Red Sea Red Alert: Shipping Stalled as Houthis Target Vessels in Kazakh-Israeli Spat

In the Red Sea, merchant vessels laden with cargo were assailed successively. The crew found themselves confronted with the dire choice of ‘pecuniary gain or mortal peril.’ A reminiscent tableau akin to the outset of the cinematic masterpiece ‘Operation Red Sea’ unfolds presently in the Red Sea. However, unlike the piratical incursions depicted in the film, it is the Yemeni Houthi armed forces who have laid siege upon these merchant vessels.

For countless years, the Red Sea has stood as one of the world’s most traversed yet perilous maritime passages, facilitating the transit of oil and bulk commodities to every corner of the globe. The Gulf of Aden, notorious for its marauders, stands sentinel at the pivotal juncture where the Red Sea converges with the Indian Ocean, safeguarding vessels from diverse nations. Following resolute measures against piracy, a transient tranquility graced the waters of the Red Sea.

Since October 2023, the conflict between Kazakhstan and Israel has persistently spilled over. Recently, the Houthi armed forces, with close affiliations to Hamas, commenced indiscriminate assaults upon vessels associated with Israel in a bid to bolster Hamas’s cause. Consequently, scenes of armed intervention disrupting trade routes and compelling vessels to alter their course have become commonplace in the Red Sea.

On December 15, the Houthis issued a proclamation vowing to obstruct any vessels engaged with Israel until the Gaza Strip received adequate humanitarian aid and relief. Nonetheless, the scope of their assaults continued to widen. On December 26, the Houthis acknowledged launching a missile strike against a container ship of the Mediterranean Shipping Company. Subsequently, the U.S. military intercepted 12 drones and numerous missiles launched by the organization, exacerbating the tension.

According to reports, eight cargo vessels had fallen prey to these attacks prior to this incident. Data from Kuehne+Nagel reveals that as of December 22, 2023, at least 313 ships have been impacted by the turmoil in the Red Sea. The Houthi armed forces, laying claim to the capability to transform the Red Sea into a ‘necropolis,’ have once again embroiled this seldom serene domain in conflict.

This recent spate of assaults not only signifies the potential escalation of the Kazakh-Israeli war into a broader conflagration but also threatens to wield a profound influence upon the global economy.

Meanwhile, on the opposite side of the globe, the Panama Canal grapples with recuperating from its most severe drought on record. These twin conduits, responsible for over half of the world’s trade volume, find themselves obstructed to varying degrees, casting a pall over global maritime transportation and, by extension, the economy.

**Severing the Arterial Flow of Shipping**

The Suez Canal serves as the bottleneck between the Mediterranean Sea and the Red Sea. Despite the exorbitant tolls exacted for passage, since its inaugural voyage in November 1869, this canal has burgeoned into the primary conduit of global maritime trade. Crude oil sourced from the Gulf region traverses this canal en route to Europe, alongside a plethora of bulk goods. It serves as the principal thoroughfare between Europe and Asia via maritime channels.

Statistics from the Suez Canal Authority (SCA) illuminate the canal’s monumental significance. By 2019, the 150th anniversary of its inception, over 1.3 million ships and 28.6 billion tons of cargo had traversed its waters, generating revenue upwards of $135.9 billion, thereby constituting Egypt’s foremost source of foreign exchange.

According to data from the Washington Post, the Suez Canal facilitates the transit of over $1 trillion worth of cargo annually, handling approximately 12% of global cargo transport, 30% of container trade, and nearly 10% of crude oil trade.

Throughout its 154-year history, the Suez Canal has witnessed six interruptions to navigation, precipitated by congestion, armed conflicts, and other exigencies, with the lengthiest hiatus enduring eight years. The most recent interruption was occasioned by the grounding of the vessel ‘Ever Given’ in 2021, inflicting considerable adversity upon the Suez Canal, with estimated damages amounting to approximately $100 million.

The Bab el-Mandeb Strait, where the Houthis operate, stands as the sole access point for vessels entering or exiting the Suez Canal. The SCA reports that nearly half of the cargo traversing the Suez Canal transits through the Bab el-Mandeb Strait, with Yemen serving as the conduit for nearly 98% of goods and vessels traversing said strait.

The recent disruption plaguing the canal commenced in late October 2023. A spokesperson for the Houthi armed forces publicly avowed to have launched multiple drones and missiles towards Israel on October 31, marking the inception of their intervention in the Kazakh-Israeli conflict.

