A longer version of this article was originally published by KIPPRA.

Kenya-Ukraine bilateral relations started in March 1993 when Kenya recognised Ukraine as an independent state.

Kenya’s imports from Ukraine were valued at 58 USD million (KES 7.47 billion) in 2020 and doubled to 159 USD million (KES 19.29 billion) in 2021, owing to increased imports of wheat and iron and steel products. This doubling can be partly attributed to the 2021 change in the law in Ukraine to allow the sale of farmlands for the first time in twenty years. The ban had been in place to prevent oligarchs from taking over. It created a vast opportunity for Ukraine to fill a gap in the global food chain caused by the COVID-19 pandemic.

At the beginning of 2022, Ukraine was the biggest exporter of sunflower oil and the fourth-largest exporter of corn. Kenya’s exports to Ukraine mainly consist of tea, coffee, cut flowers and vegetables.

Russia has a great interest in Kenya regarding trade and development cooperation. Bilateral trade between Russia and Kenya reached 402 USD million (KES 48.13 billion) in 2021. Kenya exported goods worth 83 USD million (KES 10.47 billion) to Russia and imported goods worth 310 USD million (KES 37.66 billion) in 2021. Russia and Kenya have partnered to promote and develop education at higher levels. Under this partnership, the Russian Federation provides limited scholarship opportunities for undergraduate and postgraduate studies toward developing human resources in Kenya. Other areas of cooperation include trade, investments, energy, development cooperation, technical cooperation, and partnerships, which were identified during the first Russia-Africa Summit in 2019 held in Sochi.

Kenya has no finalised trade agreements with Russia and Ukraine. During the Russia-Africa Summit in Sochi (2019), Russia and Kenya resolved to form a joint business council to spearhead the design of trade agreements. The finalisation of trade agreements will improve imports and exports between the two countries. The trade between Kenya and Ukraine has been based on long-term ties and mutual respect, as there are no finalised formal trade agreements between the two countries. In 2021, a Kenyan delegation visited Ukraine to audit bilateral contracts under consideration, intensify relations, and increase trade between Ukraine and Kenya.

Feeling the effects of the war

The Kenyan economy is a commodity market, implying it generates most of its revenue through commodity exports. Kenya’s major exports include coffee, tea, cut flowers and vegetables. The sanctions against Russia directly impact Kenya, with the disruption in trade of Kenya’s primary commodities. Flower farms in Kenya are already reducing production because of depressed demand. The tea sector is not spared either, as Russian tea buyers have kept off the auction following the announcement of the sanctions. The major shipping companies are also keeping away in response to the sanctions. The exclusion of Russian banks in the SWIFT payment system has made it difficult to receive payment for sales of commodities to Russia.

Kenya imports wheat, oil, iron, steel, and fertilisers from Russia and Ukraine. Russia and Ukraine dominate wheat imports to the East African region. In Kenya, 67%of wheat is from Russia, 22% from Ukraine and 11% from the rest of the world. Russia is the world’s largest exporter of fertiliser and exports a significant volume of fertiliser to the East Africa region. Disruption in fertiliser production and exportation has already caused a spike in the price of fertiliser in Kenya. In March 2022, fertiliser costs doubled during the long rains planting season of March-April-May 2021 from 21 USD (KES2,500) to more than 42 USD (KES 5,000).

Through the Ministry of Agriculture, the government introduced a fertiliser subsidy programme following a spike in fertiliser prices, but not all farmers benefited from this. The war and the subsequent sanctions against Russia have disrupted the oil supply in the world. The supply shocks have resulted in more expensive oil products in Kenya, leading to an increased cost of living. The high cost of oil products has a wide-ranging welfare impact through increased transport and production costs, which are transferred to consumers. For example, rising wheat prices have contributed to food inflation in the country. Kenya has an established fuel stabilisation fund to provide subsidies and cushion consumers against the adverse effects of skyrocketing fuel prices.

The Kenya-Ukraine trade and Kenya-Russia trade is modest compared to total trade between Kenya and other countries. Kenya’s exports to Ukraine in 2020 were valued at USD 9 million representing only 0.15% of the total Kenya exports. Kenya’s imports from Ukraine in 2020 were valued at USD 70 million, representing 0.46% of Kenya’s total imports. Further, Kenya exported products worth USD 75 million in 2020 to Russia, representing 1.25% of Kenya’s total exports. Regarding imports from Russia, Kenya imported various commodities worth USD 350 million from Russia, representing 2.32% of Kenya’s total imports.

Diversification is key

There is a need for Kenya to find other sources of these products. For example, Kenya could source its wheat products from other top exporting countries such as India, Australia, and countries in the European Union to bridge the gap. Serbia has already indicated that it will supply Kenya with 150,000 tons of wheat to bridge the gap caused by the supply shock resulting from the Russia-Ukraine war. In addition, Kenya could take advantage of the situation and boost its wheat production by implementing measures such as subsidies on wheat production inputs. Kenya produced 245,300 tons of wheat and imported 1,888,900 tons in 2021. It brings to the fore the magnitude of the amount of local production needed to narrow down the dependence on imports.

Kenya is taking steps to correct the shocks occasioned by the Russia-Ukraine war. The cost of goods and services has increased significantly due to the disrupted oil supply and subsequent price increase. Following this increase, Kenya has continued implementing a fuel stabilisation programme to stabilise and maintain oil prices. The government has also taken measures to ensure that oil marketing companies do not take advantage of the situation to cause artificial shortages and increase oil prices. The government has moved to increase its strategic oil reserves by allocating a higher quota to the National Oil Corporation of Kenya (NOCK) to act as a national strategic oil reserve. Diversification of wheat sources has been recommended to wheat importers in Kenya to meet domestic demand. A constant supply that meets the local need will stabilise wheat prices in the country. The government has also encouraged local millers to purchase wheat from local farmers.

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