Agriculture as ISIS Funding Source

The academic journal Food Policy has published an article by Hadi Jaafar and myself about

“Agriculture as a Funding Source of ISIS: A GIS and remote sensing analysis”

The article is open access and can be downloaded here:

Highlights:

– Recurrent taxation of agriculture is a crucial income source for the Islamic State in Syria and Iraq (ISIS) as extractive and non-recurrent income streams such as oil, ransom and confiscations show signs of dwindling

– ISIS has sustained agricultural production of rainfed winter crops (wheat and barley) despite the impact of conflict. Only irrigated summer crops (cotton) have suffered extensively

– We estimate that in 2015 ISIS might have derived income of $56 million from wheat and barley taxation alone. Additionally there is taxation further down the value chain of food processing and distribution

– The total value of estimated 2.45 million tons of wheat production in 2015 roughly equalled the annualized value of ISIS oil production during its height in late 2014 and early 2015

– Population in ISIS territory likely did not exceed 4 million in 2015, much lower than figures reported in the media of 8 million and more

– Iraq and Syria were wheat net-importers before the war; ISIS is not. It has an exportable surplus which it likely smuggles into the subsidized Iraqi food distribution system or to Turkey where prices are higher

– Agriculture in ISIS territory lives on bought time as supply chains for quality seeds and other input factors are disrupted. Food security and agriculture would need to have high priority in any post-ISIS reconstruction effort

Abstract

Agriculture is an important source of income for the Islamic State in Syria and Iraq (ISIS), which currently rules over large parts of the breadbaskets of the two countries. It has received limited attention compared to other sources of ISIS revenues such as oil, looting, ransom, foreign donations and various forms of taxation. We estimate winter crops production of wheat and barley in ISIS-controlled areas in both Syria and Iraq for the years 2014-2015 and irrigated summer crops production (cotton) in Northeast Syria. We show that remote sensing can give a credible estimation of agricultural production in the absence of statistics. With evidence from MODIS Aqua and Terra Satellites as well as Landsat imagery, we find that agricultural production in ISIS-controlled Syrian and Iraqi zones has been sustained in 2014 and 2015, despite the detrimental impact of conflict. After a drought in 2014 production was able to capitalize on improved rainfalls in 2015. First indications show that the winter grain harvest of 2016 in Iraqi territories of ISIS was significantly above pre-conflict mean and below pre-conflict mean in its Syrian territories. We also show how water flows along the Euphrates have impacted production. We estimate the revenue that ISIS can derive from wheat and barley production and the likely magnitude of an exportable surplus. Agricultural production gives the group a degree of resilience, although its economy is not sustainable in the longer run and could be affected by military collapse. Taxation of recurrent income streams such as agriculture will become more important for ISIS as its extractive sources of revenues show signs of dwindling. Beside non-grain food imports, agricultural production is crucial for its political legitimacy by ensuring food provision to the broader population. Food security considerations would require a high priority in any post-ISIS reconstruction effort and would need to include the rehabilitation of supply chains for agricultural inputs such as quality seeds and fertilizers.

 

Ouch! UAE Tests Wheat Production

The UAE tests wheat production in the desert, just as Saudi Arabia is phasing it out.

The project of the Abu Dhabi Food Control Authority has received 90 percent of the seeds from International Maize and Wheat Improvement Centre in Mexico, which is part of the CGIOAR research centers. Together with  the International Centre for Biosaline Agriculture in Dubai they want to test which varieties are most suitable for the UAE climate.

The project comes at a time when the Abu Dhabi Water Master plan has warned in 2009 that water consumption of agriculture in the UAE is utterly unsustainable. The government speaks of water being at a “tipping point.”

It is puzzling why the Abu Dhabi Food Control Authority which is in charge of designing food security policies for the emirate embarks on such a water guzzling project.

Of course it is being sold as a contribution to food security. It is not. It would threaten water security if practiced on a wide scale.  The best that can be hoped for is that it just remains a white elephant pilot project.

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.

Iranian Food Imports and Sanctions

Iran’s food imports are increasingly affected by financial sanctions. Food is not part of the sanctions regime and imports are possible, but facilitation of payment is the issue.

International traders shy away from the uncertainty and the difficulty of receiving payment in convertible currency. Transport insurance is also an issue.

It is a structural problem. Essentially the Iranian trading system has problems in coping with the new situation: Private traders stay away and the public sector cannot fill the void.

In the past, Iran has already entered barter arrangements with Pakistan or accepted payment in non-convertible Indian rupees.

In good years Iran is close to self-sufficiency in grains. But this year was not a good one and Iran had to resort to international markets on a large scale, not to mention more luxurious food items like poultry where there has been an import boom in the past fueled by oil revenues.

Iranian diets are becoming simpler and experts fear for increased malnutrition among poorer Iranians who  cannot afford a more varied diet.

Saudi Barley Imports: Russia and Ukraine Fail to Deliver

In good years, Russia and Ukraine are responsible for about half of global barley exports. Saudi Arabia in turn imports about 40 percent of globally traded barley. An early drive at barely self-sufficiency was given up in 2003 already, before the wheat phase out in 2008.

After a drought this summer Russia and Ukraine fail to provide necessary quantities and Saudi Arabia needs to source supplies in Australia, Argentina and Western Europe, where France is a large supplier.

One reason why barley imports in Saudi Arabia are so high are subsidies.They encourage a sheep fattening industry – economically it makes more sense to import lamb and feed it on subsidized barley than importing grown up sheep.

This industry is mostly located in Jeddah and other coastal cities, not in traditional livestock rearing areas.

Beside this industry barley subsidies are also important to feed the camel and sheep of Bedouin in rural areas and ensure tribal loyalty there.

