H
outhi attacks in the Red Sea region are causing significant economic and security problems to the U.S. and its allies. The most significant of these is the impact on maritime security, which is causing disruptions to the global supply chain. Insurance risk premiums and transport costs are increasing for companies that do not want to take the risk of navigating the Red Sea and instead extend their route.
Following Israel’s attacks on Gaza, the Houthis began targeting ships they claimed were linked to Israel, creating significant geopolitical risks. They have carried out nearly 30 attacks in the Red Sea since October 19, 2023, and are causing serious security problems in the region. Bab al-Mandeb, one of the most important transit points for international maritime traffic, is likely to be blocked as a result of Houthi attacks.
Indeed, the rising tensions between Ethiopia and Somalia in the Horn of Africa and the increase in maritime piracy in the region have a military impact on the security of the Bab al-Mandeb, the Gulf of Aden, and the Red Sea. A U.S.-led coalition has been formed against the Houthi attacks, while the Houthis have announced that U.S. ships will also be targeted. There were even expectations that China would contribute to this coalition; however, it took a negative stance.
The Houthis’ attacks are causing significant economic and security problems in the region, affecting the global economy and maritime security, and leading to disruptions in the supply chain. The situation increases the tendency to seek new routes. On the one hand, high risks lead to higher insurance premiums, and, on the other, the transport costs increase for companies that do not want to risk being attacked and take a longer route. At the moment, it is paramount to ensure effective maritime security in the region for the safe passage of tankers, containers, and dry cargo/bulk vessels transiting the Red Sea.
When tensions in the Bab al-Mandeb in the southern Red Sea are viewed in the context of threats to the global market, the importance China attaches to the security of its trade routes becomes clear. In Yemen, the Houthis have declared that they will not attack Chinese ships transiting the Red Sea route. Looking at published data, we can clearly see the increase in Chinese container ships passing through the Red Sea since mid-December 2023.
The importance of this route for China is more understandable when viewed in light of its quest for a new global order. Meanwhile, China’s stance against the Houthis, who pose a global threat, has confused the West as China has refused to join the U.S.-led multinational coalition including the U.K, Bahrain, and others. It is likely that China is charting its own course in this process, independent of the West, without conflict but also without cooperation.
Possible reasons for this situation include, to start off, the problem of security in the Red Sea as China does not want to contribute to the “dissolution” of the tension under the leadership of the U.S. In addition, the fact that the U.S. is in a deadlock in the Middle East and in the global economic context creates a positive situation for China. On the other hand, if China were to join the international coalition, the steps taken by the Houthis in Yemen to punish Israel would damage China’s stance on the Palestinian issue and the ongoing Israeli massacre in Gaza.
Finally, China does not want to support the coalition in terms of furthering the move towards a three-track railway from China to Europe. Shipping companies that cannot pass through the Red Sea due to security risks are extending their routes around the Cape of Good Hope, increasing their costs. It is, therefore, likely that China wants to provide an alternative to prevent companies from bearing the rising costs by directing them to the railway lines it has been building since 2016 and which have cost it billions of dollars.
Rail transport, though, is not as cost-effective as shipping—rail is an alternative route that can be used to reduce extraordinary costs, and share risks and costs. At this point, it is likely that in the future relations with the Central Asian countries and the Turkic world will become more important for the transit of Chinese goods to Europe by rail.
The Horn of Africa lies directly opposite Yemen. In this region, Somaliland and Puntland, which are part of Somalia, have a coast on the Gulf of Aden. However, Somaliland has recently made clear its intention to secede from Somalia by signing a memorandum of understanding (MoU) with Ethiopia. On the other side of the Bab al-Mandeb Strait are Eritrea and Djibouti with Sudan lying to the north of Eritrea. Many of these countries are at risk of war and conflict, and suffer economic and administrative problems and, in the case of Somalia, terrorism and piracy.
In fact, since November 2023, there have been events that indicate a resurgence of piracy in the Horn of Africa. There have been eight hijacking attempts in the last three months: on December 14, 2023, 700 miles east of Bosaso, the MV Ruen was attacked; on January 4, 2024, 470 miles east of Somalia, the MV Lila Norfolk was attacked. There have also been several attempted hijackings. In such a risk environment, the possibility of a gradual resumption of piracy activity in the region has the potential to escalate existing risks even further.
Since mid-December 2023, an unusually high density of shipping has been observed in both directions on the route past the Cape of Good Hope to Singapore. Delays in the dry/bulk cargo sector and in tanker and container shipping have a major impact on the global economy. For example, the delay of a ship currently transiting the Cape of Good Hope with over 200,000 tons of iron ore bound for China will cause major production and economic problems. Similarly, delays of other dry cargo vessels carrying coal or grain have the potential to cause serious problems for the global economy.
What is more, the cost of transit through the Suez Canal has risen steadily since the start of the Israeli-Palestinian conflict, and shipping companies that do not want to bear this risk and cost prefer to extend their route. The change of route to the Cape of Good Hope adds approximately 9-10 days journey time and an additional 4,000 nautical miles to the route. Conversely, the Bab al-Mandeb Strait is very dangerous recently with each ship that passes through this region bearing an additional cost of at least $1 million.
The issue of rising risk premiums was first raised in 2008 after the M/V Yasa Neslihan was hijacked by Somali pirates and held hostage in Mogadishu for approximately 2.5 months. Following this incident, an International Recommended Transit Corridor (IRTC) was established in the Gulf of Aden. The region from the Red Sea to Sri Lanka was declared a “High Risk Area (HRA)” and insurance premiums for transit through this region were increased. This line was later extended further west. New security companies were set up to provide armed guards for ships passing through the region for a fee. As a result, heavily armed guards are now brought into the region from the west or east, and left upon exiting. When entering and leaving the region, security ships with dozens of heavily armed guards are permanently stationed at certain locations.
It is also possible that the proliferation of hijacking incidents and their increased effectiveness is a deliberate move to increase the profits of insurance companies and to create new security companies. If we look at the insurance and security companies, we see that most of them are British and European.
In conclusion, if the Israel-Gaza war is read together with other regional developments, the Covid-19 pandemic in 2019, the closure of the Suez Canal by the Ever Given ship in 2021, and the economic crisis caused by the Russia-Ukraine war in 2022, it is very likely that the problems and events in the Red Sea today will give rise to a new global economic crisis.
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