21st Century Business Herald reporter Shi Yan reports from London
The Red Sea, the world's busiest international maritime trade route, has suddenly become a formidable "no-go zone for navigation".
Taking advantage of the location on the southern choke point of the Red Sea, Yemen's Houthi rebels have launched more than 100 drone and missile strikes on merchant ships passing through the Bab el-Mandeb Strait, the country's chokepoint, in a frightening no-go zone.
The Houthis claim that they are targeting Israeli-linked vessels – in an attempt to pressure Israel to cease fire in Gaza. However, carriers who feel the security threat have announced that they have chosen to detour to the Cape of Good Hope in Africa, freight and insurance premiums have skyrocketed, shippers are busy worrying about delays and losses, and the Egyptian government can only sigh silently at the Suez Canal, where river toll revenues have plummeted.
As 2023 draws to a close, no one could have imagined that the Yemeni rebels, who have been entrenched in the west coastline of the poorest country in the Arabian Peninsula for 20 years, will escalate the Kazakh war into a sudden crisis affecting the world economy, and no one knows how long the crisis will last.
On December 24, Danish shipping giant Maersk announced that it was ready to resume the Red Sea navigation of its vessels, which instantly increased the market's confidence that the crisis could be resolved quickly. According to the 21st Century Business Herald reporter, in the past two days, several large container ships have successfully passed through the Bab el-Mandeb Strait under the escort of warships, and more than 17 container ships have turned around and sailed to the Red Sea. "In fact, shipping in the Red Sea region has never been interrupted, and there are still a large number of merchant ships from various countries passing through every day," a senior manager of a British company told the 21st Century Business Herald reporter, "only after the sharp increase in shipping risks in this area, compared with oil tankers and bulk carriers, the risk of high-value container ships is too great, so the container ships of various shipping giants choose to detour the Cape of Good Hope, but the navigation instructions of the same company are also based on the specific conditions of each ship, and no company will all deviate." ”
While escort security measures from the International Naval Alliance are in place, the overall risk in the Red Sea has clearly not been eliminated. Maersk also admitted that if crew safety is threatened, the situation will be reassessed and the deviation plan will be reactivated.
On 25 December, Egypt's efforts to broker Hamas's withdrawal of military forces from Gaza failed. Israeli Prime Minister Benjamin Netanyahu said at a special session of parliament that the fighting in the region was "not yet over" and vowed to the families of the hostages taken by Hamas that he would "shake every tree, turn up every stone and bring back all the kidnappers."
Shipping returns to the "door of tears"
The Great Rift Valley, the largest scar on Earth, began to extend northward 20 million years ago, when the African plate separated from the Arabian plate, and the rift valley between formed the Red Sea along the trough. The Red Sea, narrow and as long as a spindle, leads north to the Mediterranean Sea and south to the Gulf of Aden and the Indian Ocean via the Bab el-Mandeb Strait. Since the construction of the Suez Canal in 1869, it has become one of the busiest waterways in the world, and the shortest shipping route between Asia and Europe has witnessed the miracle of globalization.
Today, 12% of global trade is transported through the cargo, including 30% of all container ships and about 9% of crude oil and natural gas.
At its narrowest point, the 18-mile-wide Bab el-Mandeb Strait, which means "Gate of Tears" in Arabic, is said to have been formed by an earthquake that killed many people, or to the fact that the strait's complex shipping lanes, reefs and shipwrecks have made people cry. The Houthis control the eastern side of the strait.
On November 19, Houthi masked fighters jumped from a helicopter onto the container ship Galactic Leader, which was passing by, and seized the ship and 25 crew members, which have not yet been released. The ship belonged to a British company, operated by NYK and ostensibly had no ties to Israel, but the owner's parent company belonged to an Israeli businessman.
Amid the condemnation from all sides, the Houthis have increased the frequency of attacks, and by December 15, Maersk, Habber-Lloyd, and MSC's container ships were attacked. Subsequently, the major liner companies successively announced the suspension of navigation in the region and decided to circumnavigate the Cape of Good Hope.
