Politics
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Red Sea Trade at Risk Amid Middle East Tensions
Recent attacks in the Red Sea linked to the Israel-Hamas conflict are raising concerns about the safety of one of the world's key maritime trade routes.
Casey Parker
- 2023-12-22
- Updated [[ARTICLE TIME]]
Following a series of maritime attacks believed to be conducted by Iran-backed Houthi rebels, global oil supplier BP World has suspended operations in the Red Sea. The assaults, which have included drone strikes on ships such as a Panamanian-flagged vessel, have largely occurred near Djibouti, in close proximity to the Bab el-Mandeb strait. This strategic waterway, dubbed "The Gate of Grief or Tears," is crucial for international trade, yet faces increasing security threats stemming from these regional conflicts. Despite the geographical distance between many African countries, including Ethiopia, and the Middle East, there is growing concern that the continents' issues may be overshadowed by these recent developments which are already having significant economic repercussions.
Impact on Global Trade and Economy
The closure of crucial trade passages due to security concerns has immediate implications for global markets. The Houthi rebels' strategy of targeting Israeli and Western-affiliated vessels is in direct response to Israeli actions in Gaza, raising the specter of significant disruptions to the maritime commerce. This route through the Red Sea is not only more economical when compared to the alternative via the Atlantic Ocean but is also significantly shorter, reducing travel time by up to ten days. Consequently, heightened insurance and security costs could potentially drive up global trade expenses. Meanwhile, incidents like the March 2021 Ever Given blockade of the Suez Canal, causing a daily loss of nine billion dollars and significant revenue loss for Egypt, exemplify the fragility and importance of this trade artery. African nations, which are already facing economic strain from the ongoing Russia-Ukraine conflict and higher oil prices, have had to adjust fuel prices, as seen with Ethiopia's market where gasoline costs 77 birr per liter and diesel sells for 79 birr.
Regional and Global Implications
The string of attacks has ignited fears of a knock-on effect on the global oil market and supply of commodities such as wheat and palm oil. With the Red Sea trade route contributing to a substantial portion of global maritime trade, encompassing anywhere from 10-40%, disruptions can lead to notable economic impacts worldwide. The situation is exacerbated by the fact that alternative routes, such as around the Cape of Good Hope, are less economically viable. While attempts to gather comments from Ethiopian authorities have so far been unsuccessful, the potential major economic consequences for Ethiopia and other neighboring African states remain a significant concern. These disturbances could indeed lead to afresh overshadowing of African issues in favor of larger geopolitical conflicts.
Consequence of Unrest on Africa
As the Middle East conflict continues to send shock waves through global markets, the subsequent overshadowing of African economic concerns may put further pressure on a continent already grappling with multiple challenges. The attacks by Houthi rebels and the associated increase in trade costs represent not just a regional security issue but also have the potential to exacerbate economic strains during an already tumultuous period for worldwide commerce.
