diplomatic initiatives. In other words, short supply chains make short-term planning easier, global supply chains make long-term planning viable.
For more than ten years, the Russian Federation has secured the lion’s share of grains exports to the four countries controlling the chokepoint straits, targeting their markets even when their clearing prices were below international trades. Kearney interviews with Russian grain market traders confirm they were incentivised and guided even, to prioritise those markets. In 2020, Russia exported 64 percent of Turkey’s grains, 60 percent of Egypt’s, 87 percent of Eritrea’s and 33 percent of Yemen’s grains.
Yet, bordering countries without direct control of a strait import a meagre 2-9 percent from Russia. A coincidence? The Hormuz strait into the Arabian Gulf is controlled by three countries with grain imports from Russia of 21-41 percent, while neighbouring countries range to a maximum of 2 percent. For context, a drop of 30 percent in Russian grain exports to North Africa in 2010 due to a bad harvest caused a spike in bread price of 64 percent, triggering riots and the Arab spring.
Market forces can point to sources, availability of trades, price-clearing levels to a large extent. But not all. A purely capitalist view of market forces can create efficiencies in the short-term, but the long game can be in the hand of players who do not measure results in quarterly earnings reports. In other words: a traditional supply chain view will make operations efficient and a deeper understanding of geopolitical forces at play will make them effective.
There is no better place in the world than the Middle East, the GCC in particular, to engage the full spectrum of opportunities and options, navigating straits as well as geopolitics, and be at the core of decisions that affect the sourcing, logistics, and supply chain of businesses as well as the news-making events. The supply chain managers may not get a prefecture by a Roman emperor, but there’s more at stake than what even the most dazzling dashboards can show.
There are three critical factors that should not be neglected to ensure a secure state of affairs within your organisation: Redefine the supply chain you look at to include trades besides your shipments and players outside of your industry; Play to different timescales to include any “background noise” that can charge to the fore; Operate at different bottom lines. Make sure you meet yours, but consider any variations due to the different timescales, and the agendas of key geopolitical players.
These will take your organisation’s supply chains per aspera ad astra – through toils to the stars. This, I’m sure, Emperor Titus would approve of.