Further incidents are likely in the coming weeks in the waters off the Arabian Peninsula, particularly in the Red Sea and Gulf of Aden, following the halt of Red Sea transits by major shipping companies due to attacks against shipping by Yemen-based Al-Houthi rebels. The four companies, MSC, Maersk, CMA CGM, and Hapag-Lloyd, account for more than 60 percent of global maritime trade annually, and their decision, should it be prolonged, is certain to have a significant impact on supply chains worldwide. This, combined with possible attempted attacks on US and aligned warships, is likely to draw a response from US and US allies. Although how the US responds remains to be seen, the scale of the response has the potential to expand the scope and nature of the attacks in the Red Sea and Gulf of Aden.
Supply Chain Disruption
As of Dec. 19, four of the world’s five largest shipping companies have stated that they have paused operations in the Red Sea due to the Al-Houthi threat. British Petroleum (BP), one of the world’s most significant oil and gas producers, has announced similar measures. While Chinese state-owned COSCO, the world’s fourth-largest shipping company, has yet to announce any change in operations, COSCO-owned OOCL has stated that its vessels will temporarily cease calling at Israeli ports, as has Evergreen Lines.
The decision by these companies to halt shipments through the Red Sea means that their vessels are unable to access the Suez Canal, a crucial maritime link between the Indian Ocean and the Mediterranean Sea which sees approximately 15 percent of global trade sail through annually. Affected vessels must therefore wait until the security situation improves or sail around the Cape of Good Hope in South Africa, a journey which could add up to 2-3 weeks to shipping times for those vessels already at sea before the announcements were made. The effect of such disruption was seen in 2021 when the cargo vessel Ever Given ran aground in the Suez Canal, forcing its closure for six days. The incident resulted in a significant impact to global trade and supply chains, with estimates of the daily cost to the global economy reaching as high as USD 10 billion. In addition, such a protracted delay could pose a commercial challenge to smaller shipping companies, which might be forced to continue to use the shorter Red Sea route.
Attacks on Civilian Vessels
The shipping suspensions came after almost a month of attacks against commercial vessels in the southern Red Sea and Gulf of Aden. The Al-Houthi rebels first threatened to target Israeli-linked shipping Nov. 14 in support of Hamas in the ongoing Hamas-Israel conflict. This threat was first carried out Nov. 19 with the hijacking of the Galaxy Leader cargo vessel; the Al-Houthis have since regularly targeted vessels with weaponized drones, missiles, and small arms fire. The threat was expanded Dec. 9 to include all vessels sailing to and from Israeli ports, with the number of attacks increasing in frequency since that date. Although most vessels targeted have had some form of alleged connection to Israel, it appears that vessels with no obvious links have also been struck. These cases, while most probably caused by some form of error or malfunction, highlight the threat posed to all shipping.
US, UK, and French warships have been instrumental in limiting the amount of damage the Al-Houthis have been able to cause, with naval vessels from these countries having shot down several drones and missiles. Officials have been keen to downplay the possibility that warships have been targeted, likely in an attempt to de-escalate the situation, though drones have been reported as shot down in self-defense.
Potential for Global Intervention
Given the potentially significant impact of the shipping companies’ suspensions, pressure is mounting on the US to respond. Such a response could include missile strikes on Al-Houthi storage facilities or intelligence sites. The aim of such strikes would likely be to be to dissuade further Al-Houthi action and as such limit the possibility of escalation. Any further escalation may lead to the Al-Houthis announcing an expansion of the types of vessels targeted or see the use of more indiscriminate and destructive weaponry, such as waterborne improvised explosive devices (WBIEDs), or even – though less likely – naval mines. Should the Al-Houthi rebel group come under increasing pressure, it is also possible that Iran could intervene on its behalf. This could potentially take the form of a “second front” in the Arabian Gulf, Gulf of Oman, and Strait of Hormuz, another globally significant waterway, as well as in the wider Arabian Sea. Such an intervention would open up the possibility of further escalation with more serious consequences for supply chains and security.
The US response is likely to become clearer in the coming days. On Dec. 18, US Secretary of Defense Lloyd Austin announced the formation of Operation Prosperity Guardian, a multinational maritime protection force for Red Sea shipping, comprising naval forces from the US, UK, Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles, and Spain. The plan is also likely to include the participation of neighboring Arab states and would augment the existing Combined Task Force 153 (CTF-153). However, those countries contributing to the force will likely be careful to avoid any escalation involving Iran and it is also unlikely that the creation of a new task force alone will be enough to deter further Al-Houthi action.
Conclusion
The decision by major shipping companies to suspend Red Sea transits is likely partially an attempt to pressure the US and other allied governments into action to counter Al-Houthi rebel attacks. Should the suspension remain in place for an extended period, it will have a significant impact on global markets which will quickly begin to be felt by consumers. A strong US response is likely to cause at least a temporary spike in violence in the region. Continued insecurity for commercial shipping, with resulting disruption to supply chains, is likely should the response be ineffective in deterring Al-Houthi action.
Risk Alerts
02 JAN 2024 | 06:14 PM UTC
Arabian Peninsula: Shipping in Red Sea remains disrupted as of Jan. 2 following continued attacks against vessels; further attacks likely through mid-January /update 5 Read Alert
15 DEC 2023 | 06:17 PM UTC
Arabian Peninsula: Maersk and Hapag-Lloyd pause Red Sea transits Dec. 15 due to attacks against vessels /update 4 Read Alert
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