It is difficult to believe in the 21st century that some small groups of Yemeni Houthi pirates on the Red Sea can bring a $1-trillion-plus annual global trade using the sea route almost to a halt, forcing shipowners and shippers divert the trade through a several times longer route via the Cape of Good Hope at the bottom of South Africa. Sea piracies are nothing new. But few have shown such guts as Houthi pirates indiscriminately attacking cargo vessels passing through the trait with arms, ammunition, and anti-ship missiles. They won’t even spare US Navy destroyers. Cargoes are looted and captured seamen are often thrown into the sea. The escalating Red Sea crisis poses billions of dollars of risk for India. The world mood remains inexplicably defensive. An estimated 12 percent of the global trade passes through the Red Sea.
The pirates seem to have strong backings from Iran, which it denies. The Houthi attacks are believed to be linked with Israeli counter attacks on Palestinian Gaza rebels, which have killed over 24,000 Gazans since Palestinian militants attacked an Israeli cultural entertainment programme killing some 1,200 people, mostly civilians, on October 7, last year. Iranian-backed Houthis have been protesting since November against the continuous hammering on Gaza citizens by Israel’s military force. Now, Houthi pirates from Yemen are increasingly attacking commercial vessels passing through the Red Sea. The attacks have forced shippers to avoid one of the world’s most crucial trade routes and use the alternative longer route through the waters of the southern tip of Africa, adding more than 3,500 nautical miles (6,500 km, approximately) to the journey taking close to half a month of extra sailing time in each trip apart from highly increasing shipping and insurance costs.
Since last November, the Houthi pirates have targeted vessels passing through the strait of Bab al-Mandab, a 32-km wide channel that splits north-East Africa from Yemen on the Arabian Peninsula. Although India, as in the case of other affected countries, is yet to react to the latest Houthi pirate attacks except keeping its naval frigates in the sea to ensure safety of the cargoes and seafarers. The incidents will have a major impact on the country’s foreign trade during the current financial year and beyond. The worst affected are India’s oil imports. India is the world’s third largest oil importer. It gets the bulk of its Russian supplies through the Red Sea. Russian supplies made up over 35 percent of the country’s crude oil imports, last year, amounting to 1.7 million barrels per day. As of now, Russian vessels are not the prime targets of the Houthi pirates. However, the rerouting of vessels via the Cape of Good Hope for safety has led to shortage of merchant ships due to the long travel time.
India is also the world’s biggest importer of vegetable oils and much of the import passes through the Red Sea. The supply of sunflower oil has become tight for India. The sunflower oil imports are already said to be down. Buyers are shifting to other vegetable oils available at discount. The freight cost has increased by nearly 35 percent. Similarly, fertilizer shipments are getting delayed. Logistics costs are moving up. Exports from India through the Red Sea too are facing big trouble. The Red Sea route via the Suez Canal accounts for 50 percent of the country’s exports and 30 percent of imports. Among the sectors deeply affected by the Houthi piracy are perishable items such as agricultural commodities, farm products, and marine foods, all carrying lean margins. The crisis has also hurt the export of buffalo meat. Nearly 60 percent of India’s buffalo meat exports go through the Red Sea to north African countries and Russia.
A prolonged strife can affect the profitability and working capital cycle of India’s export-oriented industries. “The extent of this will vary depending on sectoral nuances. Supply chain issues could also intensify, curbing trade volume and renewing inflationary pressures,” rating agency CRISIL has said. In a recent credit alert, the rating agency said Basmati rice exporters, shipping a third of India’s produce to these regions, are feeling the pressure. They are selling part of their inventory in the domestic market. Marine foods like shrimp and prawn could see a significant impact as 80 to 90 percent of the production is exported, over half of which flows through the Red Sea. While sectors like textiles, and chemicals may not be severely impacted as yet, a sustained disruption of trade channels could crank up working capital needs and dent operating profits for them as well as capital goods players, CRISIL has warned.
Although there is nothing new about sea piracy, Houthi pirates seem to be more politically motivated than grabbing ships just to offload goods to make money. Sea and river pirates have existed since ancient times. They attacked both passenger and cargo carriers on seas or rivers. They threatened the trading routes of ancient Greece, and seized cargoes of grains and olive oil from Roman ships. Pirates were reported to have been highly active for at least seven decades since 1650, known as the ‘golden age’ of piracy. The cases of piracy were down since the 19th Century, which saw the massive rise of the global naval power. Piracy still exists in some select seas such as South China Seas and Red Sea. Interestingly, Houthi pirates appear to be selective about their targets. They are choosy about the targeting of vessels by the flags they fly or the origin and destination of cargoes. They don’t normally touch Russian, Chinese and West Asian country vessels. So far, Indian ships have also been spared. Clearly, they are more after ships or shipments linked with countries supporting Israeli attacks, directly or indirectly, on Gaza Palestinians.
India is concerned as the Red Sea route accounts for almost 50 percent of exports, a substantial part of which are meant for EU member countries, the UK, and the USA. Almost all of these countries are against Gaza militants and have done little to force Israel to stop pounding on Gaza to massacre innocent civilians, including women and children. The matter is getting increasingly complicated as there is no sign of an Israeli withdrawal of strikes on Gaza. As a result, some of the world’s most powerful nations have chosen to avoid the Red Sea rather than taking up a collective agenda to negotiate with the Houthi controlled Yemen, the second largest state on the Arabian Peninsula and a member of the United Nations. Several naval forces, including the Indian Navy, are active in the Red Sea trying to prevent Houthi pirates from grabbing cargo carriers. However, they seem to have little impact on increasingly desperate Houthi attacks on cargo vessels in the Red Sea. A global action against Yemen may probably end the situation. Unfortunately, no country wants to take a lead in the matter. (IPA Service)