How a Yemeni rebel group is creating chaos in the global economy

An armed man opens a door on the deck of a cargo ship.
A screen grab captured from a video shows Yemen’s Houthi fighters’ takeover of the cargo ship Galaxy Leader in the Red Sea on November 20, 2023. | Houthi Movement via Getty Images

The Houthi attacks in the Red Sea, explained.

Container ship captains who make the run between Europe and Asia are about to become reacquainted with the Cape of Good Hope, making a long swing around Africa in a route that has been largely obsolete since the opening of the Suez Canal more than 150 years ago.

Since mid-November, Houthi rebels in the Middle Eastern country of Yemen have been attacking shipping in the Red Sea, firing drones and missiles and, in some cases, boarding and seizing vessels. The Houthis, who are backed by Iran, say the attacks are in solidarity with their Palestinian allies in Hamas. In response, most of the world’s largest container-shipping companies — including Denmark’s Maersk, Germany’s Hapag-Lloyd, and China’s Cosco — have stopped shipments through the Red Sea. The oil company BP is doing so as well. An estimated 7 million barrels of oil normally travel through the sea per day.

It’s an unexpected consequence of the two-month-old Israel-Hamas war, which is rapidly escalating into a wider conflict with both regional and global ripple effects.

“The impact is no longer on one country,” Noam Raydan, a Middle East shipping analyst at the Washington Institute for Near East Policy, told Vox. “Now, it is global.”

These reroutes will add thousands of miles and days of travel time to their journey, costing companies millions of dollars in extra fuel and other costs. While there are still ships braving the Red Sea, the tracking site VesselFinder shows that many have their transponders set to broadcast that they are carrying armed guards on board.

US, French, and British ships in the region have been shooting down dozens of Houthi drones, but Western governments have come under pressure to do more to protect global shipping. On Tuesday, the US announced the formation of a 10-country naval task force to protect shipping in the region. Biden administration officials are also reportedly considering operations for direct military strikes against the Houthis.

But there appears to be no easy way out of the crisis, which shows how a confluence of geography, economics, technology, and geopolitics can allow a relatively small rebel group to cause a surprising amount of havoc on the global economy.

Who are the Houthis?

They call themselves Ansar Allah, but the Houthis are more frequently referred to by the name of their founder, Hussein al-Houthi. Members of a minority Shia Muslim sect in northern Yemen, they emerged as a rebel group fighting the government of Yemeni dictator Ali Abdullah Saleh in the 1990s. Saleh was ultimately overthrown amid Arab Spring–linked protests in 2012, and the Houthis took advantage of the ensuing power vacuum to seize the capital, Sanaa, in 2014. They still hold the capital today but are generally not recognized by the international community as Yemen’s legitimate government.

Since 2014, Yemen has endured a brutal civil war that pits the Houthis — who receive substantial funding and weaponry from Iran — against Yemen’s internationally recognized government and an international coalition led by Saudi Arabia (and supported by the United States). As of last year, the United Nations estimated that the nearly decade-old war has killed more than 377,000 people — most due to malnutrition, unsafe water, and poor medical services, all exacerbated by conflict — though the violence has died down since a UN-brokered ceasefire in 2022. Today, the Houthis control about one-third of Yemen’s territory and 70 percent of its population.

To the extent that the outside world has paid attention to the war, the focus has mainly been on the humanitarian crisis and America’s controversial backing of the Saudis. But as the recent events in the Red Sea demonstrate, the Houthis’ war in Yemen isn’t staying in Yemen.

Globalizing the conflict

The Houthis have never exactly been subtle about their geopolitical views. The group’s official slogan is “God is great, death to the US, death to Israel, curse the Jews, and victory for Islam.” But until now, outsiders have mostly thought of them as a concern only in their native Yemen.

Fatima Abo Alasrar, a Yemeni political analyst at the Middle East Institute in Washington, DC, told Vox that policymakers outside Yemen have underestimated the Houthis’ international goals because “they’ve never tried to act as boldly” as they are now, but Houthi propaganda has always played up what they see as the Saudis’ too-friendly relations with Israel. They’ve told their fighters, whose ranks include a substantial number of child soldiers, that they are fighting a war against the US and Israel for control of Yemen. Now, Alasrar says, “they’re putting their money where their mouth is.”

Following the October 7 Hamas attacks and the Israeli military operation in Gaza that followed, Iran-backed armed groups throughout the region — which some refer to collectively as the Axis of Resistance and which also include Lebanon’s Hezbollah and various militias in Iraq and Syria — have all stepped up their attacks on Israel and on US military targets. (The government of Iran itself, by contrast, has made clear it doesn’t plan to intervene directly with its own forces.)

