HAMID HUSSAIN’S SPECIAL
STORMY WATERS
RED SEA CRISIS
Hamid Hussain
“Conflict is drama, and how peo-
ple deal with conflict shows you
the kind of people they are.”
- Stephen Moyer
The current Israeli-Hamas crisis is
making the headlines, but a side
show is also playing in the Red Sea
area. Yemeni militant group Ansarul-
lah (Friends of God) also known as
Houthis is attacking commercial
shipping that has significant negative
economic impact. The Red Sea with
narrow Bab al Mandab strait at the
southern end and Suez Canal on the
northern end connects the Arabian
Sea to the Mediterranean Sea. It is
an important peg in the global ship-
ping network connecting Asia to Eu-
rope. It is a vital economic artery with
ten percent of global shipping traffic
and thirty percent of global container
traffic passing through it.
Ten percent of the world’s oil and
ten percent of Liquefied Natural
Gas (LNG) also passes through this
route. On an average day, fifty ships
pass through the Suez Canal, trans-
porting $3-9 billion worth of cargo. In
addition, many ships serve local Red
Sea ports on eastern (Jeddah and
Yanbu) and western banks (Port Su-
dan, Djibouti).
Since the start of the Israeli-Hamas
war, Houthis are attacking ships
passing through the Red Sea with
explosive-equipped Unmanned
Aerial Vehicles (UAVs), Unmanned
Surface Vessels (USVs) and an-
ti-ship cruise and ballistic missiles.
On November 09, Houthis helicop-
ter-borne seizure of a merchant
ship Galaxy Leader got the world’s
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 HAMID HUSSAIN’S SPECIAL
attention. The Houthis filmed the
undertaking for global attention and
that sent shock waves throughout
the shipping industry. Large shipping
companies including Danish Maersk,
German Hapag-Lloyd, French CMA
CGM, Swiss Mediterranean Shipping
Corporation (MSC), China’s COSCO
and Taiwan’s Yang Ming announced
suspension of shipping through the
Red Sea. Two large oil giants British
Petroleum (BP) and Shell also an-
nounced re-routing of their oil tank-
ers avoiding Red Sea.
This security threat has forced a de-
tour of shipping via Cape of Good
Hope. This route increases the trav-
el time by adding seven to fourteen
days to the voyage and driving up
costs from 20-40 percent. This in-
creased travel time will affect sched-
ules and supply chain. Shipping
companies must add two additional
ships to each Asia-Europe loop to
maintain their schedule. Increased
traffic along the Cape of Good Hope
will result in congestion of ports along
that route resulting in logistical chal-
lenges and delays.
Delay in oil and LNG shipping dur-
ing the winter months in the northern
hemisphere could significantly in-
crease energy prices. However, this
increase has not materialized due to
large storage stocks of LNG in Eu-
ropean terminals. In addition, the
waters around Cape of Good Hope
where Indian and Atlantic oceans
meet are very rough and dangerous,
and some segments are known as
‘graveyard of ships’.
The shipping costs have escalated
dramatically. A single round-trip voy-
age from Shanghai to Rotterdam, via
Cape of Good Hope incurs an addi-
tional one million dollars in fuel costs.
Shipping companies are adding sur-
charges to cover additional costs.
Security threats in the Red Sea area
have increased war insurance pre-
92
miums for vessels using this route.
The risk premium has increased from
0.2 to 0.7 percent of the value of a
ship’s cargo (a ship carrying $1 mil-
lion worth of cargo through the Red
Sea now pays $70,000 in war risk
insurance).
The Red Sea crisis has come at the
worst time when there are already
problems with the Panama Canal
shipping route. The canal area has
experienced severe drought this
summer forcing the Panama Canal
Authority to restrict shipping traffic.
Now, only twenty ships (the numbers
are even much lower for Very Large
Gas Carriers - VLGCs) are allowed
per day compared to thirty-six before
restrictions were put in place result-
ing in long queues of ships.
It forced shipping companies to di-
vert to the Suez Canal and Cape of
Good Hope routes. The long queues
at the Panama Canal have added
to the costs. Companies can skip
the queue by bidding for the slot at
auction. The average cost of trans-
iting the Panama Canal has been
$900,000. In August 2023, a Lique-
fied Petroleum Gas (LPG) tanker
paid $2.4 million for the transit slot
and in November, a shipping compa-
ny paid a staggering $4 million for the
slot at the auction.
