The chokehold on world trade at the Bab Al Mandeb might seem like just one of many problems facing the global economy.
With two ceasefires in place in the Middle East, this third crisis cannot languish in the shadows much longer. In fact, it could soon transcend its roots into an issue of global security, crossing over into one of the foremost challenges taken on by US President Donald Trump following Monday’s inauguration.
The impact of the Houthi attacks on commercial shipping has gone far beyond the stated aims of the Yemeni group when it targeted vessels linked to Israel’s allies and partners in late 2023. The extent of the effective blockade of the Red Sea and the Suez Canal has reshaped the international trade landscape, even before Mr Trump’s promised shake-up from day one of his presidency.
Figures show that the volume of goods carried through the Red Sea on international trade routes had effectively fallen to one quarter between November 2023 and the end of last year. While the Houthi attacks effectively dried up last November, sources say there has been little to no resumption of cargo voyages since the relative easing of aggression.
According to figures from the Port Liner Shipping Connectivity Index, compiled by the London-based International Institute for Strategic Studies, the hit to regional ports has been substantial. The Jeddah port has seen its volumes fall over the year from more than 550 points to less than 400, while King Abdullah terminals dropped from nearly 300 to less than 100. Similar magnitude falls were seen for other ports, such as Port Said, Aqaba and Haifa.
Diverted traffic around Africa is putting a huge strain on the conduct of trade. Again, the IISS charts show that shipping from Jebel Ali to Port Said is taking 40 additional days, while Shanghai to Rotterdam can mean an extra 48 days and Shanghai to Piraeus in Greece takes an extra 49.
The new US administration takes a revolutionary view (from the conventional post-Second World War consensus) that trade in goods should be taxed to reflect national interest. It is not hostile to trade as an outright fact, though its policies are designed to bring back the manufacture of goods to the US mainland.
There should be no doubt that it also cares deeply about bottlenecks in the established trade routes. Its interest there revolves around achieving its own objectives for tariffs as well as the balance of power between the competing economies.
Mr Trump was elected on the back of huge resentment over the rise in cost of living that the US had faced under predecessor Joe Biden, which stemmed largely from the Covid-19 pandemic-induced trade interruption and simultaneous stimulus. The level of resentment hasn’t fully gone away.
The Red Sea chokepoint has helped to sustain this inflationary cycle. Going forward, there is a risk of a new inflationary surge. Alongside tariffs and the Red Sea blockade, economic planners are also factoring in the impact of adding the latest crackdown on the Russian shadow fleet.
One of the last acts by the Biden administration was to sanction major Russian oil and gas firms as well as 183 vessels that were believed to be integral to continuing Russia energy exports. That represented about 10 per cent of the global tanker fleet hit by US sanctions from early January.
Subsequent tracking by maritime specialists found 65 identified vessels that appeared to have “dropped anchor” as a result of the orders. It was reported that 25 of the oil tankers were stationary at locations off Iranian ports or near the Suez Canal. It is not known how committed the new administration will be to these measures undertaken by its predecessor, but several experts are predicting continuity of policy.
Look to the seas for how these three issues coincide. If the new administration in Washington is now doing just that, the issue becomes what role the reintroduction of the maximum pressure policy on Iran will play in the new US trade as well as diplomatic agenda. Ending the Red Sea crisis is likely to be a big part of the demands made by Washington on Tehran.
Throughout the world of diplomacy, there is a sense of the clock ticking on Tehran during the second Trump term. Listen to UK Foreign Secretary David Lammy last week, as he described the recent Geneva meeting involving the UK, France and Germany, plus Iran.
“British diplomats were discussing with Iran its nuclear programme and what needs to happen if we are not to see the snapback of our sanctions as a consequence of the Joint Comprehensive Plan of Action later this year,” Mr Lammy said. “We will do all that we can diplomatically. This is the moment when the Iranians need to step up and do the right thing, and I know that is acutely in the minds of the incoming US administration.”
As an ally to Iran, the Houthis in Yemen cannot divorce their own agenda from the wider considerations that would make the world safer. The fact that tariffs and the crackdown on the shadow fleet are happening all at once raises this crisis to the top tier of issues facing the global economic planners.