Hence, interests are vested. Yet Saudi Arabia needs to think whether it is wise to incentivize barley consumption to such an extent and maintain such a high dependence on volatile imports.

As self-sufficiency is not an option for lack of water, some sort of demand reduction might be necessary.

 

US Wheat Exports to Iran: Just Commercial or Carrot in the Sanctions Game?

Iran is continuing its wheat import spree against the backdrop of sanctions and the nuclear stand-off.

It has already purchased  or tried to purchase 3 million tons this year. In good years Iran is self-sufficient in wheat and has production subsidies in place to encourage such self-sufficiency. Yet it imported 7 million tons in 2008 after a drought and a bad harvest. Due to inclement weather this year’s harvest is not expected to be a good one either.

1.8 million tons of the 7 million tons came from the US. The US has never included food in its sanctions against Iran. It contemplated such measures in the wake of the hostage crisis in 1979, as declassified documents in the Carter Library reveal, that I have seen. Yet, food was never included in sanctions because it was assumed that “Iran’s oil is a powerful tool in finding alternative sources of supply for agricultural goods.”

Such trade diversion indeed happened in the wake of the grain embargo against Russia in 1980. It failed to achieve its foreign policy objectives and just angered the US agro-lobby.

Wheat sales to Iran just require the approval of the US Treasury and sales of more than 100,000 tons of any commodity to any country need to be reported to the USDA by law.

Apart form the commercial interest of the agro-lobby and the negative track record of food embargoes as a foreign policy tool the US might be tempted to use the carrot of food exports as a show of good will in negotiations around the nuclear program.

Recently US food aid delivery to North Korea coincided with a suspension of enrichment activity and a moratorium on nuclear and missile tests by North Korea. Marcus Noland and Stephen Haggard of the Peterson Institute have showed a historic coincidence of American aid offers and North Korean diplomatic concessions.

This year the US has already exported 180,000 tons of US wheat, enough to fill two large cargo ships. Another 200,000 are rumored to be contracted.

Iran has also purchased 120,000 tons of soy meal from India and asked to import a million tons of wheat from Pakistan in a barter deal against iron ore and urea.

It would be interesting to know how the Iranians pay for the US wheat imports given the financial sanctions which make dollar transaction all but impossible. Maybe a big commodity trader like Cargill or Glencore is accepting barter deals as well or takes not freely convertible Indian Rupees from Iran’s still vibrant oil trade with India.

Saudi Agro Lobby Strikes Back

Water guzzling wheat production in Saudi Arabia will not go without a fight. Apparently, agro-interests have brought the powerful Minister of Interior and Crown Prince Naif on board:

Wheat farming to be studied afresh

DHAHRAN – The Ministry of Interior and King Fahd University of Petroleum and Minerals (KFUPM) recently signed an agreement for the university to conduct a study on “providing the Kingdom’s need for wheat amid the scarcity of water resources”….

He said previous studies on the subject had not been adequate. Al-Sinani said he was confident the university would produce balanced results…

the ministerial committee was keen to carry out a study that would determine the exact effect this farming has on the country’s water resources. The Kingdom wants to grow wheat locally to achieve food security and to depend less on imports…

Al-Sinani said the Kingdom’s policy had previously focused on safeguarding water,  There are areas that have abundant groundwater but no population. He stressed that wheat is a strategic crop and discussions are taking place to grow it once again without affecting water reserves…..

Bahrain launches $265m food security fund

Like Qatar, Bahrain also sets its site on “food self-sufficiency.” The announcement of the fund does not mention the futuristic means like hydroponics and solar based desalination that the Qatar National Food Security Program is aiming at. Its focus is more on dairy farming, aquaculture and above all poultry. Of course for real self-sufficiency Bahrain does not have the water and the arable land. It will need to import the feedstock (e.g. grains, soybeans, fishmeal) for livestock and aquaculture, which will create new import dependence. That does not need to be bad. The country like the rest of the Gulf will need to rely on food trade and poultry production close to home might be more efficient than importing it from far away Brazil, which is the main provider of poultry meat to the Gulf. The case for dairy farming in the desert and on a small island with limited land reserve is less compelling. In aquaculture Bahrain like Saudi Arabia aims at carnivorous saltwater fish and shrimps, not at sweet water fish with its much more favorable conversion efficiency from plant based input factors to animal proteins. The size of the fund ($265 mn) is rather paltry compared to Bahrain’s need. While not realistic, the rhetoric of food self-sufficiency is ever present in the announcement of the project, which should also satisfy commercial aspirations. It always helps to sing from the hymn sheet of self-sufficiency to push forward the latter.

Qatar’s Food City

Qatar is planning a food city and wants to expand its domestic agricultural sector with the help of solar based desalination. To this end 1,400 new farms are planned. This goes hand in hand with its intention to produce 70 percent of its food by 2023.

The story of barley subsides in the kingdom is a crazy one. It encourages a large industry of sheep fattening in the country. Saudi Arabia is the largest barley importer world wide and represents about 40 percent of the global barley trade. Th livestock industry is a powerful lobby group. When barley subsidies where not enough to guarantee a profit while remaining  below a government set ceiling price the Saudi king ordered a 50 percent increase in the barley subsidy after much political wrangling.

Organic farming in greenhouses is on the rise. In the UAE it reached 2,196 acres in 2010 compared to 110 acres in 2007.Abu Dhabi also aims to reduce the input of chemicals and pesticides in agriculture by a quarter by 2013.

Gulf countries are food secure. If at all they have a problem with too many calories: Their per capita ratio of obesity and diabetes is belong to the highest in the world.