It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Saturday, March 23, 2024
Houthi Attacks Force Port of Eilat to Lay Off Half its Staff
Port of Eilat in better times, with a full lot of imported cars (Adiel Io / CC BY SA 3.0)
The Houthi attacks on Red Sea shipping have disrupted cargo traffic between Europe and Asia, increasing shipping times, costs and fuel consumption. This has forced port operators to adapt to altered schedules. For the Red Sea port of Eilat, Israel, the disruption has been much more severe: its operator is laying off half of its workforce because of a sharp drop in business.
On Wednesday, Israel's Histadrut Labor Federation said that the managers of Port of Eilat intend to lay off 60 out of 120 employees. “The port management is trying to take advantage of the war situation and harm the livelihood of dedicated workers in the southern periphery," asserted Nir Eisenberg, head of the maritime transport workers' division of Histadrut.
Port of Eilat has lost no less than 85 percent of its traffic since the Houthi campaign against Western shipping began. Houthi forces have pledged to attack Israel-bound ships in the Red Sea, and Eilat can only be accessed from the east through the Red Sea. Vessels arriving from the west can also call at Israel's Mediterranean ports, without paying Suez Canal fees to reach Eilat.
Accordingly, ro/ro imports have plummeted. Eilat handles eastern car imports for the Israeli market, and last year it brought in 150,000 cars via the Red Sea route. So far this year, the number is zero, according to Israeli business outlet Calcalist.
Eilat Port CEO Gideon Golber told Middle East Monitor that if the Israeli government did not step in to pay all salaries, the enterprise would have no choice but to impose layoffs. "I hoped the coalition countries would have solved the [maritime security] issue in a few months, but they are not solving the problem," he said.
Eilat is also within missile range of Houthi forces, and has come under attack directly. On Sunday, a Houthi cruise missile penetrated Israeli missile defense systems and struck north of Eilat, causing no serious damage. The Israeli Defense Forces confirmed the attack and said in a statement that it is investigating why the missile was not shot down.
On Thursday, Israeli air defenses shot down a suspicious aerial target off the coast of Eilat, before it could reach shore.
Three months after starting to divert all its vessels from a passage through the Red Sea, Maersk told customers today that it is too soon in its assessment to resume its normal routes. They said the routing around Africa allows the best supply chain stability, in their assessment, saying that a switch is complex and they wanted to make sure it would be sustained over the long term and avoid further disruption.
They write that they are aware that Operation Aspides has taken shape and welcome it as a positive development along with the U.S.-led efforts. Maersk writes that they are also in “continuous dialogue” and monitoring developments in the region.
“Regretfully, both our internal analysis, as well as insight we received from external sources, still indicates that the risk level in the region remains elevated,” they wrote in their latest customer alert.
Maersk vessels were targeted by the Houthi on two different occasions in December leading the carrier to first suspend, then resume, and then suspend again transits through the region around the Bab el-Mandeb Strait. The Maersk Gibraltar had a near-miss incident on December 14 leading to the first pause. After getting security assurances after the U.S.-led effort began, at the end of December Maersk said it was updating voyage plans on a vessel-by-vessel basis, which would see the first vessels pass through the Red Sea again.
A day after they informed customers that they were resuming some transits, the Maersk Hangzhou on December 30 was hit by an unknown object. The ship had passed through the Bab al-Mandab Strait sailing from Singapore to Port Suez, Egypt. While there was no indication of a fire on board, Maersk said out of a concern for crew safety they were again rerouting all sailings.
“At Maersk, we are aware that some other shipping lines have continued sailing through the Red Sea despite security risks or have announced their plans to resume sailing,” the March 22 alert says. “We respect the right of each carrier to make such decisions individually. At the same time, we continue with our own assessment that the current situation does not allow us to make a similar decision and thus still believe that sailing via the Cape of Good Hope and around Africa is the most reasonable solution at the moment and the one that currently allows the best supply chain stability.”
Aspides reported this week that it has been in place for a month and already escorted 35 merchant vessels. They reported the defensive actions led to the shooting down of eight UAVs and the repelling of three other UAV attacks. Since then, the French shot down another UAV targeting a ship they were protecting, the German warship Hessen destroyed a USV while it was escorting a ship, intercepted and destroyed 3 ballistic missiles while yesterday the French reported they intercepted and destroyed three more ballistic missiles.
Among the major carriers, only CMA CGM has said it was prepared to resume transits. At the end of February after having suspended transits they advised customers that they had “reevaluated the situation in the Southern Area of the Red Sea.” They said the situation was being assessed for each ship individual.
Previously, Rodolphe Saadé, Chairman & CEO of the CMA CGM Group, told the Financial Times they were making the Red Sea transits when they could be escorted. He said the disruptions were playing havoc on their schedule and even when they were making the trips they were often having to wait for their escorts.
