To understand the impact of Yemen's Red Sea attacks by Houthi militias on international shipping, it might make sense to start with the port of Singapore, thousands of kilometers away. Singapore is one of the busiest container shipping ports in the world and a regular stopover for all of the world's leading shipping companies, as well as an important hub for trade between Asia and Europe.
Now let's imagine a large container ship traveling the 17,000 kilometers from Singapore to Rotterdam. After leaving the port, it heads for its first major bottleneck, the Strait of Malacca. Once it passes through this vital waterway, it enters open seas and traverses the Indian Ocean and the Arabian Sea.
As it approaches the coast of Yemen, it encounters the Bab Al-Mandeb Strait, another major choke point, before flowing into the Red Sea and on to the Suez Canal.
If all goes according to plan – and it usually does – the container ship will pass through the Suez and sail across the Mediterranean toward the Strait of Gibraltar, another key choke point between Morocco and Spain. It will then run north across the Atlantic to the main Dutch port, which is an important crossroads in Northern Europe.
Everything is timed, synchronized, planned and mapped to ensure everything runs smoothly. After all, the global economy – and the shipping company’s bottom line – depends on it. According to the United Nations, approximately 80-90% of world trade volume is shipped by sea.
So if something goes wrong on any part of the journey, it's not just individual ships or shipping companies that feel the pain. We all do that.
Recent attacks by Houthi militants on international shipping in the Red Sea have snarled supply chains, driven up oil and natural gas prices and heightened geopolitical tensions far beyond the Red Sea's bordering states.
Some of the world's largest shipping companies – MSC, Maersk, CMA CGM Group and Hapag-Lloyd – have suspended their sailings in the Red Sea. Energy giant BP has also said it will avoid the Red Sea until further notice.
The impact on world trade is serious. Around 15% of world trade and 30% of container traffic pass through the Suez Canal. The Red Sea and Suez Canal are vital connections in the global economy and play a central role in the global supply chain for oil, natural gas, food, industrial products and more.
About 40% of Asia-Europe trade passes through the Suez Canal, including vital liquefied natural gas shipments. When a ship got stuck on the other side of the canal in 2021, blocking it completely, economists estimated that about $10 billion in trade was affected for each day the waterway was blocked.
The US military has announced an international coalition to protect Red Sea shipping lanes and ensure the safety of the approximately 400 ships transiting the Red Sea at any one time.
The U.S. plan hasn't entirely appeased insurers, who have raised prices for trips through the Red Sea and expanded the areas considered high-risk. The prospect of US attacks against the Houthi fighters, who are backed by Iran, has been raised. Oil prices are slowly rising after several weeks of decline.
The Houthis, who control parts of northern and western Yemen, have said their attacks are a response to Israel's war in Gaza and that they are targeting ships linked to Israel or using Israeli ports. Most of America's regional allies have been cautious about joining the coalition.
Across the Arab world, even in capitals where the Houthis are seen as a serious threat to regional stability, rapprochement with the United States has made several countries uneasy at a time of growing public anger over the Israel-Gaza war. As a result, the US may have to lead this operation without a large Middle East contingent in its coalition.
Meanwhile, China's role is also being closely monitored. Chinese boatmen regularly cross the Red Sea. China is also the only major buyer of Iranian crude oil, giving it some leverage over Tehran.
Iran's ties to Houthi fighters are clear, but it remains to be seen whether Beijing will try to pressure Tehran to curb Houthi attacks – or at least target them at non-Chinese ships.
Egypt should also be kept in mind. The country is in an economic quandary. The Suez Canal Authority reported record revenue of $9.4 billion for the 2022-2023 fiscal year.
A serious decline in these revenues would further strain the Egyptian economy, which is already suffering from the foreign exchange crisis and rising inflation. Fears are growing that Egypt could default on its roughly $165 billion in foreign debt, one of the highest amounts in emerging markets.
According to logistics giant Kühne+Nagel, around 100 container ships are now actively avoiding the Red Sea route, and many more are likely to follow. The Singapore-Rotterdam route will now circle the entire coast of southern Africa and head back towards the Atlantic and Europe, adding weeks to the journey and increasing costs.
At a time of precarious global economic recovery and razor-sharp geopolitical tensions, the Red Sea attacks are a reminder of how connected we are – and how dangerous it can be when these vital connections are severed.
Afshin Molavi is a senior fellow at the Foreign Policy Institute at the Johns Hopkins School of Advanced International Studies and editor and founder of the Emerging World newsletter. Twitter: @AfshinMolavi
Republished with permission of the Syndication Bureau, which holds copyright.
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