The Water-Energy-Food Nexus in the Arab World and Financial Challenges

Martin Keulertz and I have published a new article in the International Journal of Water Resources Development: “Financial Challenges of the Nexus: Pathways for investment in water, energy and agriculture in the Arab world.”

Abstract:

The Water–Energy–Food (WEF) nexus is a development challenge in the Arab world,
particularly in the ‘core nexus countries’ with low to mid-incomes in which limited
water endowments permit agricultural production, such as Egypt, Morocco, Tunisia,
Lebanon, Algeria, Sudan and Jordan. The WEF nexus is often conceptualized in mere
technocratic terms, yet politics matter in the implementation of projects that address it.
Internalizing hydrological externalities or leaving them as they are and financing them
as a public good requires states whose capacities have been reduced as a result of
neoliberal reform. The article explores five different pathways of how Arab countries
could finance green growth projects ranging from regional financial markets to
concessionary loans by funds from oil rich Gulf countries.

The Water Energy Food Nexus in Drylands

I have just returned from the conference about the Water Food Energy Nexus in Drylands that CIDOB has organized together with the OCP Policy Center in Rabat, King’s College London and Texas A&M University.

Approximately two billion people live in arid countries. One third of the global population will be most affected by water scarcity and climate change. Efficient management of water resources for food and energy production is a developmental challenge that requires holistic approaches. The water-food-energy nexus highlights that food, water and energy security are inextricably linked and that any decision in one of the three sectors has consequences for the other.

Nowhere else this nexus is as evident as in dry lands and in the MENA region in particular. Energy will be required to pump, treat and desalinate water for domestic and agricultural purposes. Water will be required to produce energy. About 1-2 percent of global energy consumption can be attributed to the production of nitrogen fertilizer alone. Such development challenges call for a nexus approach to broaden the analysis from a mere ‘blue water’ focus to the more efficient use of soil moisture (‘green water’) and sustainable policy options.

Tony Allan of King’s College pointed out that the nexus between water, energy, and food was first conceptualized at World Economic Forum 2011, which was then followed by a high profile conference organized by the German Ministry of Economic Cooperation (BMZ).

Since the 1980s there have been growing sustainability concerns about the various hydraulic missions that have been undertaken since the 1850s. The constant rise in irrigation since the 1960s coincided with declining food prices – until 2008. Further irrigation growth is unsustainable. There has been a peak of World Bank dam financing in 1980.

As a result the focus has shifted from blue water to green water since the 1990s and the latter’s major role in food and virtual water trade. About 70 percent of global crops are rainfed and rely on green water.

Sustainable intensification, protection of farm livelihoods, supply chain management, waste and consumption issues are crucial in Allan’s view. This was echoed by Brian Chatterton, a farmer and a former Minister of Agriculture of South Australia and Lynn Chatterton, an independent consultant. They complained that farmers have not been at the center of attention of the international agro research establishment, which has focused on higher yields instead of lower costs and ecological factors, which are crucial for farmers. They also deplored a relative neglect of pastoralists in extension services, symbolized in the FAO’s closure of its pasture department.

The Chattertons described the green revolution as an abject failure in dry lands because its application of nitrogen fertilizer relies on reliable rainfalls, yet they were optimistic that yields can be improved without more water and irrigation and pointed out that productivity in Australian drylands is 2-4 times higher than in the MENA region without more water and in similar climatic conditions. In the same vein Kris Dodge of ICARDA demonstrated how adapted seeds and plowing techniques, rain harvesting and supplemental irrigation can improve yields in the MENA.

Existing reporting and accounting rules do not account sufficiently for natural resources like water as inputs as Tony Allan, Martin Keulertz of Purdue University and myself pointed out. Rainfall frequency is often reflected in land prices, at least in developed markets, there are also varying pricing schemes for irrigation water in some countries, yet often water remains external to the economy. In case of damage there are only limited sanctions in place to internalize costs, while its provision as a public good is compromised by limited state capacities that have been weakened after decades of neo-liberal reform.

