Red Sea crisis: Houthi attacks raising prices worldwide
UP UNTIL a few weeks ago, the Red Sea and Yemen held little significance for the peoples of Latin America and the Caribbean. However, an unexpected turn of events thrust these regions into the spotlight – t he relentless attacks on commercial shipping by a group known as the Houthis. Emerging from global obscurity, the Houthis have become central to headline news worldwide.
DRIVING UP PRICES FOR GOODS
The Houthi assaults severed vital shipping routes by blocking access to the Suez Canal, a critical link connecting the Red Sea to the Mediterranean, representing a staggering 15 per cent of global trade. These attacks have propelled shipping costs to unprecedented levels – data from the London-based Drewry Shipping Consultants reveals that the average global price for a 40-foot container has more than doubled in the past month.
Further, the World Trade Organization reported a staggering 40 per cent decline in wheat shipments through the Suez Canal in the first half of January. Faced with this disruption, companies are re-routing fleets away from the Red Sea, opting for the Cape of Good Hope route around South Africa. However, the journey takes 10 days longer, further increasing costs.
NO REGION IS IMMUNE
While Europe, Africa, and the Middle East directly bear the brunt of trade disruptions from the conflict, the global turmoil poses risks for all, including the Caribbean. Intertwined global transportation, with rising shipping costs, idle warehouses, and disrupted container schedules, initiates a ripple effect, impacting prices universally.
Additionally, the global stock market’s speculative nature further contributes to rising prices. Notably, in mid-January, heightened risks in the Red Sea led to a surge in oil prices to $80 per barrel.
The Caribbean, already grappling with elevated costs from the COVID-19 pandemic and the Russian-Ukrainian conflict, is not immune to the recent price hikes. Prolonged disruption by the Houthis, far from a distant concern, directly affects the Caribbean, impacting the pockets of people across the region.
WHO ARE THE HOUTHIS?
The problem is the Houthis have no self-serving interest to stop. The Houthis are a political and military organisation in Yemen, a country located in the southern end of the Arabian Peninsula. It is bordered by Saudi Arabia to the north and Oman to the north east. Significantly, it overlooks the Red Sea at its narrowest point – a 20-mile strait of water – before it plunges into the Arabian Sea. It is from this vantage point that the Houthis have been attacking ships since the conflict between Hamas and Israel in Gaza began in November 2023.
The Houthi organisation controls most parts of Yemen, including the capital. They have been at war with a military coalition, organised and supported by Saudi Arabia for 10 years. The organisation is supported by the Government of Iran for two reasons. The first is that Iran rivals Saudi Arabia for regional dominance; Yemen is a proxy for the wider competition. The rivalry is exacerbated by religious differences – Iran is largely Shia Muslim, while Saudi Arabia is Sunni Muslim.
The second reason for I ran support of the Houthis is the conflict between Israel and Hamas over Gaza. Israel and Iran are sworn enemies, and Iran is believed to be financing the Houthis to attack ships serving ports in Israel. But what started out as an attempt to inflict damage on Israel, in support of the Palestinian cause, has spread into attacking ships belonging to the US, the UK and other Western nations regarded as allies of Israel.
THE UN RESPONSE
On January 10, the United Nations Security Council attempted to address the issue by passing a resolution, condemning the Houthi attacks on shipping. But the resolution, while adopted, exposed serious divisions among the five veto-nations on the Council. The US, UK and France voted in favour, Russia and China abstained. Both Russia and China linked their abstention to the consequences of Israel’s military operations in Gaza that have now lasted for more than three months, resulting in more than 25,000 people being killed.
SITUATION ABOUT TO WORSEN
Recent US and UK airstrikes across Yemen, directed at Houthi operations, prompted a Houthi demand for the expulsion of all US and UK, the UN and humanitarian staff within a month. Whether this demand hints at further retaliatory actions against the US and UK remains uncertain.
Meanwhile, the Houthis lack an incentive to cease attacks on Western-owned ships, as their actions in Yemen, purportedly in support of Palestine, have bolstered their popularity, diverting attention from the organisation’s failure to provide basic services to the Yemeni people.
Both the US and UK governments are facing general elections this year. Wars – even small ones – have the tendency to rally national support behind governments, particularly if they claim that the involvement in conflict is to provide economic benefits or enhance national power. Thus, the US and UK governments also have domestic political reasons to intensify their military response to the Houthis, in the hope that it will build their political capital.
NO PROSPECTS FOR AN EARLY END
The ongoing disruptions underscore the urgency for nations to unite in diplomatic efforts, prioritising humanitarian concerns and seeking enduring solutions to restore stability. However, given all the vested interests at play, no such thing will happen.
Therefore, the prospect is real of a prolonged disruption of shipping. Countries around the world need to prepare for higher prices. And, once again, small states, through no fault of their own, will be the victims of events in which they play no part.