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While the United States forms a coalition with other nations to protect ships transiting the Red Sea from the attacks by the Yemen Houthi rebels, even a week of further shipment delays could significantly impact American and global consumers, Northeastern University experts say.
“We’re not in a dire situation yet,” says Nada Sanders, Northeastern distinguished professor of supply chain management. “There are estimates that it won’t get very dire. Having said that, I think we really don’t know at this point.”
Even a week of interrupted shipments, Sanders says, can cause significant increases in the price of gas and consumer products.
In the last four weeks, Houthi rebels have carried out about a dozen attacks on cargo ships crossing the Bab el-Mandeb Strait, which separates the Red Sea from the Gulf of Aden on the shortest trade route between Europe and Asia. Several of the attacks by drones and ballistic missiles have damaged vessels, and the militants seized and still hold hostage 25 crew members of the MV Galaxy Leader, a vehicle carrier partly owned by an Israeli businessman.
Although Houthis claim they only attack Israeli ships or ships carrying cargo from and to Israel, vessels under Norwegian and Liberian flags have also been fired at.
On Tuesday, Dec. 19, U.S. Defense Secretary Lloyd Austin announced a new multinational security initiative, Operation Prosperity Guardian. He said the United Kingdom, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain have joined the mission. Some of the countries will conduct joint patrols while others will provide intelligence support in the southern Red Sea and the Gulf of Aden.
A growing number of shipping companies, including BP, Maersk and Hagan-Lloyd, announced earlier that they are holding their ships or re-routing them around the African continent past the Cape of Good Hope. These companies face a dilemma of charging clients more due to the increased risks, Sanders says, or going the safer way, which would result in higher costs.
“Do you risk your crew? And if you do that and something happens, you’ve got a whole host of issues that can impact you, including potentially losing customers,” she says.
Rerouting ships will lead to 10-day delays at minimum, Sanders says, which can have huge consequences for the supply chain.
Up to 15% of the world’s shipping traffic goes through the Suez Canal, Sanders says. Commercial vessels mainly carry oil and liquefied natural gas, as well as grains and certain consumer goods.
Lessons should have been learned from COVID, she says, and the grounding of a ship in the Suez Canal that blocked commercial traffic for six days.
“These things have a tendency to escalate pretty rapidly when it comes to global supply chains, that everything is interconnected,” Sanders says. “With the length of time it has implications.”
If the attacks continue, she says, Americans are going to feel the price increases.
Sanders saw freight insurance rates go up in real-time over the weekend by 100%, 200%, even 250% in some cases. Longer journeys will increase costs as well, which will be passed down to consumers, she says.
“The average consumer thinks of finished products,” Sanders says.
But the disruption of the streamlined supply chain of oil and natural gas affects not only the prices of gas at the pump, but also production of goods that require gas.
“It is a clear reminder that our global trade system is enormously dependent on maritime,” says Stephen Flynn, professor of political science and founding director of the Global Resilience Institute at Northeastern.
Prolonged disruptions of supply chains, he says, that adversely affect economies also lead to political tensions. Meanwhile, the Panama Canal, another crucial maritime way in the global supply chain, is still not operating at its full capacity because of the lack of water due to drought.
Carrying out Operation Prosperity Guardian might still slow shipment deliveries. With everything else going on in the world, Flynn says, the U.S. Navy might not actually have a lot of excess assets.
The implications will be felt both by Israel and global markets. Europe relies heavily on a growing volume of refined fuels, Flynn says, that are shipped directly through the Red Sea because of the embargo on Russian oil. Also, many sub-Saharan African countries and much of the developing world have less ability to withstand the disruptions.
In general, there is no formal security provided to cover international maritime shipments.
“They are kind of on their own and it is normal,” Flynn says.
There’s always been concerns about potential terrorist risk to shipping in the Red Sea, Flynn says, but mostly there’s been long-standing issues of piracy, primarily coming from Somalia.
Flynn does not see the situation with the Houthi attacks developing into a bigger conflict, however. He believes Houthis might be trying to get more visibility and legitimacy by supporting Palestinians.
“Houthis are not so much committed to disrupting global shipping,” he says, “as to seize the moment and raise their profile.”