Of all these groups, the Houthis’ actions in the conflict have in some ways been the most audacious, if only because of their physical distance from the fighting. Since October, the Houthis have been regularly firing missiles and drones at Israel, which sits more than 1,000 miles from Yemen. The Houthis have previously attacked targets in Saudi Arabia and the United Arab Emirates with missiles, but the launches against Israel — which have all been intercepted so far, either by Israeli missile defenses or US naval ships in the Red Sea — are by far their longest-range strikes.

On November 19, helicopter-borne Houthi rebels boarded and seized the Galaxy Leader, a cargo ship partially owned by an Israeli businessman. The ship is still being held off the coast of Yemen, its crew held hostage and allowed only “modest contact” with the outside world. Since then, there have been attacks of various degrees against at least 12 different commercial vessels, most of them with little or no direct connection to Israel.

Some of these attacks have demonstrated startling technical capabilities, including what may be the first-ever combat use of an antiship ballistic missile by any military. These missiles, which travel at much higher altitudes and greater speeds than cruise missiles, could dramatically extend the range at which militaries can strike enemy ships and render many existing defenses obsolete. The models used by the Houthis appear to be somewhat less sophisticated than those tested by countries like China and rely on drones for spotting.

A critical chokepoint

About 12 percent of global trade and 10 percent of the maritime oil trade passes through the Red Sea, a body of water defined by two chokepoints: to the north, Egypt’s Suez Canal, and to the south the Bab al-Mandab, or “Gate of Tears,” a strait between Yemen and Djibouti on the east coast of Africa that is about 20 miles wide at its narrowest point and where making of the attacks are taking place.

“This is a chokepoint on the most densely used trade route on the planet,” said Sal Mercogliano, a former merchant mariner and shipping historian. “Any disruption is going to impact the entire supply chain.”

The route has been cut off before, most recently in 2021 when the container ship Ever Given ran aground in the Suez Canal, blocking traffic for a week. The current disruption, though, has the potential to last much longer, with much more serious consequences.

Some countries may feel the impact directly, such as the cash-strapped government of Egypt, which earns more than $9 billion a year from Suez Canal transit fees. But given the complex web of global trade woven by maritime shipping, other nations will experience knock-on effects.

Rachel Ziemba, an energy and economics analyst at the Center for a New American Security, pointed out that the disruption comes at a time when many European economies have been forced to increase their reliance on shipborne oil and natural gas, much of it from the Middle East, in an effort to wean themselves off Russian pipelines. Russia, meanwhile, has increased its own oil exports to India, China, and other markets in Asia — and much of that oil travels by ship through the Red Sea as well. “If anything, when it comes to shipping, there’s been more reliance on shipping rather than less,” said Ziemba.

Oil prices have been falling for the last two months, due largely to slackening demand in major consumers like China, but it did rise more than $1 a barrel on Tuesday. European natural gas prices also jumped 7 percent after news broke that BP was suspending its Red Sea shipments of liquefied natural gas.

The crisis couldn’t come at a worse time for the global shipping industry, which is in a slump as global industrial output flatlines and post-pandemic consumer demand normalizes. The issue for shippers is not just the risk to their vessels, cargo, and crews, but also the cost of insuring against that risk. The war risk premiums charged by insurance companies for shipping in the Red Sea have already jumped from around 0.07 percent of a ship’s value in early December to around 0.5 percent now. Considering that oil tankers can be valued in the hundreds of millions of dollars, these premiums could make Red Sea shipping prohibitively expensive if they rise further.

The Bab al-Mandab is also not the only global shipping chokepoint under stress. The Panama Canal is currently operating at reduced capacity due to low water levels caused by a historic drought, which limits the number of ships that can pass through. Analysts are also concerned that the turmoil in the Middle East could affect the Strait of Hormuz, the gateway to the Arabian Sea between Iran and the UAE. Given its importance as a route for oil shipments, that could have a much more significant impact on energy prices.

“It really only highlights the importance of having different supply chains, of having the ability to redirect,” Ziemba said. But the costs of developing these alternatives are starting to add up.

Firing back

Global shippers have been leading the calls for global governments to do something about the Houthis. In a striking recent editorial, Lloyd’s List, the leading journal of the shipping industry, drew explicit comparisons to the use of the British Navy to protect shipping during the 19th century, writing, “Let gunboat diplomacy be confined to the past. But there are legitimate uses of gunboats in the 21st century; the continued flow of world trade is one of them.”