The threat posed by the current at-
tacks is particularly challenging to
counter despite the presence of
powerful navies in the region. At the
start of the current crisis, the United
States sent two aircraft carrier strike
groups to the region. The Dwight Ei-
senhower carrier group is stationed
in Gulf of Aden and Gerald Ford in
Eastern Mediterranean. The main
purpose was deterrence of Iran and
a signal to Tehran to avoid expand-
ing the war. However, such a mas-
sive show of force against foes like
Houthis shows weakness rather than
projecting strength.
According to the Department of De-
fense, the Houthis have conducted
over one hundred drone and ballistic
missile attacks targeting cargo ves-
sels since October 7. U.S. Navy de-
stroyers have shot down about fifty
drones and multiple missiles in the
Red Sea. The U.S. has used multiple
interceptors of its layered naval air
defense system to tackle the threat
that includes Evolved Sea Sparrow
Missile – ESSM (targets less than 5
nautical miles), air burst rounds of
5-inch gun of the ship (targets less
than 10 nautical miles) and Standard
Missile-2(SM-2), Block IV (targets 90
or 130 nautical miles). ESSM costs
$1.8 million per shot and SM-2 $2.1
million.
The Houthi’s Iranian made one way
attack drone costs about $2,000. The
cost of a larger Shahed-136 drone is
estimated at $20,000. In the current
crisis, a French frigate used Aster-15
surface-to-air missile costing €1
million to shoot down Shahed-type
drone costing $20,000. France’s
chief of defense staff, General Thi-
erry Burkhard, summed up this cost
dilemma despite the successful in-
terception by stating that “when you
kill a Shahed with an Aster, it’s really
the Shahed that has killed the Aster.”
The U.S. navy is pondering over the
cost issue and research in this area
has been put on fast track.
A careful analysis of Houthis attacks
in Red Sea gives an interesting pic-
ture and provides a window to ana-
lyze Iranian strategy. The most inter-
esting fact is that only container ships
are being targeted and tanker ships
carrying crude oil, petroleum prod-
ucts and LNG are passing through
the Red Sea with no dramatic shift.
Iran has been under internation-
al sanctions for decades and it has
developed a sophisticated system
of transporting oil bypassing normal
shipping and financial institutions.
One strategy is using Iraqi oil infra-

structure that is in close geographic
proximity to the Iranian oil fields in
Khuzestan and Iraqi oil is transport-
ed to Europe via the Red Sea route.
We do not know all the details of this
system, but we can be sure that a
sizable portion of Iranian oil mixed up
with Iraqi oil is passing through the
Red Sea.
In 2021, thirty percent of the tanker
ships that were passing through the
Suez Canal were carrying Russian
oil from the Russian ports to China
and India. In the aftermath of the
Russian-Ukrainian war and western
sanctions on Russia, oil and gas ex-
ports have been shifted from Europe
to Asia. In 2023, seventy percent of
the southbound oil shipment traffic
passing through Suez Canal is car-
rying Russian oil and despite all the
sensation about Red Sea shipping
risks there is no evidence that Russia
has diverted its tankers to another
route. Qatari LNG exports to Europe
also use the same route and Qatar
hosts Hamas political leadership on
its soil and enjoys good relations with
Iran since fellow Sunni sheikdoms
ostracized Qatar in 2017.
Houthi attacks are very calibrated,
and they are attacking only contain-
er ships. In addition, there has been
no major damage to any ship nor any
casualty. This suggests that Irani-
ans are fine tuning Houthis attacks.
There are credible reports that Ira-
nian handlers are based in Yemen
and directly guiding the Houthis. An
Iranian spy vessel was operating in
Red Sea area likely providing Houth-
is with intelligence about ships.
This ship fearing being added to the
target list moved out of the area when
the U.S. attacked Houthi anti-ship
assets in Yemen. Houthi’s first suc-
cessful hijacking of a ship paid more
dividends and they tried to pursue
this strategy. However, U.S. correctly
analyzed this threat and sent a pow-
erful signal when in another hijacking
HAMID HUSSAIN’S SPECIAL
attempt, three boats of Houthi fight-
ers were sunk by U.S. ships killing
ten fighters.
Houthi’s attacks on shipping in Red
Sea are reckless and they are tar-
geting all commercial ships. A drone
attack was made on a ship near the
Indian coast that was bringing oil
from Saudi Arabia to India. This ship
was owned by Japan, operated by a
Dutch company, and flying a Liberi-
an flag. Houthis also attacked a ship
taking cargo from Saudi Arabia to
Pakistan.
This ship was owned by a company
of Italian shipping magnate Gianluigi
Aponte and headquartered in Swit-
zerland. In response to these inci-
dents, Indian and Pakistani navies
have moved ships to patrol these
waters. United States climbed one
step up on the escalation ladder
and carried limited attacks on Houthi
drone and missile assets in Yemen to
convey the message.
