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Yemen, an unexpected outlier in the current conflict in Gaza, has intervened in the war between a pygmy Hamas and mighty Israel, by shutting down the Suez Canal, throwing international shipping out of gear. Since December 15, 2023, Hapag-Lloyd, CMA CGM, Maersk, and MSC, the four largest shipping companies that account for 53 percent of global container trade, have halted all transit through the Red Sea. Taiwan’s Evergreen shipping has also halted transit through the Red Sea and will no longer accept any Israeli cargo.
On December 20, Malaysia announced it was closing the Strait of Malacca for the Israeli ZIM shipping company and refused ZIM ships permission to dock or transit in its territorial waters. The decision will be effective in four weeks. The ban covers ships sailing under the Israeli flag or moving towards Israel. Globes, an Israeli financial newspaper, has reported that Israeli shipping companies have so far lost around 23% of their market value, a loss of billions of dollars. Since then, the oil majors, Evergreen, Euronav, and BP, have joined the growing list of shipping companies that have temporarily suspended shipments through the Red Sea.
The region’s geo-economic chessboard has thus been turned upside down. Rerouting of cargo ships will impact the economy of Egypt, which derives a substantial portion of its revenues from traffic through the Suez Canal. The Suez Canal is on the fastest transit route from Asia to Europe; its closure will affect global supply chains as a drought in Panama has affected shipping via the Panama Canal. Nearly 5 percent of all global trade moves through the Panama Canal, and 12 percent via Suez. Disruption in supply chains will impact every link in the chain, from producer to end user.
Admiral Ossama Rabiee, chairman and managing director of the Suez Canal Authority stated that 55 ships have been rerouted since November 19, causing a loss of US$ 27.5 million for Egypt. Diversion via the Cape of Good Hope (South Africa) will add 9-14 days to every trip. Experts say shipping costs have risen by nearly 50% in just one week and could rise further with tensions in the Red Sea.
The Houthis have announced that they want a ceasefire in Gaza. Washington is reluctant to expand the Israel-Hamas conflict by hitting Houthi missile sites and provoking Iranian retaliation, despite intense pressure from Israel. Instead, it mooted Operation Prosperity Guardian, a “multinational security initiative” to protect shipping and shoot down incoming missiles and drones. The coalition was to include the US, Britain, France, Italy, Canada, the Netherlands, Norway, Spain, Bahrain, and the Seychelles. Former British MP George Galloway observes that Saudi Arabia and UAE, new members of the BRICS grouping, have refused to join the coalition against Yemen, as they do not wish regional chaos to enable covert plans for regime changes. Bahrain, which hosts the US and UK navies, has joined the Western alliance.
However, Operation Prosperity Guardian collapsed almost immediately, as France, Spain, and Italy withdrew and announced that they would join maritime operations under the Command of NATO and/or the European Union, and not the United States. The Netherlands and Norway then stated that they would not send any vessels but only liaison officers. In the circumstances, Britain may refrain from joining the coalition to protect Israeli shipping in the Red Sea. Moreover, Algeria indirectly extended support to Palestinians by closing its airspace to American military planes and forcing an aircraft en route to Israel to turn back.
Houthi spokesperson Mohammed al-Bukhaiti was firm that his forces would confront any US-led coalition in the Red Sea. The Houthis have Zoheir and Khalij-e-Fars anti-ship ballistic missiles with a range of 300 to 500 km. The Hezbollah has also entered the arena, targeting two Iron Dome batteries north of Kabri with Basir artillery shells. He added, “Even if America succeeds in mobilising the entire world, our operations in the Red Sea will not stop unless the massacre in Gaza stops.”
Ansar Allah spokesman Muhammad Abdel Salam said Yemen’s position towards Palestine is based on religious, national, and moral principles, as the Palestinian issue is not negotiable, and the events in Gaza are unacceptable. Besides lifting the siege on Gaza, Yemen wants food and medicine to be allowed in the area. Salam claimed that the Red Sea is safe for navigation by all ships, barring ships linked to Israel.