IN THE PAST FEW DAYS, THE COSCO SHIPPING GALAXY HAS BEEN MISREPORTED BY SOME DOMESTIC SOCIAL MEDIA NETWORKS AS "ALONE IN A TIGER'S DEN" AND SAILED AGAINST THE TIDE THROUGH THE HOUTHI-CONTROLLED BAB EL-MANDEB STRAIT. According to the 21st Century Business Herald reporter's query of the real-time ship navigation records of the ship news network, the Galaxy entered the Suez Canal from north to south on the 14th, waited for instructions in safe waters on the 17th, turned around near Port Sudan in the central Red Sea on the 19th and re-opened to the Suez Canal, paid the toll again on the 24th, and is currently located in the eastern Mediterranean to the west, and is expected to arrive at the port of Singapore on January 22.
The Suez Canal is expensive to pass once. Some industry veterans estimated to 21 reporters that a 21,000 TEU (20-foot standard container) oversized container ship like this will charge more than $1.6 million for westbound and $1.2 million for eastbound when fully loaded. But for shipping companies, "safety of navigation is the number one consideration".
A 20,000 TEU ship is priced at more than $60,000 a day, and the diversion to the Cape of Good Hope will add seven days to the South Asia-US voyage and about 10 days to the Asia-Europe voyage, plus the increased fuel costs for the detour, and the additional transit and fuel costs per ship will also be about $2 million.
The above-mentioned ship-owning company personnel explained: "The first consideration of the circumnavigation ship is whether it is related to Israel, whether the insurance company agrees to enter the Red Sea area, and secondly, it is necessary to comprehensively consider factors such as the operating cost and value of the ship." ”
Ships must notify the insurance company and pay additional fees when navigating through high-risk areas. At the beginning of December, the risk premium paid by shipping companies was only 0.07% of the value of the vessel, but it has recently risen to about 0.5%~0.7%, and the rate of ships linked to Israel has increased by 250%, and some insurance companies have refused to underwrite it.
After a comprehensive trade-off, some ships continued to sail in the Red Sea without diversion, and some of them were armed with guards from professional security companies to prevent hijacking by the Houthis.
Overnight, the quotation of containers on related routes soared several times. Concerns about disruptions to schedules have led to increased shipping routes to the rest of the world. Most carriers invoke force majeure clauses in bills of lading to give them the right to abandon the goods. Surcharges are also coming.
Last Thursday, Maersk notified that an additional $200 "transit disruption surcharge" will be imposed on 20-foot containers from China to Northern Europe, and an additional $500 peak season surcharge must be paid from January 1, 2024. Mediterranean Airlines subsequently announced a similar surcharge.
The Houthis, hoping to deter Israel and their Western backers by force, may not have imagined that their actions in the Red Sea are driving shipping companies' stock prices soaring and boosting the profitability of shipowners.
Shares of Israeli container shipping company ZIM are up 50 percent since last month's attack on ships in the Red Sea, Maersk is up about 20 percent and Hapag-Lloyd is up 17 percent.
"If you go back to the war in 1967 that led to the closure of the Suez Canal, you can see that freight rates soared, and that was the golden age of shipping, the era of Onassis. John Kartsonas, founder of Breakwave Advisors, an asset management consultancy, said.
The last time the Israeli-Palestinian conflict affected Red Sea shipping was in 1967 during the Third Middle East War, when Egypt closed the Suez Canal at the outbreak of war and reopened it eight years later.
In John Kartsonas' view, if ships are difficult to pass through in the Red Sea for months, it will be a favorable environment for shipowners and shipping companies.
But this time it doesn't seem like to have to wait that long. More and more container ships are returning to the Red Sea route.
According to the 21st reporter's inquiry, under the escort of the French Navy, the APL Salalah ship under the Singapore flag of CMA CGM has successfully sailed through the Bab el-Mandeb Strait into the Red Sea, arrived at the port of Jeddah, Saudi Arabia on December 25, and continued to the Suez Canal on the 26th.
CMA CGM's Maltese-flagged CMA CGM AQABA is currently sailing out of the Red Sea. It is expected to arrive at the port of Mombasa, Kenya on the 27th.