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Global trade is a complex
business and crisis can be devas-
tating for one actor but can bring a
windfall of profit for the other. Con-
cerns about the safety of the Red Sea
route has prompted European coun-
tries to buy oil from United States
where ships can bring as much oil
that U.S. can export through the safe
sea lanes of Atlantic Ocean in a two-
week round-trip journey with no extra
costs or risks. It is no surprise that
U.S. oil exports have jumped 35%
from 3.9 million barrels per day to 5.2
million barrels per day due to this cri-
sis.
Information needs to be shared with
the region’s population that Houthis
action has very minimal impact on Is-
rael (only five percent of Israeli trade
is through the Red Sea port of Ei-
lat) but causing enormous econom-
ic damage to the region. The first is
the devastating impact on Yemen’s
economy. Ninety percent of Yemen’s
imports, especially vital food imports
94
come from its Red Sea port of Ho-
deida controlled by Houthis and the
first to suffer are Yemenis. Egypt’s
main source of cash is transit fee
from the Suez Canal and reduction of
ships passing through the canal has
immediate impact on Egypt’s fragile
economy. War ravaged Sudan is an-
other economic casualty and more
dangerously tribal militias operating
in Port Sudan area may take a cue
from Houthis.
If central authority weakens due to
intense clashes between Sudanese
Armed Forces (SAF) under military
dictator General Abdul Fattah al
Burhan and Rapid Support Forces
(RSF), a powerful militia headed by
General Muhammad Hamdan Daga-
lo then these tribal militias will move
in to try to control the lucrative port.
Land-locked Ethiopia with a popula-
tion of 120 million depends on the
port of Djibouti for its imports and
exports and facing economic impact
from the crisis. China has heavily in-
vested in the Red Sea area and Horn
of Africa and a sizable portion of its
imports and exports use Suez Canal
(sixty percent of Chinese exports to
Europe pass through Suez Canal).
Saudi Arabia has recently expanded
the use of its Red Sea ports and the
current crisis will have impact on its
economy, but it is limited (East-west
pipeline of the kingdom mitigates the
risks by bypassing both chokeholds
of strait of Hormuz in Persian Gulf
and Bab al Mandab in Gulf of Aden).
More concerning is the impact on the
ambitious Neom project of the Vision
2030 that is anchored on the north-
ern Red Sea coast of Saudi Arabia.
It is important that Iran restrain Hou-
this otherwise there is a clear and
present danger of the fire spreading
that will also engulf Houthis and Iran.
The Houthi’s opponents in Yemen
are already presenting their case for
support to confront Houthis and even
Iran’s longtime friends like India are
furious. Houthis are not simply Ira-
nian pawns but are shrewdly using
the current crisis for increasing their
bargaining position in ongoing nego-
tiations with Saudi Arabia and more
importantly for consolidating domes-
tic power base. Houthis support in
Yemen has been declining in the last
few years due to prolonged civil war,
economic crisis in areas controlled
by Houthis and label of working as
an Iranian proxy.
They are using pro-Palestinian senti-
ments to recruit more young men and
there are already indications on the
ground that Houthis are concentrat-
ing their forces around the strategic
Ma’arib governorate where Houthi
offensive was halted when cease-
fire was concluded in the spring of
2022. Yemen could be rest assured
that not even a single Yemeni will be
fighting the Israelis, but the flower
of their youth will be cannon fodder
for a brutal civil war that has already
 HAMID HUSSAIN’S SPECIAL

seen 350’000 Yemenis dead from di-

rect and indirect causes and will like-
ly end up in division of Yemen along
North-South fault line.

The situation in the Red Sea is a

stark reminder of the fragility of glob-
al supply chains and the ripple effect
of regional conflicts on international
trade. The lesson of the conflicts of
the last two decades is that there
are limits to power. Even the most
powerful countries cannot enforce
their will on the others and even the
weakest adversary has at least a
vote in the conflict. In the Red Sea
theatre, the richest of the rich and
the weakest of the weak are playing
their roles. Rich regional and inter-
national countries have engaged in
transactional relationships with the
poor countries of the region focusing
mainly on security. This has forced
the weak countries to take sides that
has resulted in deepening of divi-
sions and aggravated militarization
of the region. means bringing allies and adversar- tial, and an inclusive model rather
ies together. There are several mul- than an exclusive club approach may
Non-state actors taking advantage tilateral military, economic and po- allay fears of the countries.
