Attacking more than 70 vessels and sinking more
than 30 of them Houthis have successfully interdicted the Suez-Red Sea Route. Highlights
of the debacle and the effects it has on geoeconomics are discussed below:
Beginning October 19, 2023 a ramshackle movement officially called as Ansar Allah but popularly known as Houthis has made the shipping lane Suez-Red Sea let us call it direct route, a non-viable alternative in comparison with the Cape Route let us call it indirect route, that traverses roundabout way passing the Cape of Good Hope in the tip of South Africa. Shipping companies were forced to opt for this indirect passage between Europe to Asia as a counter measure.
Here is the brief comparison of the direct and direct shipping routes:
1. The length of direct route is approximately 8,440 nautical miles whereas Cape Route is about 11,720 nautical miles.
2. Travel time of the Suez-Red Sea route is estimated as 18 days at the speed of 20 knots while roundabout route takes 25 days at similar speed of 20 knots
3. Fuel consumption for opting for Cape Route goes up by 30% over the direct route. Transporting cost has gone up by USD 1000/- per Twenty-foot Equivalent Unit (TEU)
4. An attack on the Greek flagged oil tanker MV Delta Sounion on 21 August 2024 and subsequent leaking of the oil caused the marine insurance to almost double making the direct route economically unviable.
5. The direct route traffic has dropped more than 80% from the pre October 2023 level.
Most shipping companies including Hapag Lloyd, Maersk, and CMA CGM have agreed that navigating integrity of the Suez-Red Sea route is irreparably lost. Until such time the Gaza War ends there is no question of opening up this route for normal transportation. The bottom line is Suez-Red Sea route accounts for 12.5 % of the general transport and 30% of the container ship transport.
Houthi blockade has a big toll on geoeconomics power spectrum. Here are samples:
1. There is a slow motion depreciation of the military power of the America led west that results in the erosion of their geoeconomics sway over the Middle – East
2. Houthis transformed themselves from a nondescript poor nation of camel drivers into a geoeconomics power house with a sway over nations West to East.
3. ‘Sea Denial’ as both military and geoeconomics tool can be employed by even a small nation that borders any international shipping route.
4. The West as a whole has to choose between peaceful co-existence and continuing the conflict in the Levant!
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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