Under the escort of the U.S. Navy, the Maersk Seletar, a U.S.-flagged ship under Maersk's flag, also entered the Red Sea through the Bab el-Mandeb Strait and is expected to arrive at the port of Algeciras, Spain, on December 31.
ANOTHER MAERSK-OWNED DANISH SHIP, METTE MAERSK, ALSO CHANGED ITS PREVIOUS ROUTE ON DECEMBER 24 AND TURNED BACK NORTH, AND IS EXPECTED TO ARRIVE AT THE SUEZ CANAL ON JANUARY 2, 2024.
CMA CGM CONGO, a Liberian-flagged CMA CGM CGO, is also currently passing through the Bab el-Mandeb Strait and is on its way to the port of Jeddah.
Flying the Maltese flag from THESEUS, chartered by a Greek shipowner, EVA Shipping departed from Singapore and entered the Red Sea through the Bab el-Mandeb Strait, arriving at the port of Jeddah on December 26.
Maersk's Danish flagged MAERSK LONDRINA was even more twists and turns, experiencing two U-turns. The ship was supposed to depart from the port of Jeddah on the Red Sea for Asia on December 18, and then turned around and re-routed through the Suez Canal to prepare for a southward detour, but turned back in the Mediterranean Sea on December 25, and is expected to arrive at Port Said in Egypt on the 26th, and then return to the Red Sea through the Suez Canal.
The Houthi dilemma
Hussein al-Houthi, 45, could not have imagined that in the autumn when he launched an armed challenge to Yemen's government and died, the organization he founded would have the ability to cap the world's attention and suffer just 19 years later.
Hussein founded the organization in the nineties of the last century and has grown since then. In September 2004, Hussein was killed in a clash with Yemeni government forces. In honor of his brother, Abdul Malik al-Houthi changed the name of the group to Houthi. The Houthis seized Yemen's capital, Sana'a, in 2014, and Yemeni government forces have since been locked in a protracted civil war with the Houthis.
By early 2022, the civil war had killed an estimated 377,000 people and displaced 4 million in Yemen, according to the United Nations. To date, most of Yemen's more than 30 million people live in Houthi-controlled areas. In addition to the capital, Sana'a, and northern Yemen, the Houthis also control the strategically important Red Sea coastline.
The Houthis collect taxes and print money in areas under their control and declare themselves part of an "axis of resistance" for Israel, the United States and the wider West, viewing Hamas and Allah in Lebanon as allies.
According to the U.N. Security Council, the Houthis had between 100,000 and 120,000 followers, including armed forces and unarmed supporters, by 2010.
But Professor Manuel Trajtenberg, executive director of Tel Aviv University's Institute for National Security Studies (INSS), believes the Houthis have about 300,000 to 400,000 active members and have demonstrated a wide range of capabilities at sea, including the use of unmanned surface vehicles and drones to attack ships traveling to and from the Red Sea, as well as the laying of naval mines and the launch of anti-ship missiles.
Professor Traitenberg noted that today's global trade, particularly in the field of container shipping, has evolved from a network of national shipping companies to a global and international matrix network with unprecedented complexity and scope, as well as the size of ships, with today's ships carrying goods for a range of international destinations, not just one country. The Houthis' attempts to attack ships linked to Israel pose a threat to all global maritime trade between Asia and the Mediterranean, Europe and even the United States.
Former U.S. President Donald Trump signed a document to add the Houthis to the U.S. Foreign Terrorist Organization (FTO) list the day before he left the White House, but two months after Biden entered the White House, his national security adviser Jake Sullivan removed the Houthis from the list of foreign terrorist organizations.
Now this practice is being brought out and questioned. A White House spokesman also said it was considering whether to put the Houthis back on the list of terrorist organizations. If designated, it would be a crime to knowingly provide "material support or resources" to the Houthis.
Erfan Fard, a counterterrorism analyst and Middle East researcher, believes the FTO designation would have a "limited" practical impact on the Houthis.
Farder noted that the Houthis' recent actions are in line with their long-term strategy, driven by domestic political considerations as well as their opposition to Israel, and serve multiple Houthi targets.
The Houthis hope that the attack on the merchant ships is a fight on behalf of the Palestinians and will increase their influence and popularity in Yemen and the Arab world.