of this situation have increased their litical organizations operating in the
leverage. The revolution in business Red Sea area including International Saudi Arabia and Iran share the most
model is being replicated in the con- Naval Task Force – 153, Intergov- responsibility. Their mutual hostility
flict arena. Uber is the world’s largest ernmental Authority on Development and use of proxies in sectarian wars
taxi service but does not own a single (IGAD) Task Force on the Red Sea, devastated many societies with large
car or employ a single driver. Houth- the African Union’s High Level Imple- scale bloodshed of Muslims in this
is don’t own a single naval ship, but mentation Panel (AUHIP), and the fratricidal conflict. Recent reproach-
they have been able to disrupt a cru- Council of Arab and African Coastal ment between the two countries with
cial shipping lane jeopardizing trade States of the Red Sea and the Gulf of a helping hand from China and cease
worth billions of dollars. A naval task Aden later renamed Red Sea Coun- fire in Yemen are positive signs and
force of 39 countries possessing the cil. These organizations were creat- this avenue should be strengthened.
most sophisticated and expensive ed to serve the interests of dominant
naval assets is not able to ensure players and geared towards control A two-pronged approach with one
safe shipping. rather than a meaningful dialogue covering the front yard where U.S.
about the region. navy is patrolling the waters to keep
We need a broader and longer view commercial shipping safe while in the
of conflict management. An inclu- African Union’s mechanisms for backroom China convincing Iran and
sive approach where countries with peace and security management Saudi Arabia to keep the détente.
stakes in peace and stability and have paid dividends despite enor- Iran is asked to keep Houthis on a
common interests are brought to- mous challenges. Qatar and Oman tight leash and de-escalate while
gether despite differences. Existing have played an important mediating Saudis are encouraged to stay the
mechanisms need to be strength- role in many recent conflicts. Own- course and not contribute towards
ened to encourage cooperation on ership by African and Middle Eastern escalation. Iran has achieved its
vital issues despite differences. This stake holders of Red Sea is essen- goals, and its long-term interests are

95
 HAMID HUSSAIN’S SPECIAL
not served by widening the conflict.
However, recent reckless moves by
Iran by not restraining Houthis and
launching missile attacks in Syria,
Iraq and Pakistan is earning them
hostility from a wide range of coun-
tries. Iran should consider lowering
the temperature as they risk unin-
tended escalation due to miscalcula-
tion by Houthis.
China’s economic stakes are much
higher than any other country. Chi-
na’s long-term interest is securing
heavy investment in Suez Canal
region and short-term interest espe-
cially in view of upcoming Chinese
New Year on 10 February. Chinese
factories are shut down for a week for
the new year holidays when 300 mil-
lion migrant Chinese workers head
home. Normally, all export orders are
shipped out before the holiday sea-
son begins. This factor is prompting
China to actively work to de-esca-
late but not publicly. If this approach
works, considering the calculations
by Iran and China, then we may see
a marked reduction in Houthi activ-
96
ity of interference with commercial
traffic in the next 2-3 weeks. Safe
commercial shipping in the Red Sea
is a challenge as ‘states have both
conflicting objectives and a universal
goal of maintaining freedom of nav-
igation’. We have a recent example
of successful multilateral cooperation
in anti-piracy operations off the coast
of Somalia. European Union, U.S.
China, South Korea, Turkey, Gulf
countries and even Iran participated
in anti-piracy operations in Operation
Atalanta as it served the common in-
terest of protection of vital commer-
cial sea lanes.
“Those who love peace must
learn to organize as effectively
as those who love war.”
- Martin Luther King Jr.
Notes:
• Red Sea Dynamics. Africa Re-
port, 2020. This nine-part series
is the most comprehensive
review of Red Sea problems
https://www.theafricareport.com/
in-depth/red-sea-dynamics/
• Final Report and Recom-
mendations of the Senior
Study Group on Peace and
Security in the Red Sea
Arena, October 29, 2020
https://www.usip.org/
publications/2020/10/fi-
nal-report-and-recommen-
dations-senior-study-group-
peace-and-security-red-sea
• Elisabeth Braw. The Red Sea
Crisis Is About to Ruin Christ-
mas Gifts. 18 December 2023
https://foreignpolicy.
com/2023/12/18/red-sea-suez-ca-
nal-shipping-houthis-christmas-
gifts/
• Nick Childs. Global implications
of the shipping attacks in the
Red Sea. 19 December 2023
https://www.iiss.org/online-analy-
sis/online-analysis/2023/12/glob-
al-implications-of-the-shipping-
attacks-in-the-red-sea/
Author Information
Hamid Hussain
coeusconsultant@optonline.net
(20 January 2024)
Reproduced with permission of copyright owner. Further reproduction
prohibited without permission.