The Houthis rocking the boat in the Red Sea

Red Sea crisis causing ‘massive impacts’ on businesses

Supermarket behemoths Ahold Delhaize, Carrefour, Lidl, M&S, and Tesco are among the members of Eurocommerce, along with clothing retailers H&M, Inditex, and Primark.

Every so often, in what for some is a remote corner of the world, a crisis emerges that puts the name of a particular ethnic minority in constant mention in the world’s news.

This time it is the Houthis of Yemen and their maritime attacks in the Red Sea and how their actions have sent economic and financial shock waves around the world.

The Zaydi Shiites, also known as Zaydiyyah, are Yemen’s Houthis who in the Islamic world, are a minority of Shiites who hold doctrines and beliefs that differ greatly from those of the Shiites who predominate in Iran, Iraq, and other places.

Iran started to serve as the Houthis’ secondary source of support, particularly since Saudi Arabia is their shared enemy, though it’s unclear how close their ties are.

As it did to many other Arabs, the US invasion of Iraq in 2003 deeply radicalized the Houthi movement. In the wake of this invasion, among other things, they adopted the slogan: “God is great, death to the US, death to Israel, curse the Jews, and victory for Islam”. The group also officially called itself Ansar Allah, or supporters of God.

Although different kinds of Shiites, Hezbollah, the Shiite movement in Lebanon, became a role model and mentor for the Houthis and provided inspiration and expertise for them.

In the midst of all this, the US had for a while a productive informal intelligence relationship with the Houthis in its fight against al-Qaida. As a military force, the Houthis are a formidable force who in recent years managed to resist and overcome both the Yemeni military and Saudis. The Houthis now control a territory inhabited by 80 percent of Yemen’s population.

This after a war that began in late 2014 when Sanaa was seized by the Houthis. Worried by the growing influence of Shi’ite Iran along its border, Saudi Arabia intervened at the head of a Westernbacked coalition in March 2015 in support of the Saudi-backed government.

The Houthis established control over much of the north and other big population centres, while the internationally recognised government based itself in Aden.

Now the Houthis are grabbing world attention with their attacks on the Red Sea’s shipping route, a strategically critical strait that is transited by 15 percent of global trade - attacks that are a response to the Israel-Hamas war, which apart from targeting shipping according to them connected to Israel, they have also fired missiles and drones toward southern Israel.

In a world still recovering from the Covid-19 pandemic, impacted by the Russo-Ukraine war and the conflict in Gaza, the Houthi attacks are forcing shipping companies to temporarily suspend sailing through the Suez Canal and re-routing them round the Horn of Africa, a change that adds about 10 days to their journey.

As a direct consequence of that, this has raised shipping costs and the cost of consumer goods worldwide.

The Red Sea has to date seen a 35 per cent decrease in traffic. Although most ships can choose

“This has raised shipping costs and the cost of consumer goods worldwide”

the longer but safer route around Africa, this crisis has raised the cost of shipping internationally, adding to the already high cost of commerce at a time when problems at the Panama Canal have made shipping more difficult and central banks are concerned about a fresh inflationary spike.

If the Houthi actions persist, the costs to consumers and the impact on local states will be considerable. Oil tankers which travel around South Africa will arrive two weeks later than planned, consuming more fuel in the process.

Diverting oil tankers around Africa uses up an extra 200,000 barrels a day, an oil expert told Breakingviews, pushing the growth in oil demand this year to 1.4 million barrels a day.

This February, the EU is set to launch Aspides – meaning ‘protector’ - a joint Red Sea naval mission with a mandate to protect commercial operations and to intercept attacks, without taking part in direct strikes against the Houthis.

This follows another mission launched in December of last year by the US and other countries to allay fears that disruption in one of the world’s top trading arteries could hit the global economy.

But some U.S. allies, notably European countries, have raised reservations about the American plan, which has seen the U.S. and Britain launch air strikes on Houthi positions, and baulked at the idea of being under Washington’s command.

In a letter to Belgium’s foreign minister, the European retail industry body Eurocommerce stated that the Red Sea crisis has already had “massive impacts” on businesses and urged EU institutions and member states to resolve it to restore trade.

Supermarket behemoths Ahold Delhaize, Carrefour, Lidl, M&S, and Tesco are among the members of Eurocommerce, along with clothing retailers H&M, Inditex, and Primark.

“In the end, consumers will suffer from additional costs adding to the already high costs of living in Europe the longer carriers are forced to reroute,” stated Eurocommerce in the letter.

Retailers who source from factories in China and South-East Asia have faced delays and cost increases as the alternative shipping route around Africa’s southern tip takes 2-3 weeks longer, resulting in higher fuel and labour expenses.

The disruption has raised fears that inflation will take longer to unwind in Europe, at a time when cash-strapped consumers were looking forward to prices of food and clothes starting to ease.

“Given the magnitude of the impacts on businesses and the global supply chain, we appeal for continued intensified and coordinated efforts by the EU institutions and Member States to address the situation,” said Eurocommerce confirming its support to any EU initiatives that protect commercial ships and seafarers against attacks.

PHOTO: REUTERS The Red Sea has to date seen a 35 per cent decrease in traffic.