The threat to global trade in the Red Sea remains a significant concern, despite efforts to protect commercial vessels from attacks by Iranian-backed Houthi militants based in Yemen. Danish shipping giant Maersk’s recent decision to suspend Red Sea and Gulf of Aden transits until further notice highlights the ongoing challenges faced by the U.S.-led initiative, known as Operation Prosperity Guardian. The situation has prompted more commercial ships to divert away from the Red Sea, opting to navigate around the Cape of Good Hope on the southern tip of Africa. This change in shipping routes has disrupted trade and caused an increase in container rates, affecting billions of dollars in trade and impacting hundreds of vessels.
The threat to trade in the Red Sea has had a profound effect on the global economy. According to calculations, it has already impacted $225 billion in trade and affected 330 vessels. The estimated total capacity of these vessels stands at 4.5 million containers, or 20-foot equivalent units (TEUs). Each container bound for the Suez carries a value of $50,000, further highlighting the economic risks caused by the disruption in the Red Sea region.
As a result of the heightened threat, more commercial ships are choosing to avoid the Red Sea altogether. Global trade data provider Kpler reported a significant increase in the number of ships opting for the longer journey around the Cape of Good Hope. The number of ships taking this route jumped from 55 last week to 124 this week, with a notable increase from 18 a month ago. However, there has been a modest increase in container ships present in the Red Sea, indicating that some shipping companies are still willing to take the risk, albeit with caution.
The challenges faced by Operation Prosperity Guardian require a great deal of naval coordination to achieve desired results. Rear Admiral (Ret.) Mark Montgomery, a senior fellow at the Foundation for Defense of Democracies, emphasizes the need for loose convoys and naval coordination, along with forward-deployed helicopters to deter small vessels from approaching critical points. He also highlights the financial burden associated with shooting down multiple missiles, emphasizing the importance of a strategy that focuses on deterrence by denial.
To address the threat posed by Houthi militants, the coalition must employ deterrence strategies. Deterrence by denial involves making it unlikely for an action to succeed, such as shooting down Houthi missiles or drones. Deterrence by punishment, as demonstrated by the actions of U.S. helicopters, serves as an example to dissuade further attacks. While the Biden administration remains cautious about escalation, failure to deter could potentially lead to heightened aggression from the adversary. The United States’ historical role as the sole guarantor of free and open trade necessitates decisive action in these circumstances.
The U.S.-led coalition has faced challenges due to national interests and a perceived lack of understanding of global trade dynamics. France, for instance, has limited its protection to companies headquartered in their country. However, it is essential to recognize that trade is not solely defined by the flag associated with a vessel. Many vessels are owned and operated by U.S.-domiciled companies but are not U.S.-flagged. While branding coalition task forces has been a practice for decades, there is a need for greater international cooperation to address the complexities of global trade.
The suspension of transits through the Red Sea and the growing use of alternative routes have led to imbalances in equipment and potential shortages in Asia. Carriers are now opting for the longer route around the Cape of Good Hope to ensure the safety of crews and cargo. This shift in shipping routes further compounds the challenges faced by global trade and underscores the need for enhanced security measures in the Red Sea region.
The threats to global trade in the Red Sea remain a significant concern, impacting billions of dollars in trade and disrupting hundreds of vessels. The challenges faced by Operation Prosperity Guardian call for enhanced naval coordination, deterrence strategies, and international cooperation to ensure the safety and security of commercial vessels. As the United States and its allies navigate these waters, it is critical to balance national interests with the broader goal of maintaining free and open trade for the benefit of the global economy.
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