Nestled between Africa and Asia, the Red Sea serves as an inlet to the Indian Ocean. Connecting to the Gulf of Aden in the south through the Bab el Mandeb and to the Mediterranean Sea in the north via the Gulf of Suez and the Suez Canal, it offers northern sea access from Middle Eastern countries through the Gulf of Aqaba (or Gulf of Eilat).
On the east, the Red Sea is bordered by Saudi Arabia and Yemen, while Sudan, Eritrea, Djibouti, and Egypt form its western border. Egypt, Israel, and Jordan share the northern border. As one of the world’s most densely packed shipping channels, the Red Sea is positioned south of the Suez Canal, a crucial waterway linking Europe to Asia and East Africa.
You can also read: Western Intervention Secures Red Sea from Houthi Forces
The Houthis in Yemen have vowed to target ships bound for Israel in the Red Sea. Israel urges U.S. President Biden to respond, but Saudi Arabia advises caution. As the president weighs the response, the threat to free navigation heightens. The U.S. teeters on the edge of involvement in another Middle East conflict, this time in Yemen, intending to safeguard navigation through two vital international waterways.
In support of the Palestinian side in the Israeli-Hamas War, the Iranian-backed Houthi government in Yemen aims to block all ships heading to Israel via the Bab el-Mandeb Strait in the Red Sea. Despite firing numerous drones and missiles toward Israel, the Houthis’ attempts have been thwarted by U.S. and French warships patrolling the Red Sea.
Houthi Threats Escalate in Red Sea
The Houthis have successfully seized two Israel-linked commercial vessels, however, one of which they now hold captive with its non-Israeli crew in the Yemeni Red Sea port of Hodeida. After two more commercial ships were hit by Houthi missile or drone fire on December 15, 2023, two shipping companies announced they were suspending passage through the strait until further notice. The Houthis have also shot down one American Reaper intelligence drone flying over international Red Sea waters.
The latest Houthi threat on December 9, 2023, came just one day after the United States found itself the only member of the 15-nation UN Security Council to veto a resolution calling for an immediate humanitarian ceasefire. A Houthi spokesman warned that “if Gaza does not receive the food and medicines it needs, all ships in the Red Sea bound for Israeli ports, regardless of their nationality, will become a target of our armed forces.”
The Saudi fear is that US attacks inside Yemen could not only upset peace talks but trigger a renewal of the civil war marked also by hundreds of Houthi drone and missile attacks on Saudi oil facilities, military bases and even major cities.
Stability in the Red Sea region is crucial to many Visions 2030 projects. These include NEOM—the new urban area in the northwestern Tabuk province, that includes a floating port city on the Red Sea coast and luxury island destinations—as well as The Red Sea, a tourism development project. For the traditional oil economy, the Yanbu terminal is also critical for Saudi Arabia as an alternative to the Hormuz Strait in 2018, the kingdom added three million barrels per day to its export capacity from its western coast.
Due to a combination of economic and security reasons, Saudi-Israeli normalization remains a matter of when, rather than if, as suggested by plans for the India-Middle East-Europe Economic Corridor project, signed by Riyadh and Tel Aviv in September 2023. Vision 2030 is based upon connectivity: Riyadh needs regional stability, maritime security, and a broad set of alliances to fulfill its economic targets, all of which are challenged as long as the Red Sea remains a military flashpoint.
International Shipping Giants Suspend Operations
The announcement by the world’s four largest shipping companies about suspending sailing through the Suez Canal due to the increasing Houthi attacks is not only a severe blow to global trade but, more importantly, to Egypt’s national security
This decision is anticipated to significantly reduce shipping traffic in the Suez Canal, impacting Egypt’s income, as about 20% of the world’s oil and gas consumption passes through Bab el-Mandeb. Additionally, the Suez Canal handles approximately 98% of the ships traveling between Europe and Asia, encompassing about 30% of global container traffic and 12% of global goods trade. Last fiscal year, the canal contributed $9.4 billion to Egypt’s economy, making it a vital source of foreign exchange income. On average, the canal generates $25-30 million for Egypt each day through shipping fees and additional services.
About 12% of global trade passes through the Red Sea, including 30% of global container traffic. Billions of dollars of traded goods and supplies pass through the Red Sea every year, meaning that delays there can affect petrol prices, the availability of electronics, and other aspects of global trade.
The Houthis are a Yemeni rebel group who control the west of the country, including its Red Sea coast. They are aligned with and supplied by Iran but are politically independent. While other Muslim countries and groups have chosen not to try to help Hamas in Gaza, the Houthis declared war on Israel at the end of October 2023.
As the situation escalated over the past month, the US has repelled attempts to board other cargo ships, while US, French, and British warships have shot down Houthi drones and missiles.
Some analysts believe the Houthis hope to embroil the US in a direct confrontation. Escalation could also imperil peace talks between the rebel group and the Saudis. The two have fought a bloody war since 2015, in which Riyadh has repeatedly been accused of killing civilians with indiscriminate airstrikes.
Prominent shipping companies including Maersk, Hapag-Lloyd, and MSC have decided not to use the Red Sea over the past week. According to the Atlantic Council, a thinktank, seven out of the 10 biggest shipping companies by market share have suspended operations in the Red Sea.
Some ships are being diverted around the Cape of Good Hope, on the southern tip of Africa, increasing their journey time by up to two weeks. On 15 January 2024, BP halted all shipments of oil and gas through the Red Sea.
Insurance risk premiums for sailing through high-risk areas are also rising. This risk premium paid by shipping companies was just 0.07% of the value of a ship at the start of December but has risen to about 0.5% to 0.7% in recent days.
Rerouting Challenges
Shipping companies sailing around the Cape of Good Hope to avoid Houthi attacks on the Red Sea face tough choices over where to refuel and restock, as African ports struggle with red tape, congestion, and poor facilities, companies and analysts say. Hundreds of large vessels are rerouting around the southern tip of Africa, a longer route adding 10-14 days of travel, to escape drone and missile attacks by Yemeni Houthis that have pushed up oil prices and freight rates.
The attacks by Iranian-backed militants have disrupted international trade through the Suez Canal, the shortest shipping route between Europe and Asia, which accounts for about a sixth of global traffic. South Africa’s major ports, including Durban, one of Africa’s largest in terms of container volumes handled, as well as Cape Town and Ngqura ports are among the worst performing globally, a World Bank 2022 index released in May found.
“Even the state that Durban is in now, it is still the most advanced and largest port in Africa, so ships rerouting around the continent have very limited choices for berthing for replenishment,” Alessio Lencioni, a logistics and supply chain consultant told Reuters. Other large African deep-water ports along the Cape route, such as Mombasa in Kenya and Dar es Salaam in Tanzania are too ill-equipped to handle the expected traffic over the next couple of weeks, Lencioni said.
Thus, the Red Sea crisis pressures importers and exporters as shipping delays, and costs mount.