Suggesting that the potential consequences of designating the Houthis as a terrorist organization should be carefully considered, he said, the international community needs to deliberate and cooperate, and has a responsibility to resolve the complex Houthi dilemma in a balanced and responsible manner.
How to maintain shipping safety?
On December 22, the UN Security Council finally adopted a resolution allowing for increased aid into Gaza. After a week of heated negotiations to avoid a U.S. veto, the United States abstained from voting on the final proposal submitted by the United Arab Emirates, which called on all parties to "create conditions for a sustainable cessation of hostilities," and Russia also abstained in protest of the weakening of an earlier draft calling for a ceasefire.
But Israel has not stopped its attack on Gaza, and a new round of Houthi attacks on Red Sea ships has followed. Two merchant ships were reported attacked on December 23 after two anti-ship ballistic launches were launched from Houthi-controlled Yemen regions into the South Red Sea's international shipping lane, in what is believed to be the 14th and 15th Houthi attacks on commercial shipping since October 17.
Maersk was unaffected and announced on the 24th that it would arrange for ships to return to the Red Sea, citing in its statement that the company "has been confirmed that Operation Prosperity Guardian (OPG), a previously announced multinational security initiative, has now been established and deployed to allow maritime trade through the Red Sea-Gulf of Aden".
The U.S. announced last week that the multinational naval alliance, known as Operation Prosperity Guardians, patrols the Red Sea and the Gulf of Aden to deal with "bandit roadblocks on the Red Sea International Highway" and protect passing merchant ships. Two days later, the number of participating countries increased from 10 to 20, but Spain clarified that it would not participate unilaterally in the Red Sea operation, Australia rejected a request from the United States to deploy warships in the Red Sea and stationed only six additional military personnel in Bahrain, and at least eight participating countries refused to be publicly named.
In fact, multinational naval task forces have been operating off the coast of Yemen for weeks, with American, British and French warships intercepting Houthi drones and missiles.
Emile Hokayem, an expert at the International Institute for Strategic Studies (IISS) in London, believes that if the Houthis continue to attack merchant ships, the United States may face increasing pressure to destroy Houthi military bases, and the last thing the United States wants is to be dragged into the Yemeni civil war.
For his part, Houthi intelligence chief Dhaif Allah Al-Shami threatened to target any country involved in the US-led international maritime alliance. "Even if the whole world unites to stop us, it won't work," he said. As the circle of (multinational military) alliances expands, so do our goals. ”
A spokesman for the Houthis said the Red Sea would become a "burning arena" if the United States and its allies continued to act, and urged the countries bordering the Red Sea to recognize the dangers that threaten their national security.
There is no need to be reminded that the countries bordering the Red Sea are well aware of the crisis. Egypt's president, Abdel-Fattah al-Sisi, who just won his third term on December 18, is grappling with the country's worst economic crisis in decades, with onions rising 423 percent a year, meat up 84 percent, tea up 78 percent, and the black market dollar to Egyptian pound reaching 1:50, well above the official exchange rate. Since the Israeli-Kazakhstan conflict, Israel has suspended natural gas exports to Egypt, forcing the Egyptian government to implement rolling power outages across the country. Tourism accounts for 5% of Egypt's GDP, and tourist bookings have fallen sharply since October. The Suez Canal earned a record $9.4 billion in revenue from river crossings last fiscal year, and Egypt would lose a significant amount of revenue if attacks on merchant ships in the Red Sea continued.
The Houthi attacks have all but reached the goal of blockading Israel's port of Eilat, whose revenues have fallen by 85 percent and the cost of delivering goods to Israel has risen, but Eilat handles only about 5 percent of Israel's seaborne trade, and 95 percent of Israel's seaborne trade volume is carried out through two ports in the Mediterranean.
Eight hundred enemies were killed, and one thousand were self-inflicted. About two-thirds of Yemenis depend on aid to survive, and freight costs in Yemen have increased by more than 50 percent since the Houthi attack. Yemen, which imports more than 80 percent of its food, has quadrupled the price of a basket of staple foods in the past five years.
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