Before the “Al-Aqsa Flood” operation, there were several assumptions regarding the security and safety of international trade and its important routes, including the Bab al-Mandab Strait on the Red Sea, through which ships transiting from the Gulf oil countries to Europe and Asia pass.
But in one of the forms of geopolitical exploitation, specifically on November 19, the Ansar Allah (Houthi) group turned those assumptions upside down, as it targeted more than one ship that had a relationship with Israel, in an attempt to pressure it to stop the war on Gaza and allow… For humanitarian aid to reach this besieged sector.
Not only did the Houthis seize a ship owned by an Israeli businessman, but they also targeted several ships carrying goods and products for Israel, which clearly affected the movement of ships in that region.
As a result, more than one navigation company announced a change in its plans for the conduct of its cruises, so that it would be far from the route of Bab al-Mandab, which is close to Yemen. Oil prices also began to be affected, so the media carried news about the rise in oil prices yesterday, Monday, due to the risks threatening the vital artery. International crude trade.
What is the impact of Houthi threats on international trade?
The UNCTAD report for 2022, which came under the title “Maritime Transport Review,” indicated that global maritime trade in 2020 declined by 3.8% due to the Corona pandemic, but in 2021 it rose again by 3.2%, and total maritime shipments reached 11 thousand million tons.
According to the report, it is expected that maritime trade will witness a growth rate during the period 2023-2027 of about 2.1%, but the Houthi threats in the Red Sea may negatively affect the results of these expectations, according to observers.
A quick reading of the effects of the Houthi operations may be limited to the percentage of global trade passing through the Bab al-Mandab Strait, which is estimated at 10%-12%, but the truth is that the negative repercussions are many. Recently, the British Oil and Gas Company announced that it would stop operating its tankers through this strait.
Also, the International Monetary Fund’s estimates of a decline in global inflation in 2024 will be questionable, as the Fund said that inflation will decline to 4.8%, after it was 5.9% in 2023.
However – in light of the effects resulting from the Houthi operations in the Red Sea – experts expect that the cost of transportation will increase, and the cost of insurance for goods and ships will increase, which means an increase in the prices of goods and services, and a direct impact on the wave of inflation in global markets.
How badly has the region’s trade been affected?
The Houthi operations in the Red Sea are still in their infancy, and they have not faced a reaction from any party, and therefore the matter will depend on the continuation of these operations, especially since the Houthi group only targets ships heading to Israel, and the matter may expand to include other countries supportive of Tel Aviv, especially if it is subjected to an external attack.
Recently, the Houthis announced that their operations in the Red Sea are continuing, so that food and medicine are allowed to enter the people of Gaza, they say.
But at the level of foreign or intra-regional trade, the Unified Arab Economic Report for 2022 tells us that the region’s total foreign trade is approximately $2.6 trillion, most of which is controlled by oil.
In general, the foreign trade of Arab countries with ties to Israel (Egypt, Jordan, UAE, Bahrain, Morocco, Sudan) could be affected, in addition to Turkey, which has a large share in trade relations with Tel Aviv.
How is the Israeli economy affected by Houthi operations?
Of course, the Israeli economy is the most affected, as tankers linked to Tel Aviv are being targeted on both the export and import levels.
In light of the losses that befell the Israeli economy related to the tourism sectors and the expected decline in growth rates, the Houthi operations in the Red Sea led to negative effects on the work of Israeli ports, and some of them became completely empty of ships.
It is a reality that forces Israel and its dealers to use other means of transportation or sea lanes far from the Red Sea, which means an increase in the cost of trade, amid expectations that Israel’s foreign trade in general will be affected in light of the consequences of the “Al-Aqsa Flood” operation launched by the Palestinian resistance.
Observers believe that the value of Israel’s foreign trade, which amounted to about $180.7 billion in 2022 – according to the World Bank – is expected to decline this year, which will increase the economy’s trade deficit.
What is the commercial importance of Bab al-Mandab and the Red Sea?
The commercial importance of the Bab el-Mandeb Strait lies in the fact that it complements the passage through the Suez Canal. Without using Bab el-Mandeb, the Suez Canal loses the advantage of passing through it, which is represented by shortening the distance and transit time, and thus reducing fuel and transportation costs.
Perhaps the most important thing that passes through the Bab al-Mandab Strait from Asia to Europe is oil and gas, as Gulf oil and gas pass from the Suez Canal and Bab al-Mandab to Asia and Europe, and it is known that the Arab region produces approximately 25% of the world’s oil.
The alternative routes to the Red Sea are limited to the Cape of Good Hope, the southernmost point of the African continent, which will lead to high transportation costs, due to the long time it takes.
How damaged is the Suez Canal?
The Suez Canal is one of the most important sea lanes in the field of global trade across seas, due to it shortening long distances between Asia and Europe and between Africa and Europe, which will reduce the cost of maritime transport.
According to the Chairman of the Suez Canal Authority, Lieutenant General Osama Rabie – in a previous statement – the passage of ships through the canal provides a time period ranging between 9 days and two weeks for flights heading between Asia and Europe.
For her part, the Minister of Planning and Economic Development in Egypt, Dr. Hala Al-Saeed, stated – via the ministry’s website – during the announcement of the development plan for the year 2022-2023 that “about 10% of the total global trade movement passes through the Suez Canal, and approximately 25% of the total movement of goods that Container transport is carried out by sea, and almost 100% of the total seaborne container trade is between Asia and Europe.”
However – in light of the Houthis targeting Israeli ships or those dealing with them in the Red Sea – there are expected negative effects on navigation in the Suez Canal, whose revenues represent one of the most important sources of foreign exchange for Egypt.
