Why the Houthi attacks in the Red Sea are worrisome
Mint looks at the crisis, efforts taken to contain it, and its implication for India and the world. The Yemen-based and Iran-backed Houthi militants have fired over 100 drones and missiles at ships belonging to over 35 countries plying the Red Sea. They are doing so ostensibly in support of the Palestinian cause.
Many missiles have been intercepted by the navies of Western nations present in the region, but a few have slipped through, damaging the vessels. Many large container shipping firms and BP, one of the world’s largest oil producers, have suspended voyages through the narrow waterway—one of the busiest trade routes that connects Europe and Asia through the Suez Canal. More than 20,000 ships pass through the Red Sea and Suez Canal annually.
They carry as much as 30% of the world’s container volume, 9% of oil, 6% of gas and account for 12% of global sea-borne trade. Any disruption to this trade route would naturally have significant implications. In the last one week, more than 300 vessels have opted to take a 6,000 nautical mile detour around Africa.
This means an additional 12 days of transit time. The crisis, if not contained quickly, will disrupt the global supply chain and hurt the world economy. It is already sending the cost of transportation up significantly.
In the last three weeks, spot freight rates between Asia and Europe have soared 40%. Insurance premiums have also shot up. Crude prices have risen too.
Experts warn this is just the start. As ships take the longer route around Africa, it will soak up a lot more shipping capacity and create container mismatch as more containers are leaving China than those returning to the country. The US is leading an effort to put in place a multilateral task force,
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