The Yemeni Armed Forces spokesperson, Yahya Sarae, who announced the attack on the container ships MSC Alanya and MSC PALATIUM III, said the objective was to defend the Palestinian people in the Gaza Strip, who urgently need food and medicine. The United States forces are also targeted, with US bases in Syria and Iraq under attack with missiles and drones.
According to the Israeli newspaper, Haaretz, Hamas has forced Israel to call up nearly 360,000 reservists and evacuate thousands of people from their homes in the south, and most economic activity there has ground to a halt. Meanwhile, Hezbollah is doing similar economic damage in the north. Overall, the Israeli economy is expected to shrink by an annual rate of 15 percent in the fourth quarter. Workers have been put on unpaid leave, and unemployment rose to 9.6 percent in October, from 3.6 percent in September. Tourism has sunk to the levels experienced during the COVID-19 pandemic.
Haaretz observes that Yemen “presents an entirely new threat to the economy because it is targeting Israel’s international trade”. Already, cargo traffic at Israel’s Eilat Port has fallen by 85 percent and the cost of marine insurance for Israeli-owned (and presumably Israel-bound) vessels is soaring. Ships transiting via Africa take two weeks longer, which adds to the costs of imports, which will eventually be passed on to the end consumer.
Domestic and international pressure, particularly from Washington, compelled Israeli Prime Minister Binyamin Netanyahu to modify his position and allow the Mossad chief to go to Qatar to negotiate with Hamas after the Israel Defense Force mistakenly killed three Israeli captives (Yotam Haim, Alon Shamriz, and Samer El-Talalqa) in Gaza on Dec 15, provoking outrage and protests in Tel Aviv. The trio were carrying a white flag and cried for help in Hebrew when the incident occurred. In a televised press conference (Dec 16), Netanyahu hinted at fresh negotiations to recover the hostages.
Israel has suffered a public relations setback since the hostilities began on October 7, as thousands of Orthodox Jews in the United States rallied for a ceasefire in Gaza.
References:
Maersk, Hapag-Lloyd pause Red Sea shipping activity following attacks, Dec 18, 2023 https://www.themanufacturer.com/articles/maersk-hapag-lloyd-pause-red-sea-shipping-activity-following-attacks/
US announces 10-nation force to counter Houthi attacks in Red Sea, AlJazeera, Dec 19, 2023
A new Suez crisis threatens the world economy, The Economist, Dec 16, 2023
https://www.economist.com/international/2023/12/16/a-new-suez-crisis-threatens-the-world-economy
Hezbollah shells 2 air defense platforms in northern Israel, Anadolu Ajansi, Dec 18, 2023
Shipping lines avoid Suez Canal as Red Sea attacks continue, Supply Chain Dive, Dec 18, 2023
Stopping operations in Red Sea depends on halt to aggression against Gaza, IRNA, Dec 17, 2023
https://en.irna.ir/news/85324860/Stopping-operations-in-Red-Sea-depends-on-halt-to-aggression
US warns Ansarallah against attacking Israeli ships, The Cradle, Dec 15, 2023
https://new.thecradle.co/articles/us-warns-ansarallah-against-attacking-israeli-ships
Houthis Open New and Dangerous Front in Israel’s Economic War, Haaretz, Dec 13, 2023
Netanyahu hints at new Hamas negotiations after hostage deaths, France24, Dec 16, 2023
Shippers mask positions, weigh options amid Red Sea attacks, Reuters, Dec 20, 2023
Malaysia Bans Israeli-Based ZIM From Anchoring in Its Waters, Bloomberg, Dec 20, 2023
Spain, Italy, France Decline US Command Of Red Sea Operation Prosperity Guardian, gCaptain, Dec 22, 2023
Shipping costs rise by nearly 50% in a week and could go up further amid Red Sea attacks, Sky News, Dec 22, 2023.
HMS Diamond joins new international task force to protect shipping in the Red Sea, Dec 19, 2023 https://gov.uk/government/news/hms-diamond-joins-new-international-task-force-to-protect-shipping-in-the-red-sea
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