GAZA WAR, RED SEA CRISIS AND SEA OF ISSUES FOR MERCHANTS
The Red Sea crisis, which is having a great impact on international trade, is unlikely to end anytime soon despite the Us-led naval and air forces’ hitting Houthi targets in Yemen. Since the Houthis insist that they will not cease attacking ships in the Red Sea unless a ceasefire is enforced in Gaza, the Red Sea crisis will end only if there is a ceasefire in Gaza. And that appears to be a far cry.
Neither the Israelis nor Hamas is willing to give in. Israel will not stop its brutal offensive until Hamas releases the 100 hostages it still holds, and Hamas will not release them so long as there is no ceasefire in Gaza.
President Ranil Wickremesinghe has talked of finding alternatives to the Suez Canal/red Sea route for international trade. Indeed, for reasons unrelated to the Gaza/ Red Sea conflict, China has been exploring the prospect of a land route to Europe via Central Asia through its Belt and Road Initiative (BRI). India is also exploring a Mumbai-iran-central Asia sea-road/rail link.
“Compared to the land link, seaway is the least expensive. Land routes may also have to negotiate disturbed areas,” pointed out Rohan Maskarola, CEO of the Shippers’ Academy in Colombo.
Sea transport is cheaper than land transport for a number of reasons. The main reason for this is that shipping routes need no infrastructure to be maintained as in the case of roads and railway. Then there is the economy of scale. Container ships can handle large quantities of cargo. The largest container ship today can carry around 18,000 TEUS in total, which means it has space for up to 18,000 20-foot containers.
Sea transport is safer because ships are much bigger than trucks or trains and are built for safety. The large size of ships also means that they are less likely to tip over. There is more room for manoeuvring in the open sea than on roads or tracks. Statistically, major accidents at sea are much rarer than accidents involving land vehicles. If freight cost is a major factor and sea routes are available, sea transport will often be the best choice.
However, given that ships are now avoiding the Suez Canal and the Red Sea and going round the Cape of Good Hope (South Africa), shipping costs have shot up and there are delays hampering world trade. Consumers are hit.
COST OF REROUTING
Container News, quoting Niels Rasmussen, Chief Shipping Analyst at Baltic and International Maritime Council (BIMCO), one of the largest international shipping associations representing ship owners, says that in the first seven weeks of 2024, cargo volumes to and from ports in the Gulf of Aden and Red Sea declined 21 percent year on year.
“The number of ships arriving in these ports significantly declined as merchant shipping increasingly avoided transiting through the region,” Rasmussen said.
Since November 2023, Houthi forces have attacked ships in the Red Sea and Gulf of Aden. In February, the number of ships transiting through the Gulf of Aden and the Suez Canal was 50 percent and 37 percent lower than last year. Container ship transits were down by 70 percent through the Gulf of Aden and the Suez Canal.
Prior to the attacks, shipments through the Suez Canal accounted for roughly 10 percent of global trade and in normal times at any given point of time, about 400 ships would be passing this waterway.
“Even where alternative export routes exist, these often come at a higher cost, longer duration and with constraints to capacity,” Rasmussen added.
According to Economynext freight rates to some European ports from Colombo port have increased by as much as 2000 to 3,000 US Dollars per 20-foot container, which has resulted in doubling of freight costs in some cases.
“As ships are strung along around Africa, it will take longer for them to turn around and return to East Asia reducing ship calls and also containers, which will remain at sea for longer. Going around Africa has increased the time to three weeks, when the return journey is counted. Both the supply of containers and availability of ships have reduced, affecting Eastern routes as well,” Masakorala said.
Timothy George, who is involved in freight forwarding, wrote in his Linked in post that Sri Lanka relies heavily on the Red Sea route for the import of essential goods, raw materials and energy resources, as well as the export of its products to the European markets.
“Any disturbance in these routes can lead to delays, increased shipping costs, and supply chain uncertainties for Sri Lanka. Disruptions in the Red Sea could result in increased costs for oil imports, potentially leading to higher energy prices domestically and impacting various sectors of the economy,” George added.
The answer lies not in searching for a land route but in making sincere and collective efforts to end the Gaza war and the Red Sea conflict. But efforts in this direction have been disappointing to say the least.
American Secretary of State Antony Blinken’s incessant shuttle diplomacy has neither led to the release of the Israeli hostages nor to the end of Israeli ground and air operations.
Meanwhile, food and essentials for the trapped civilians in Gaza are blocked. President Joe Biden, having failed to restrain his ally Benjamin Netanyahu or make him stop the carnage in Gaza, could only air-drop some food and other relief material on Gaza.
But as the New York Times pointed out, airdropping supplies will not serve the purpose as there is no organisation on the ground to collect and distribute the parachuted supplies. There will be chaos.
LIMITATIONS OF US OPERATIONS
A Us-led coalition launched military operations against the Houthis. But according to Rasmussen, it is going to be a long haul for the Us-led forces as they are ranged against the Houthis, whose armoury of missiles seems to be huge, thanks to Iranian backing.
The official aim of the US anti-houthi operation is “to secure safe passage for the commercial ships”. But experts consider this to be “too vague,” according to Al Jazeera.
“Admirals want politicians to give them precise tasks and clear mandates to achieve the desired results,” the news website added.
The Americans have shot down many Houthi missiles, and have hit their bases in Yemen, but still, the Houthi threat remains high as their arsenal is substantial.
“In theory, attacks against Houthi missile infrastructure in Yemen could be based on satellite and Unmanned Aerial Vehicles (UAV) reconnaissance and carried out by missiles launched from the Red Sea and the Indian Ocean and armed drones from distant land bases.”
“But attacks against targets in Yemen would also carry a clear political risk,” Al Jazeera points out.
The US would alienate the Arab and Islamic world as the Houthis have linked their war to the struggle of the people of Gaza, who have widespread global support, including in the US and Europe.