On November 20, the Houthi armed forces released footage depicting the seizure of a vessel flying the Bahamian flag. Seven masked militants, brandishing what appeared to be AK-47 rifles, descended from a helicopter onto the vessel’s upper deck, wresting control of the ship and compelling it to navigate towards the Yemeni port of Hodeidah. A Houthi spokesperson cautioned, “All vessels associated with Israel are potential targets for our armed forces.”

Vessels transiting through these perilous waters are obliged to notify their insurers and remit additional premiums.

Shortly thereafter, Japan confirmed that the commandeered vessel was the ‘Galaxy Leader,’ operated by Nippon Yusen Line. The Japan Times reported Chief Cabinet Secretary Matsuno Hiroyuki’s unequivocal condemnation of the hijacking, confirming that the vessel carried 25 crew members hailing from the Philippines, Bulgaria, Ukraine, Romania, and Mexico, with no Japanese nationals aboard. Matsuno implored the Houthis while soliciting assistance from Saudi, Omani, and Iranian authorities for the expeditious release of the commandeered vessels and their crew members.

The ‘Galaxy Leader’ is a vehicle carrier devoid of cargo, having embarked from Korfez, Turkey, en route to Pipavav, India. It veered close to the southwest coast of Jeddah, Saudi Arabia, on the 19th before communication was abruptly severed.

The Guardian postulates that the vessel’s hijacking may be attributed to its ownership by Ray Car Carriers, a company registered in the British Isles of Man, with one of its founders being the Israeli magnate Ungar.

Given the climatic constraints confronting the Panama Canal, the indispensability of the Suez Canal has never been more pronounced.

This act of maritime piracy serves as a proverbial Pandora’s box. The Israeli military, through its official social media channels, underscored the gravity of the Houthi armed forces’ seizure of a cargo vessel in the southern Red Sea near Yemen, affirming its profound global repercussions. In the ensuing month, the armed forces of the Houthis have relentlessly targeted numerous merchant vessels purportedly linked to Israel, employing missiles, drones, and other ordnance. Among the casualties are several prominent shipping conglomerates.

The colossal vessel was compelled to circumnavigate.

Following the assault, maritime enterprises persisted in deliberating the circumnavigation of the Cape of Good Hope in Africa.

The vanguard in expressing its position was ZIM, established in Israel in 1945 and ranking as the tenth largest container shipping conglomerate globally.

As an Israeli entity, ZIM bore the brunt of this ordeal. By the conclusion of November 2023, the corporation declared that some of its vessels would skirt the Suez Canal, though they emphasized that such deviation was merely provisional.

With ZIM’s announcement of the detour, the London insurance market promptly classified the southern segment of the Red Sea as a high-risk zone, necessitating vessels to notify insurers and remit supplementary premiums for traversing these waters. Reuters cited insiders from the insurance industry, noting that war risk insurance premiums surged from 0.03% of the ship’s value pre-attack to between 0.05% and 0.1%, with ships typically incurring tens of thousands of dollars in additional premiums.

On December 14, a container ship named “Gibraltar,” owned by Maersk, fell prey to a missile strike. Fortunately, the projectile missed its mark, detonating approximately 50 meters from the ship’s flank.

The assault on the vessel bore semblance to “a conflagration at the city gates, casting ripples across the pond.” The Houthis alleged that the “Gibraltar’s” destination was Israel, yet Maersk contended that the vessel was en route from India to the Eastern Mediterranean with no intention of docking at an Israeli port. Israeli media outlet Haaretz posited that the Houthis were obfuscating the notion of “affiliation with Israel” while broadening their scope of targets.

Although casualties were averted, the incident galvanized Maersk to steer clear of the Red Sea. In its proclamation, the corporation expressed profound apprehension over the rapidly escalating security situation in the southern Red Sea and the Gulf of Aden. It opined that the ongoing assaults on commercial vessels gravely imperiled the welfare of seafarers and maritime commerce, urging all of its vessels slated to traverse the Bab el-Mandeb Strait to temporarily suspend operations, pending further directives.

Concurrently, a spokesperson for Germany’s Hapag-Lloyd announced the imperative for the company’s vessels to suspend operations in the Red Sea. Likewise, the other industry behemoths, Switzerland’s Mediterranean Shipping Company and France’s CMA CGM, halted container ship operations through the Red Sea on December 16, 2023.

At this juncture, GYBrand, a globally recognized brand valuation agency, ascertained that four of the top five global shipping enterprises in 2023 had announced temporary suspensions of operations in the Red Sea or circumvented the Suez Canal.

