By Wasana Nadeeshani Sellahewa
(Commonwealth) _ In the initial weeks of 2024, there has been a significant reduction in cargo volumes to and from ports in the Gulf of Aden and Red Sea, marking a 21% year-on-year decline. This decline has sparked concerns regarding the safety of maritime transit in the region. Merchant shipping companies are increasingly wary due to attacks by Houthi forces, a factor attributed to the drop-in cargo activity. The Red Sea and Gulf of Aden have been witnessing these attacks since November 2023, leading to a substantial decrease in transits across various sectors. The maritime challenges and security issues in the region are casting a shadow over international trade, underscoring the urgency for effective measures to address safety concerns and ensure the resumption of normal shipping activities.
Decrease in Cargo Transit
In the month of February alone, ship transits through the Gulf of Aden and the Suez Canal have plummeted by 50% and 37% respectively compared to the previous year. Container ship transits, specifically, have taken a severe hit, experiencing a 70% reduction in both the Gulf of Aden and the Suez Canal. Historically, the Suez Canal accounted for approximately 10% of global trade, emphasizing the substantial impact of the recent developments on international shipping.
Impact on Global Trade
The attacks on ships in the Red Sea have direct repercussions on the ability of countries in the region to import and export cargo. While some nations like Saudi Arabia, Jordan, and Egypt can explore alternative routes, rerouting often involves higher costs, longer durations, and capacity constraints. For example, Saudi Arabia and Jordan can opt for cargo transportation via Dammam in the Persian Gulf, and Egypt can rely on its Mediterranean ports like Alexandria and Damietta. However, such alternatives may not be feasible for all types of cargo, especially for non-container shipments.
Challenges for Specific Countries
Countries lacking viable alternatives to Red Sea shipping, such as Sudan, Somalia, Eritrea, and Yemen, have seen a substantial decline of 25% year-on-year in shipments during 2024. Djibouti, however, stands out as an exception, with stable shipment levels. This divergence underscores the varying impacts on regional economies based on their ability to explore alternative shipping routes.
Geopolitical and Economic Ramifications
The escalating conditions pose a threat to the economies of affected countries and may contribute to increased instability. Yemen, Sudan, and Somalia, already grappling with armed conflicts, face heightened challenges in receiving international aid due to the turmoil in the Red Sea. Furthermore, the cost of basic goods may rise, exacerbating the existing economic challenges in these regions. The situation underscores the interconnectedness of geopolitical events, maritime security, and the economic well-being of nations.
International Response
In response to the escalating threats, a US-led coalition and a recently launched maritime operation by the EU have been deployed to safeguard ships in the Red Sea. However, the attacks persist, and the outlook remains uncertain. Until a sustainable solution emerges, the economies of the region will continue to bear the costs of increased trade disruptions, posing challenges to stability and development.
Conclusion
The maritime challenges in the Red Sea have far-reaching implications, impacting global trade dynamics and exacerbating economic challenges for countries in the region. The decline in ship transits, particularly for non-container shipments, has heightened concerns about the cost, duration, and capacity constraints associated with alternative routes. The geopolitical complexities and the ongoing attacks underscore the need for collaborative international efforts to find a lasting solution. As the situation unfolds, regional economies remain on edge, grappling with uncertainty and potential long-term consequences.