On Monday, Defense Secretary Lloyd Austin announced the formation of Operation Prosperity Guardian, a multinational naval mission meant to protect shipping in the area. But it’s still unclear how large this task force will be or how it will operate. “I don’t think you’ll see World War II–style convoys escorting ships,” said Mercogliano. The scale of shipping involved makes such escorts implausible. “You’re more likely to see naval vessels basically putting themselves between Yemen and the main shipping channel and acting like gatekeepers.”

The coalition, which includes a number of European countries as well as Bahrain and the Seychelles — a small island nation of just 100,000 people — also has some notable absences. Missing is China, which has a military base in nearby Djibouti and is heavily reliant on importing Middle Eastern oil and exporting consumer goods to Europe via ship. Beijing has been playing a more active role in the region’s politics lately, including brokering a historic diplomatic deal between Saudi Arabia and Iran earlier this year, while Hong Kong-flagged container ships have been among those attacked. Yet while the US and Chinese navies have collaborated in the region before, including in efforts to combat Somali piracy a decade ago, geopolitical tensions between the two nations are much higher now. Far from Beijing joining the multinational task force, the Pentagon has accused Chinese naval vessels of ignoring a distress call from an Israeli-owned tanker that came under attack in late November.

Another missing country: Saudi Arabia, which is all the more surprising given that the country has been fighting the Houthis for years. But Saudi leaders, who recently have been taking steps to disentangle themselves from the bloody and costly Yemen conflict and have hosted several rounds of peace talks with the Houthis, have reportedly urged the US to show restraint in responding to the shipping attacks.

Alasrar suggests Saudi leaders are likely still resentful over what they see as a lackluster response by Washington to Houthi and Iranian attacks on Saudi and Emirati oil facilities in recent years. “At this point, the Saudis are probably more interested in being a spectator because the Houthis are addressing Israel and the United States more directly,” she said. The Saudis are “not interested in escalating because it hasn’t gotten them anywhere.”

In addition to the new task force, the US has moved the Dwight D. Eisenhower carrier strike group to waters near Yemen to support a possible further US response to the attacks. Politico recently reported that Biden administration officials have been weighing options to strike back against Houthi targets in Yemen itself.

There is some precedent. In 2016, under President Obama, the US launched Tomahawk missiles at three Houthi radar sites in response to a previous round of Houthi attacks on US Navy ships in the region. The US has also launched hundreds of drone strikes on suspected terrorist targets in Yemen over the past two decades. But it would represent something of a reversal for the Biden administration, which announced a halt to US support for the Saudi-led coalition in Yemen as one of its first foreign policy actions back in 2021 and has been scaling back the US drone war as well.

The Houthis, for their part, say they are undeterred by the new task force, with a spokesperson telling the Washington Post, “Our war is a moral war, and therefore, no matter how many alliances America mobilizes, our military operations will not stop.”

However the situation resolves, it could have lasting repercussions far beyond the Red Sea. The global economy remains as reliant on shipping as ever — it accounts for around 80 percent of global trade. And between the disruption of grain shipping through the Black Sea as a result of Russia’s naval blockade of Ukraine and the Houthis’ operations in the Red Sea, recent years have given ample demonstration of how armed conflict can disrupt that trade.

More disruptions may loom. Last year, in response to a visit to Taiwan by then-House Speaker Nancy Pelosi, China’s navy conducted live-fire drills around the island, effectively blockading international shipping lanes for several days. There are growing fears that China could enact a longer blockade, either in the lead-up to a full-scale war on Taiwan or instead of one.

Mercogliano says recent events have upended assumptions about the balance of naval power. “We saw what the Ukrainians could do to the Russian Black Sea fleet without an advanced navy,” he said, referring to Moscow’s decision to mostly withdraw the fleet from its traditional base in Crimea after a slew of attacks by Ukrainian aerial and maritime drones. “Now we’re seeing what the Houthis can do without any navy at all. Now, imagine what a Taiwan scenario would look like.”

The Houthis will likely struggle to respond to a true US-led response, but their audacity — and their strategy — could also be offering a preview of greater disruptions to come.

——————————————-
By: Joshua Keating
Title: How a Yemeni rebel group is creating chaos in the global economy
Sourced From: www.vox.com/world-politics/24010092/houthis-red-sea-shipping-yemen-israel-gaza
Published Date: Thu, 21 Dec 2023 11:30:00 +0000

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I'm a writer for lifestyle publications, and when I'm not crafting stories, you'll find me cherishing moments with my family, including my lovely daughter. My heart also belongs to my pets—Sushi, Snowy, Belle, and Pepper. Besides writing, I enjoy watching movies and exploring new places through travel.