Despite all evidence to the contrary, the crisis of Houthi militants threatening shipping in the Red Sea is still seen by many as principally a political one. Some observers have accepted the Houthis’ disingenuous justification that their terrorism is motivated purely Israel’s actions in Gaza. Tell that to the crew of the Strinda, a Norwegian-flagged tanker carrying palm oil from Malaysia to Italy, which was hit by a cruise missile on 12 December. Others have framed the crisis, correctly but incompletely, as part of an Iranian-backed campaign for regional dominance over their perennial nemesis, the United States.
Fundamentally, however, this is an issue of free trade. Yemen dominates the northern side of the Bab-el-Mandeb, the strait which leads into the Red Sea and gives access to the Suez Canal. This is one of the most important trade routes in the world. Between 12% and 15% of global trade goes through here every year, representing $1trn of goods, and that includes a fifth of the refined oil coming into Europe and North Africa, and 13% of crude oil. In terms of container ships, the proportion is around 20%. This is a main artery.
Like the handful of other major choke points around the globe – the Panama Canal, the Strait of Hormuz and the Malacca Strait – it does not take much to severely constrict the Bab-el-Mandeb. In the two months after the Houthi attacks began, the volume of traffic through the Suez Canal fell by 42%, while container ship transits dropped by 67%. BP suspended all oil shipments through the Red Sea. Some of the world’s biggest maritime commerce outfits like Maersk and the Mediterranean Shipping Company started diverting their vessels around the Cape of Good Hope at the southern tip of Africa. This longer route might add 10 days to the journey time from the Far East to Europe, stretching it from 10,000 nautical miles to 13,500, but at least the ships would get to their destinations unharmed and afloat.
The effects of this are enormous. The cost of container shipping has risen, as have insurance premiums for the operators. Delays in exporting oil and gas have pushed up energy prices even further than they had already risen. The cost of food, already affected by the disruption to grain supply caused by Russia’s invasion of Ukraine, is going up. The worst is yet to come – the United Nations Conference on Trade and Development warns that the full impact on prices will only be apparent towards the end of 2024.
On a micro level, we should pity poor Egypt. Revenue from the Suez Canal has fallen by 40% since November 2023. This is not just about the overall quantum either. Egypt relies on tolls from the canal for scarce foreign currency, and carried out expansion work in 2015 to make it more lucrative. On a larger scale, the disruption has hit the margins on Russian oil exports to the Far East, if not the volume of supply, and refineries in Asia are starting to consider whether the United States, Africa and South America might not be more reliable suppliers.Of course, any difficulty for Vladimir Putin is to be welcomed. But the underlying point here is that this is a situation which hits everyone negatively.
Despite that, arranging coordinated and effective international action has proved almost impossible. In December last year, the US Department of Defense established a maritime security initiative called Operation Prosperity Guardian ‘with the goal of ensuring freedom of navigation for all countries and bolstering regional security and prosperity’. This was not some imperialist cowboy enterprise – the United Nations Security Council had condemned the Houthis’ actions weeks before, and Prosperity Guardian was a defensive measure, designed to intercept missiles, drones and other threats directed against commercial shipping.
It proved a hard sell. The United Kingdom quickly put its weight behind the operation, with the guided-missile destroyer HMS Diamond already in the region. The US initially indicated support from Bahrain, Canada, France, Italy, Netherlands, Norway, Seychelles and Spain, but this was deceptive. France stated that its assets, including the frigate Languedoc, would only operate under national control, not as part of a US-led mission; Italy despatched the frigate Virginio Fasan to the region but stressed that it would act in defence only of Italian national interests; while Spain said it would participate only in a coalition led by the European Union or NATO.
There is no major dispute here: the UN Security Council passed a resolution on 10 January which condemned the attacks on shipping. No-one imagines that France, or Italy, or Spain does not believe that freedom of navigation is negotiable or somehow to be argued away. Somehow, though, the idea of free trade, of economic prosperity and the upholding of international norms is not proving an attractive enough platform to create a broad coalition. Canada’s apparently straight-faced announcement that it would contribute three staff officers to Prosperity Guardian showed that governments around the world have their priorities badly out of kilter.
Obviously the conflict in Gaza matters. America’s so-far staunch support for the Israeli government has made many allies deeply uneasy and meant that they think twice before standing shoulder-to-shoulder with the US on other matters. That the UK has been so ready to support the task force indicates the government’s correct assessment that the ‘special relationship’ is hugely valuable and that it has few other options in diplomatic terms at the moment.
There is, however, a hint of a worrying malaise in the chancelleries of Europe. The left-wing coalition eventually formed in Spain last November might like to posture about multilateral organisations, but does it think that the Houthis and their Iranian sponsors have a point? Does President Macron think that worries about the loss of innocent lives in Gaza are in any way addressed by choking off global trade? Too many seem to have become complacent about our reliance on free trade.
Collectively we need to get serious, to understand that the disruption in the Red Sea is a systemic threat to our prosperity, and that there are costs to protecting it. To quote Team America, ‘Freedom isn’t free, it costs folks like you and me’.
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The post The Red Sea crisis has exposed Europe’s indifference to free trade appeared first on CapX.
