By K Raveendran
The Israel-Palestine conflict has sent ripples through the shipping and maritime industry, leading international companies to issue cautionary advisories and adapt their operations in the region.
In view of the missile attacks and the incursion of opposing militias, the security of transporting goods through the port of Haifa has become uncertain. The transit of containers, especially hazardous materials, and the arrival of commercial vessels greatly emphasize the importance of security on this route and this could lead to a shift in the transportation of goods.
Maersk, a major player in the industry, reassured stakeholders by announcing that its port operations across Israel’s key terminals are functioning without disruption. MSC echoed this sentiment, asserting that Israel’s major terminals are operational, enabling them to facilitate cargo delivery.
However, the maritime industry is aware of the security situation, and companies such as MSC remain vigilant, pledging to monitor the situation closely and heed government guidance. This underscores the industry’s adaptability and resilience in the face of geopolitical tensions. For a start, the conflict serves as a testament to the shipping and maritime industry’s ability to adapt, demonstrating that despite challenges and disruptions, trade and operations can persist, albeit with the necessary caution and vigilance.
According to Container Xchange, the ports directly affected by the action include ports of Ashdod, situated a mere 50 km from the Gaza border; Israeli port and shipyard Haifa, operated by India’s own Adanis, Ashkelon, located just 15 km from the Gaza border and has been severely impacted, rendering it incapable of normal operations due to missile threats; Hadera, which in comparison carries on without disruption, and port of Eilat, which similarly remains operational.
Beyond the ports, several global companies with a presence in Israel have been forced to adjust their operations. Chevron, the second-largest U.S. oil and gas producer, was directed by Israel’s energy ministry to shut down the Tamar natural gas field off the country’s northern coast. Adani Ports, operator of the Haifa Port, assured stakeholders of operational readiness while closely monitoring the situation and having a business continuity plan in place.
India is a crucial trading partner for Israel, with $3.94 billion in Israeli exports. The conflict could have an impact on bilateral trade, potentially leading to disruptions in Israel’s exports to India. Key Indian exports to Israel include diesel, cut and unpolished diamonds, electronics, and telecom components like integrated circuits and photovoltaic cells. Conversely, India’s imports from Israel consist mainly of rough diamonds, fertilizers, and herbicides. This evolving trade relationship extends beyond traditional sectors, encompassing electronic machinery, high-tech products, communication systems, and medical equipment.
The Israel-Hamas conflict has raised concerns about increased costs for Indian exporters, such as higher insurance premiums and elevated shipping expenses. These expenses stem from the heightened risk associated with shipping goods to regions experiencing geopolitical unrest. While the conflict may result in higher expenses for Indian exporters, the impact on trade volumes is expected to be limited unless the war escalates significantly. The primary concern is the financial burden on exporters, which may reduce their profit margins.
Israel’s trade with China is characterized by a notable trade imbalance, with China being a major importer of Israeli goods. While Israel’s exports to China are substantial at $4.68 billion, the conflict may disrupt trade flows, particularly concerning Israel’s high-tech exports. The disruption could affect Israel’s exports and potentially hinder access to China’s vast market.
The United States is a critical trade partner for Israel, with a strong focus on exports. Israel exports goods worth $18.67 billion to the U.S., including high-tech products and defence-related items. Germany also is a key European trade partner for Israel. The conflict might impact Israel’s exports to Germany, valued at $1.88 billion. As Israel navigates regional instability, German imports from Israel could be affected.
It is pointed out that the conflict could serve as a reminder of the uncertainties facing ambitious trade projects like the India-Middle East-Europe Economic Corridor (IMEC), positioned as a Western counterpart to China’s Belt and Road.
IMEC, involving railways, ports, and green energy, aligns with the G7’s plans to mobilize $600 billion by 2027 for global infrastructure investments. India’s trade with Saudi Arabia has doubled in two years, reaching $53 billion in 2023, but the corridor’s true potential lies in strengthening Indian-European trade ties.
To fully realize IMEC, a reliable link between Saudi Arabia and Israel is essential. However, the ongoing regional complexities make it riskier for Saudi Crown Prince Mohammed bin Salman to normalize diplomatic relations with Israeli Prime Minister Benjamin Netanyahu.
In the near term, the Suez Canal remains the primary route for goods from India to Europe. This conflict underscores the enduring complexities of reshaping global trade and financial routes, highlighting the unpredictable nature of such endeavours.
Geopolitical conflicts and global health crises, unfortunate as they are, often lead to unintended consequences, boosting profits in specific sectors. Wars tend to inflate returns for defence contractors, while the pandemic brought substantial gains for select pharmaceutical companies. The maritime industry is not immune to these dynamics, with shipowners reaping unexpected benefits from both types of crises. (IPA Service)