OA thousand miles from Gaza, a maritime crisis is brewing that could turn the war between Israel and Hamas into a global affair with repercussions for the world economy. Since December 15, four of the world's five largest container shipping companies, CMA CGM, Hapag-Lloyd, Maersk and MSC, have suspended or suspended their services in the Red Sea, the route through which traffic from the Suez Canal must pass, due to Iran- Backed Houthi fighters armed with sophisticated weapons are escalating their attacks on global shipping flows. With one of the world's most important trade arteries suddenly closed, America and its allies are increasing their naval activities in the Middle East and may even attack the Houthis to restore free passage.
Bab al-Mandab is a narrow strait between Africa and the Arabian Peninsula through which an estimated 12% of global trade volume and perhaps 30% of global container traffic normally flow. It has become a no-go zone as Yemen-based Houthis attack ships ostensibly to support Palestinians in Gaza. The strikes have been going on for weeks, but have now increased significantly. On December 15, the Houthis threatened to attack a ship, struck another with a drone, and fired two ballistic missiles at the MS Palatium III, one of which hit the ship. The attack on the Palatium III was the first ever use of a ballistic anti-ship missile. All ships sailed under the Liberian flag. On December 16, the American naval ship USS Carney (pictured) shot down 14 drones over the Red Sea, while a British ship, HMS Diamond, destroyed another.
Image: The Economist
With the increasing risk of ships becoming disabled and their crews dying, the global shipping industry is shifting into emergency mode. On December 15, Maersk and Hapag-Lloyd suspended their services. On December 16, CMA CGM and MSC, the owner of the Palatium III, followed suit by declaring that their ships would not use the Suez Canal in either direction “until passage through the Red Sea is safe” and that some ships would use the Suez Canal would be rerouted to the Cape of Good Hope. Together, these four companies account for 53% of global container trade. Smaller container operators as well as bulk carriers and oil tanker companies could now follow their example.
The crisis has two major impacts; On the one hand for the global economy and on the other hand in terms of the risks of military escalation in the Middle East as Western countries try to restore order. Start with the economy. Revenue from the Suez Canal is an important source of income for Egypt, which is already in the midst of a financial crisis. Israel will be less affected because only about 5% of its trade passes through Eilat, its Red Sea port. For the global economy, a prolonged closure of the Suez route would increase trade costs by rerouting shipping around Africa, taking more time and causing insurance premiums to skyrocket. Short-term supply chain disruptions could also result from large-scale trade diversions: In 2021, the Ever Given, a Taiwan-operated ship, ran aground and blocked the canal for six days, causing a global supply chain crisis. If the security crisis in the Red Sea is perceived to threaten shipping in the nearby Arabian Sea, through which perhaps a third of the world's maritime oil supply flows, the economic costs would be dramatically higher.
These risks are why America and its allies will be inclined to act. But the Houthi threat is daunting and complex. The militant group's motto includes the exhortation “Death to Israel. A Curse on the Jews,” and it claims to “target all ships heading to Israeli ports” until food and medicine are delivered to Gaza. But most of the ships attacked are neither en route to Israel nor Israeli-owned. Countries all over the world are affected: one of the ships attacked by the Houthis was flying the Hong Kong flag.
The apparent incoherence of the Houthis' stated goals should not be confused with ineffectiveness: For years, Iran has trained, armed and supported the group in its successful insurgency in Yemen and in a war against Iran's regional rivals Saudi Arabia and the United Arab Emirates (UAE ). The sophistication of some of the weapons involved is high. “The Houthis currently have a huge arsenal of anti-ship missiles,” says Fabian Hinz of the International Institute for Strategic Studies (IISS), a think tank in London, including some with ranges of up to 800 km.
Western officials are unsure whether Iran is directing individual attacks. Israeli intelligence is not yet convinced that the latest attacks were authorized by Corps 6000, a unit of Iran's Quds Expeditionary Force that works with the Houthis in a joint command center. However, the group is believed to receive information about shipping from Iranian surveillance vessels in the Red Sea. And the broad anti-shipping campaign fits with Iran's strategy of calibrated pressure, avoiding an all-out attack on Israel while resorting to its regional proxies to violently denounce Israel from all sides. The danger now is that Iran is not in perfect control of the Houthi attacks and the attacks are affecting a much wider range of countries.
It is possible that diplomacy can help de-escalate the crisis. In 2015, Saudi Arabia and the United Arab Emirates intervened in Yemen's civil war on behalf of the internationally recognized government. In March 2022, the Saudis agreed to a ceasefire, giving the Houthis control of the capital Sanaa and the strategic west coast. They may soon announce a roadmap to make the ceasefire permanent and end the war. Pledges to stop attacks at sea could potentially be part of the talks.
Nevertheless, a major military response to the Houthi threat is now likely. A multinational task force currently led by the American Navy is already operating off the Yemeni coast to stop the Houthis from forcibly boarding ships – a raid was interrupted in November – or firing missiles. It includes both Egypt and Saudi Arabia. In recent weeks, American, British and French warships have all intercepted Houthi drones and missiles, and America has asked Australia to also send a warship.
But this defense fleet struggled to keep the crisis under control. The Houthis have shown that a few drones and missiles are always likely to get through. A possible next step is armed escorts for merchant shipping, which America used during the so-called tanker war between Iran and Iraq in the 1980s. However, these are resource-intensive and require very large numbers of warships, according to naval sources involved in the debate.
The main alternative is to attack the Houthis and their arsenal directly. Both America and Israel have developed plans to attack Houthi depots and launchers. America will be reluctant to expand its involvement in the Middle East: The Biden administration had focused on expanding the Red Sea Task Force and exerting diplomatic and economic pressure on Iran. Israel does not want a new conflict: It is already under pressure from the United States to end this phase of the Gaza war and is concerned about Hezbollah, the Lebanese militant group that fires rockets into Israel almost daily. But if Iran and its Houthi allies continue attacks that close one of the world's most important trade routes, escalation could be inevitable.■
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