What's Happening in the Red Sea
RED SEA
When I first began writing this piece on the goings on in the Red Sea I found myself waking to find more incredible things taking place. Cascading from one crisis to yet another.
You will by now know that the Houthis in Yemen began threatening and then bombing any container ships supplying Israel.
Their position being that they’ll stop when the genocide in Gaza ends.
Notably Chinese and Russian ships have free passage. The US, under Defence Secretary Lloyd Austin, then attempted to form a “coalition” serving Israel called ‘Guardians of Prosperity’ (do these guys watch too many Hollywood movies or what?) but was met with limited success.
Despite visits to 39 countries, the initiative includes Britain, France, Canada, Italy, the Netherlands, Norway, Spain, the Seychelles and Bahrain — none of which you’ll notice have coastlines on the Red Sea.
In contrast, all the Red Sea littoral states, notably Eritrea, Djibouti, Ethiopia, Sudan, the Kingdom of Saudi Arabia and Egypt, have all refused to be part of this alliance. Ouch!
This significantly undermines the American strategy of protecting Israel’s economic interests, putting Washington in an embarrassing (and rather compromising) position.
While you wouldn’t know it if your information sources are the MSM, 154 countries called for a ceasefire in Gaza at the United Nations General Assembly.
In addition, 13 countries in the United Nations Council voted for a cessation of hostilities in Gaza. The United States opposed them and the Brits abstained, which just goes to show that a level of isolation even among allies and adversaries has crept in.
Their refusal is based on the argument that they see no direct relevance to their interests, as there is no perceived threat to the navigation of their ships or those travelling to and from their ports.
This situation underlines a notable shift in global dynamics, suggesting that America’s influence is waning. The inability of the United States to garner broader support for this initiative indicates a decline in its ability to legitimise and execute military action with general international support unilaterally.
The Strait of Bab al-Mandab is a vital maritime choke point of immense strategic and economic importance.
Approximately 6 million barrels of oil and goods worth around ten billion dollars pass through this narrow waterway every day.
That’s about 12% of the world’s shipping traffic. Its geographical importance is underlined by its location at the junction of the continents of Asia and Africa, serving as a crucial passage for maritime routes connecting the five continents.
If the Bab al-Mandab were closed to Israeli ships and their cargoes, the consequences would be far-reaching. Such a blockade would require significant maritime traffic to be diverted around the Cape of Good Hope, bypassing the Suez Canal. (great for our shipping stocks).
This diversion, which has already been adopted as a precautionary measure by major international trading and transport companies, poses significant logistical challenges.
Firstly, the alternative route significantly increases shipping distances, leading to longer delivery times for oil and goods. Adding weeks to transit times affects supply chains and global markets that rely on timely deliveries.
Secondly, the longer journey and increased risk factors significantly increase transport and insurance costs, reportedly rising by up to 200%. This increase in operating expenses will inevitably find its way into consumer price inflation.
Moreover, the strategic importance of the Bab al-Mandab Strait goes beyond commercial shipping. It’s a vital artery for energy transport, particularly to European and Asian markets. Disruptions to this waterway can have a ripple effect on global energy prices and availability.
We promised you that energy and indeed energy security was going to become a significant issue, and it feels like right now it’s all happening except few want to even acknowledge it. Very strange.
The situation at the ports of Ashdod and Haifa, have reported a significant reduction in goods, illustrates the critical impact of disruptions in the Bab al-Mandab Strait, particularly for Israel.
Given that Israel imports about half of its oil through this vital sea route, the effect of such a blockade is significant.
The shortage of goods at these ports suggests that Israel and the United States may need to explore alternative sea or land transport routes or a combination of both.
However, these alternatives come with their challenges and costs. Sea routes, such as the extended voyage around the Cape of Good Hope, increase transit times and costs.
At the same time, land alternatives could involve complex logistical arrangements and potentially fraught geopolitical negotiations.
Israel is particularly vulnerable as it relies heavily on the Bab al-Mandab for its oil imports. The European continent is also at risk. The transport and insurance costs increase, coupled with the additional delay of around four weeks due to the longer shipping routes, could exacerbate the situation, especially during the harsh winter season when Europe is more vulnerable.
In summary, the blockade of the Bab al-Mandab Strait not only disrupts the flow of goods and energy to Israel but has broader economic implications.
The resulting inflationary pressures and logistical challenges could affect local and international markets. Given its energy and economic context, Europe is particularly sensitive to these changes.
The recent escalation by the US and British forces (bombing Yemen) look like they may escalate the situation. Remember these guys can quite easily cause complete closure of the Bab al-Mandab Strait. This scenario would turn the strait into a war zone and deter all maritime traffic, regardless of destination, affecting global shipping routes.
A total blockade of the Bab al-Mandab would have far-reaching consequences, not only for regional stability but also for the global economy. A closure of the strait would disrupt vital supply chains and have a significant impact on the worldwide flow of goods and energy. Such a development would damage the economies of numerous countries and potentially damage the reputation and perceived effectiveness of the United States and its allies in maintaining global maritime security.
In essence, while the US joint force is designed to protect Israeli interests, the broader implications of military involvement in the region present a series of complex and potentially volatile outcomes.
The decision to use force is not just tactical; it also involves strategic considerations of regional stability, global economic impact, and the long-term implications for international relations and America’s standing as a global power.
Any significant escalation in the region, particularly around the Bab al-Mandab Strait, would likely have consequences beyond the immediate area.
Something else to consider is that it’s plausible that Ansar Allah would not be the only party involved in the conflict against Israel and its allies. Iran and its allies might be inclined to broaden the scope of the conflict, causing the United States and its allies to rethink their strategies. The prospect of more global sea lanes being closed or destabilised and the potential expansion of the geography of the conflict could make the situation increasingly difficult to control.
In this context, the United States may find its global standing compromised in its efforts to defend Israel. It is hard to know as there are many competing interests here. Clearly, the US is struggling to maintain control of critical sea lanes. Both embarrassing, but crucially, it is also empowering its enemies to fill that vacuum and that escalates conflict.
Much of the world is taking the position right now that the US has no moral authority by allowing Israel’s actions to continue.
The more the US is seen as defending actions that are increasingly scrutinized and criticized, the more it risks its reputation and standing in the international community.
I hate to say it, but A LOT is pointing to an increasing conflict.
On the plus side, that is rather bullish for our portfolios. The more things fall apart globally the more they come together for the portfolio.
Sincerely,
Capitalist Exploits
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