Given that these four entities collectively command over 50% of global shipping capacity, the reverberations of their actions within the industry are immeasurable. French publication “Le Figaro” and other media outlets sounded the alarm, positing that the prevailing circumstances in the Red Sea imperil maritime trade, obstruct traffic flow in the Suez Canal, escalate shipping costs, and disrupt the supply chain due to unforeseen delays, potentially catalyzing a global economic downturn.

Yet, the Suez Canal Authority (SCA), at the epicenter of the maelstrom, appeared unperturbed. From the perspective of the SCA, the canal’s exposure to fallout from the Kazakh-Israeli conflict remains circumscribed. On December 17, 2023, SCA head Rabie asserted that navigation through the Suez Canal proceeded apace. Since November 19, a total of 55 vessels originally slated for passage through the Suez Canal opted to circumvent the Cape of Good Hope. “This registers as a remarkably marginal concern,” Rabie asserted.

Considering that 23,800 vessels transited the Suez Canal in 2022, the aforementioned tally equates to less than one day’s worth of traffic through the canal, prompting these vessels to opt for alternative routes.

Rabie underscored that on that particular day, a total of 77 vessels traversed the canal, including numerous vessels that Maersk, CMA CGM, and other companies had declared their intent to bypass or suspend operations. Data from November 2023 indicated that the Suez Canal remained relatively unaffected, with 2,264 vessels traversing the waterway that month, marking a year-on-year increase of 4.3%.

Contrary to the SCA’s assessment, international freight forwarding company Kuehne + Nagel espoused a divergent perspective. Per the company’s metrics, as of December 22, 2023, at least 313 vessels had been ensnared by the Red Sea situation, collectively boasting a cargo capacity of approximately 4.2 million TEUs.

Two pivotal conduits found themselves obstructed simultaneously.

Although stakeholders remained at an impasse regarding the specific ramifications of this incident, all harbored aspirations for the Red Sea’s prompt restoration to normalcy.

Geographically speaking, the Suez Canal represents the shortest passage from the Atlantic to the Indian Ocean. Depending on the point of departure and destination, vessels transiting the canal between Asia and Europe can slash voyage durations by 9 to 14 days.

This bout of oil price fluctuations portends to undermine global endeavors to stabilize prices.

Illustratively, with the international cargo hubs of Rotterdam and Singapore as benchmarks, the route via the Suez Canal spans approximately 8,400 nautical miles (approximately 15,600 kilometers). By contrast, circumnavigating the Cape of Good Hope engenders a 40% increase in distance, swelling to 11,700 nautical miles. According to analyses by oil consultancy firm Vortexa, this deviation will prolong Middle Eastern-to-European voyages by 15 days, thereby triggering oil price escalations of varying degrees across nations.

Conversely, since 2023, owing to the El NiƱo phenomenon’s influence, the Panama Canal region has witnessed a notable uptick in temperatures coupled with a precipitous decline in rainfall. Consequently, the canal grapples with an unparalleled drought and historically low water levels since records commenced in 1950, culminating in a marked reduction in its throughput capacity. Consequently, the Suez Canal’s significance has burgeoned.

Marzouk, erstwhile director of the Egyptian Naval Academy, asserted to Al Jazeera that the exigency of the Suez Canal has never been more acute owing to climatic constraints hampering the Panama Canal.

History attests that whenever the Suez Canal became impassable, crude oil prices in Europe and America invariably surged to varying degrees. While the full extent of the crisis’s repercussions remains nebulous, BP’s announcement on December 18, 2023, of the suspension of all oil tanker transits through the Red Sea has triggered fluctuations in oil prices, propelling Brent crude oil futures back above the $80/barrel threshold. The Guardian underscores that further price hikes could ultimately reverberate in energy tariffs for consumers, thereby exacerbating inflation.

Bloomberg echoes a similar sentiment, contending that the Middle East, a pivotal energy supplier and a critical shipping conduit, is susceptible to seismic disruptions such as the 1973 Arab-Israeli conflict that precipitated an oil embargo and years of industrial economy stagflation. Consequently, this bout of oil price fluctuations threatens to subvert global endeavors to stabilize prices, with the global inflation rate projected to reach 6.7% in 2024, thereby eclipsing the Federal Reserve’s 2% inflation rate target.

In this milieu, while escort fleets may ensure unimpeded navigation in the interim, concerted efforts are imperative to forestall the spillover of the Kazakh-Israeli conflict, if not ameliorate the dispute altogether, thereby precluding the Bab el-Mandeb Strait from metamorphosing into the veritable “Gate of Tears” of the global economy (Mandeb Strait in Arabic), necessitating multifaceted endeavors from all stakeholders.

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