Thus there is a danger that the nexus is conceptualized in apolitical and technocratic terms, as Harry Verhoeven of Oxford University deplored. Often there is a focus on technical fixes, presumably neutral scientific policy choices and “governance”. Yet politics rather than governance matter in water, energy and food allocation and imply control over people. Such politics entail winners and losers as Verhoeven outlined in a depiction of the political economy of the nexus in the Nile Valley.

Other country examples included Jordan, Lebanon, Syria, Egypt, Yemen, Qatar, Darfur, USA, Ethiopia, Senegal, Tunisia and Morocco. Bassel Daher of Qatar Foundation demonstrated his nexus tool that shows trade offs between water, food and energy allocation in the case of Qatar and could be applied to other countries. Samer Talozi of the Jordan technology University in Irbid showed that 14 percent of Jordan’s electricity production is used for water treatment and pumping. Holger Hoff of the Stockholm Environment Institute and Potsdam Institute for Climate Research and Rabi Mohtar of Texas A&M outlined latest trends in nexus research and forthcoming conferences and research initiatives. Musa Mckee of SOAS, London showed interlinkages between culture and water, food and energy allocation.

Caroline King of the Ecosystems and Human Development Association (EHDA) made a case for improved green water management, particularly in Yemen and Talal Darwish of the National Center for Remote Sensing (CNRS) in Beirut  showed that the effects of climate change in Lebanon have been mainly in the form of irregular rainfall patterns. Decline of overall rainfalls was relatively benign in comparison.

Gabriele Cassetti of Milan Politecnic introduced the TriNex cooperation platform for nexus related projects between European and Egyptian universities that is funded by a Tempus grant of the European Union. Ansoumana Bodian of the Université Gaston Berger (UGB) showed a model how to investigate the effects of rainfall run-off on water resources in Senegal. Rachid Doukkali of Institut Agronomique et Vétérinaire Hassan II and Omar Aloui of Agroconcept demonstrated changes in water and land use in Morocco and related food security issues. Francis Ghilès of CIDOB discussed recent developments in the natural gas industry in North Africa.

Saqib Mukhtar of Texas A&M described problems of the Texan Ogallala aquifer that are similar to challenges in the MENA: Agriculture in Texas uses 80 percent of groundwater and 35 percent of surface water. 66 percent of all groundwater comes from the Ogallala aquifer that stretches all the ay up to South Dakota. Its current recharge rate only covers about 15 percent of withdrawals. Given the accumulated over-extraction it would require 300-1000 years of recharge to go back to the level of the 1940s when large scale irrigation took off.

Brendan Bromwich who worked for many years for UNEP in Darfur showed unintended consequences of water provision in refugee camps against the backdrop of a society that still relies on wood as primary fuel. The water supplies prompted a brick stone industry that required wood and considerably contributed to deforestation. Hence alternative building materials are needed to safeguard energy and soil resources.

Guy Jobbins of the Overseas Development Institute pointed out that Moroccan subsidies for drip irrigation rather benefit wealthier and literate farmers as ‘urfi land of the poor cannot be mortgaged. He also showed the limits of technical fixes: Drip irrigation improves efficiency, but it has not reduced water consumption in Morocco as it prompted farmers to increase the irrigated area and switch to more commercial but water intensive crops. Rural electrification in Morocco went up from 18 percent to 97 percent between 1995 and 2011 and caused a massive growth in installed pumps and irrigation.

As for climate change Mark Mulligan of KCL departed from the current consensus and argued that African dry lands will possibly receive more rather than less rainfall in the future, which could compensate for the negative effects of higher temperatures on agricultural productivity. Rabi Mohtar of Texas A&M pointed out another often forgotten nexus between energy and water: About 70 percent of the water that is used for unconventional oil and gas production via fracking remains underground and is withdrawn permanently from the hydrological cycle. This could diminish water availability in the long run.

Daniel Yeo of the Global Green Growth Institute in Addis Ababa outlined Ethiopia’s strategy of agricultural led development and the role of its dam program while pointing out cleavages between academic and political mindsets. The latter was also highlighted in the concluding key-note address by H.E. Miguel Moratinos, the former Spanish Minister of Foreign Affairs.

