In the last 14 months, the Houthis, using shore-to-ship missiles procured from Iran, have targeted about 200 vessels in the Red Sea
)
The United States may not get much involved militarily as very little of its cargo moves through the Red Sea. (Red Sea | Photo: Bloomberg)
Listen to This Article
Last week, the Houthi rebels who control most of western Yemen and access to the Red Sea, announced suspension of attacks on non-Israeli vessels carrying commercial cargo through the Red Sea, following the temporary ceasefire between Israel and Hamas. They also released ‘Galaxy Leader’, a vessel they had hijacked in September 2023, and its 25 crew members they had taken hostage. The major western shipping lines have said they will not be rushing to use the Red Sea route soon and that the previously announced transit disruption surcharges for all cargo on vessels affected by the disruptions remain in effect for now. That position may change soon.
In the last 14 months, the Houthis, using shore-to-ship missiles procured from Iran, have targeted about 200 vessels in the Red Sea, damaging more than 40 and sinking two of them. Most major shipping lines have been avoiding the Red Sea, routing their cargo around Africa, burning more fuel for travelling an extra 6000 kms and taking about 10-14 days more for cargo to move between Asia and Europe. By one estimate, the shipping lines incurred extra costs of about US$ 175 billion last year, part of which they passed on to the consumers. Before the attacks, about 2000 ships used to pass through the Red Sea carrying about 12 per cent of global cargo every month. The traffic in that route has fallen by more than 70 per cent, adversely affecting Egypt’s revenues from the Suez Canal.
The Houthis say that it is to support Palestinians that they are targeting the commercial vessels of those sympathetic to Israel. So, the countries unwilling to be seen as sympathetic to Israel have been reluctant to intervene militarily. The British and American navies have bombed the Houthi positions in Yemen to try and restore free passage of vessels through the Red Sea, without much success. Last week, the Trump administration in the United States designated the Houthis as a ‘foreign terrorist organisation’ but that may mainly affect the humanitarian aid that flows to Yemen. The United States may not get much involved militarily as very little of its cargo moves through the Red Sea. Another report says that the Houthis are collecting ransom money from some shipping lines for safe passage and so have an incentive to keep the threats alive. Some shipping lines also think so and therefore, are still hesitant to resume the sailings through the Red Sea. Thus, for most shipments from/to Asia from/to Europe, the longer route around Africa continues for now. The only consolation is that just about all shippers in Asia and Europe are affected more or less to the same extent. Weaker global demand and increase in shipping space due to orders placed earlier have kept the freight rates in check. For shipments from/to the Americas, however, the Pacific route is much shorter and cheaper from East Asia than for shipments from India that go around Africa. About 23 per cent of our exports go to that region. The assurances of the Houthis to not attack non-Israeli vessels should help lift the hopes of the shippers who want transportation costs to be reduced. However, unless the insurers are willing to support, the shipping lines may still hesitate. That might just be a matter of time, if the truce between Hamas and Israel continues.
email : tncrajagopalan@gmail.com
aniltikotekar4sme.com 