Editor's note: On December 18, U.S. Secretary of Defense Lloyd Austin announced the creation of a 10-nation naval mission to protect merchant shipping in the Red Sea.
Thousands of miles away from Gaza, a naval crisis is unfolding that could turn the war between Israel and Hamas into a global event with implications for the global economy. Since December 15, four of the world's five largest container shipping companies, CMA CGM, Hapag-Lloyd, Maersk and MSC, have suspended their services in the Red Sea, through which traffic from the Suez Canal must pass, at the request of Iran. Paused or stopped. The Houthi militants, backed by , are armed with sophisticated weaponry and are escalating attacks on global shipping flows. Amid the sudden closure of one of the world's major trade arteries, the United States and its allies are ramping up naval activity in the Middle East, potentially attacking the Houthis to re-establish free passage.
The Bab al-Mandab is a narrow strait between Africa and the Arabian Peninsula, through which an estimated 12% of global trade and perhaps 30% of global container traffic typically passes. The Yemen-based Houthis have been attacking ships ostensibly aiding Palestinians in Gaza, and the area has become a no-go zone. The strike has been going on for several weeks, but is now rapidly escalating. On December 15, the Houthis attacked one ship, threatened to attack another with a drone, and fired two ballistic missiles at the MV Palatium III, one of which hit the ship. . The attack on Palatium III was the first use of anti-ship ballistic missiles in history. All ships were Liberian-flagged. On December 16, the US Navy ship USS Carney (pictured) shot down 14 drones over the Red Sea, and the British ship HMS Diamond destroyed another.
Image: The Economist
Faced with a growing risk of ship malfunctions and crew deaths, the global shipping industry is moving into emergency mode. On December 15th, Maersk and Hapag-Lloyd suspended their services. On December 16, CMA CGM followed suit, as did MSC, owner of the Palatium III, which said its vessels would not use the Suez Canal in either direction “until the Red Sea route is safe” The department announced that its ships would be changing their transit points. Cape of Good Hope. These four companies together account for 53% of the world's container trade. In addition to small container operators, dry bulk carriers and oil tanker companies may soon follow their lead.
This crisis has two major implications. One concerns the global economy and the other concerns the risk of military escalation in the Middle East as Western powers seek to restore order. Let's start with the economy. Revenue from the Suez Canal is a major source of income for Egypt, which is already in the midst of a financial crisis. (Israel is less affected, with only about 5% of its trade passing through the Red Sea port of Eilat.) For the global economy, a prolonged closure of the Suez route means that shipping will be rerouted around Africa. As a result, trade costs will rise. It will take longer and your insurance premiums will go up. Short-term supply chain disruptions can also result from large-scale trade route changes. In 2021, the Taiwan-operated ship Ever Given ran aground, blocking the canal for six days, intensifying the strain on global supply chains. If a Red Sea security crisis were to be recognized as threatening shipping near the Arabian Sea, through which perhaps a third of the world's offshore oil supply passes, the economic costs would rise dramatically.
These risks are what predispose the United States and its allies to take action. But the Houthi threat is daunting and complex. The extremist group's motto includes the exhortation: “Death to Israel.” “It is a curse on the Jewish people,” and claims it is targeting “all ships heading to Israeli ports” until food and medicine can be delivered to Gaza. However, most of the ships being attacked are neither headed for Israel nor under Israeli ownership. Countries around the world are affected, and one of the ships attacked by the Houthis was flying the Hong Kong flag.
The apparent incoherence of the Houthis' stated objectives should not be confused with incompetence. Iran has been training and arming the group for years in its successful insurgency in Yemen and in its war against the Islamic Republic's regional rivals, Saudi Arabia and the United Arab Emirates (UAE). Some of the weapons involved are sophisticated. “The Houthis currently have a huge arsenal of anti-ship missiles,” said Fabian Hintz of the International Institute for Strategic Studies (IISS) think tank in London.
Western officials are unsure whether Iran is directing individual attacks. Israeli intelligence is not yet convinced that the attack was authorized by the 6000 Corps, a unit of Iran's Expeditionary Quds Force that operates under joint command with the Houthis. However, the group is believed to receive information about the vessels from Iranian surveillance vessels in the Red Sea. And the wide-ranging campaign against shipping is consistent with Iran's coordinated pressure strategy, using its regional proxies to lash out from all sides while avoiding a full-scale attack on Israel. However, Iran has not been able to fully control the Houthi attacks, which have dragged on in a growing number of countries.
Diplomacy may help defuse the crisis. In 2015, Saudi Arabia and the UAE intervened in Yemen's civil war in support of the internationally recognized government. In March 2022, Saudi Arabia agreed to a ceasefire, leaving the Houthis in control of the capital Sanaa and the strategic west coast. They may soon make the ceasefire permanent and announce a roadmap to end the war. A promise to halt maritime attacks could be part of the negotiations.
Nevertheless, a larger military response to the Houthi threat is likely. A multinational force led by the U.S. Navy is already operating off the coast of Yemen, trying to prevent the Houthis from forcibly boarding ships (a raid that was halted in November) and launching missiles. This includes both Egypt and Saudi Arabia. US, British and French warships have all intercepted Houthi drones and missiles in recent weeks, and the US has asked Australia to send warships as well.
But this defense fleet is struggling to contain the crisis. The Houthis have demonstrated that a small number of drones and missiles can pass through at any time. A possible next step would be armed escort for merchant ships, which the United States used during the so-called tanker war between Iran and Iraq in the 1980s. But that would require significantly more warships, according to Navy officials involved in the discussions.
The main alternative is to attack the Houthis and their arsenal directly. Both the United States and Israel are developing plans to attack Houthi warehouses and launch pads. The United States will likely be active in expanding its involvement in the Middle East. The Biden administration has expanded the Red Sea Task Force and focused on applying diplomatic and economic pressure on Iran. Israel does not want another conflict. Israel is already facing pressure from the United States to wind down the current stage of the war in Gaza, and is concerned about the Lebanese militant group Hezbollah, which fires missiles at Israel on an almost daily basis. But escalation may be inevitable if Iran and its Houthi proxies continue their attacks that shut down one of the world's major trade routes.