In sum water, food and energy are inextricably linked via various nexi and should not be regarded separately. However, a purely technocratic approach should be avoided given the importance of political economy issues in allocation procedures.

The Ability to Pay: One Third of Iranians go Hungry

Sanctions and the resulting currency crisis, the Iranian riyal plunged more than half over the last year, affect food security in the country too.

Food accessibility is compromised for lower income households. About a third of Iranians have been cutting back their diet.Luxury products like dairy or chicken are consumed less.

The situation is exacerbated by neglect of the agricultural sector and recent droughts.

Like in Egypt, strained foreign exchange position affects the ability to import sufficient food at affordable prices.

The Ability to Pay: Egypytian Food Imports Threatened

As a result of its continuous currency crisis Egypt is facing problems in financing food and fuel imports. Lack of diesel for pumps and farming equipment in turn threatens domestic agricultural production.

The country is the world’s largest wheat importer, a dependency that has developed since the 1950s when Egypt started to import large quantities of P.L. 480 deliveries from the US as I describe in chapter 4 of Oil for Food.

This dependency is not to go away despite Egyptian efforts to increase self-sufficiency from currently around 60 percent. There is simply not enough land and water around. Ethiopia has already questioned the Nile waters accord of 1959 that grants Egypt three quarters of the flows.

Egypt is now amidst a demographic transition. Birth rates have been falling and the fertility rate, the average number of children per woman, stands at 2.64. However, it takes time until youth cohorts grow through a population pyramid.  Population will continue to grow to 124 million by 2050 and will only level out afterwards.

That means more food imports while Egypt faces growing problems financing them. It has turned into an oil net importer at the end of the 2000s. Natural gas exports face problems of their own due to underinvestment and sabotage of the pipeline to Israel and Jordan. In any case the rent component of natural gas production is much lower than for oil, even Qatar, the world’s largest LNG exporter receives the majority of its government revenues still from oil.

The problems of Syria are similar. Because of a lack of refining capacity its overall petroleum balance turned negative in monetary terms at the end of the 2000s. Dwindling crude oil exports did not earn as much foreign exchange as was needed to import refined products like gasoline. With the civil war and the EU import embargo against Syria this gap has grown.

Hence, the ultimate story of food security in the Middle East is not domestic agriculture, but economic diversification and the ability to pay for food imports. This is a daunting task given the current global financial crisis and the paltry track record of  the region’s countries in this field.

Al-Dahra Land Deal in Egypt Declared Illegal

An Egyptian court has declared a 100,000 feddan (43,000ha) land acquisition by Abu Dhabi based Al-Dhara illegal.

The transaction happened in 2008 and Al-Dahra anticipated to invest $500 million in the southern Toshka Valley where land has been reclaimed from the desert and is supposed to be irrigated with water from the Nile, which is transported via canals to the project area.

Al-Dhara would lose its acquired land except for a paltry 100 feddans. Something similar happened to Saudi Arabia’s Kingdom Holding in 2011 when it lost most of its land in the Toshka Valley that it had acquired in 1998.

The ruling came after  an anti-corruption case against the former Egyptian Minister of Agriculture Yousef Wali. Wali was also Deputy Prime Minister and General Secretary of the ruling NDP before he was stripped of his official positions in 2004 already under another corruption charge. As a large landowner he used to be a driving force of the Mubarak’s regime drive at economic liberalization.

The Toshka valley project’s diversion of water from the actual Nile bassin is regarded critically by southern riparians like Ethiopia. The Egyptian government hopes to cultivate wheat in the valley as part of its current program for wheat self-sufficiency. However, the  salty soils and the hot climate are hardly suitable for wheat cultivation.

For Gulf countries the examples of Al-Dahra and Kingdom Holding show the risks of legal uncertainties and highlights the importance of fair and transparent deals. Reliance on backdoor deals with corrupt regime representatives can backfire.

The preference of Gulf countries for developed agro-markets like Australia or Argentina will likely be reinforced by these developments.