MSC reported it was also avoiding the transit. Even still, one of its vessels heading to Djibouti was attacked on March 4 with a small fire started in containers. The Indian Navy assisted with the fire and the MSC vessel was able to continue its voyage.
Most of the transits are being made by smaller operators. BIMCO reported this week that traffic through the region was down by 50 percent in January and February. In the first three weeks of March, they calculated that the gross tonnage transiting the Suez Canal had dropped 61 percent year-over-year.
Why Houthi Attacks in the Red Sea Are Likely to Persist: They're Popular
A well-attended rally and parade for Houthi missile and drone units in Sana'a, Yemen (Houthi Military Media)
Since mid-November 2023 the shipping route through the Red Sea has been disrupted by a series of attacks on vessels by Yemen’s Houthi movement, recently designated as a terrorist organisation by the US government. The Houthis have presented their attacks as retaliation for Israel’s military assault in Gaza. Although this undoubtedly is one of the motivations for the Houthis’ activities they are also driven by more long-standing domestic political considerations. These dynamics may propel the Red Sea crisis forward for the foreseeable future, especially if U.S. and U.K. forces are unable to hobble the Houthis’ offensive capabilities.
The most dramatic result of the Houthi attacks has been an 80% drop in the volume of freight passing through the Red Sea since late November. Insurance costs have soared for those ships still attempting the passage. Roughly 45% of lost traffic now detours around the Cape of Good Hope, lengthening journey time by an average of 30% and adding significant extra costs. Freight rates, especially, have skyrocketed. Despite the raised insurance premiums and increased costs for the rerouted voyages, the overall economic impact of the disruption to shipping will be limited if the situation continues as it is for a relatively contained period, perhaps adding up to 0.7% to core goods inflation globally in the first half of 2024. That said, there appears to be no end in sight to Houthi attacks.
Having framed their actions in the Red Sea as a response to Israel’s actions in Gaza, it might not be unreasonable to believe the Houthis would cease their attacks in response to a ceasefire in Gaza. The Houthis could claim such a ceasefire as a major victory. Ongoing multilateral diplomatic efforts to secure one could, therefore, resolve the crisis in the Red Sea. There are two problems with this position: firstly, the likelihood of a lasting ceasefire being agreed soon is low due to the uncompromising negotiating position of the Israeli government, an apparent lack of US political will or ability to soften Israel’s stance, and the unrealistic demands of Hamas. Secondly, even if a Gaza ceasefire were to be signed, there is a substantial likelihood that the Houthis would continue their attacks in the Red Sea in any case due to domestic political incentives to do so. They may attempt to justify such a continuation of attacks in terms of the Palestinian cause in general, beyond the current military campaign in Gaza.
Prior to the conflict in Gaza the Houthis had suffered a decline in public support due to poor governance. Now, however, the Houthis have successfully leveraged strong local pro-Palestinian sentiment to reverse this decline and boost their support. Appearing to take action in support of the Palestinian cause, the Houthis can now credibly present themselves in Yemen as the true representatives of the popular will both there and across the broader region. Moreover, long-standing Yemeni hostility to foreign military intervention has meant that US and UK missile attacks on Houthi positions – and Houthi retaliatory attacks on US and UK shipping – have only bolstered the Houthis' domestic popularity. The Houthis can now claim to be making good on their long-stated goal of militarily confronting the US and its allies. Domestic rivals of the Houthis are loathe to move against them for fear of appearing to undermine this ‘resistance’, and some traditional rivals have even started to provide material support to the Houthis. Similarly, Saudi Arabia, the Houthis’ old regional foe, is especially keen to avoid any confrontation that might harm the progress of its Vision 2030 and, to this end, is anxious to complete paused bilateral peace talks in Yemen. Beyond the Middle East, the Houthis can even claim political gains at the global level, having recently reached an agreement with the Russian and Chinese governments to guarantee safe passage for Russian and Chinese shipping in exchange for increased political support for the Houthi cause from those countries on the world stage. Indeed, the Houthi-Russian-Chinese trilateral talks in themselves are emblematic of the Houthis’ now greatly enhanced political stature.
With a cessation of attacks in the Red Sea unlikely to be forthcoming from the Houthis, the future security of Red Sea shipping relies on the effectiveness of the US-led military response. So far, however, the US-led mission in the Red Sea has largely failed to achieve its objectives, raising questions about the prospect for future success.
The sizeable US-led naval task force is stretched thin, and is widely regarded as too small to effectively guard the entirety of the vast area of water within which the Houthis can strike. A January attack on two Maersk-operated US Merchant Navy ships, despite a naval escort, highlighted the challenges facing the task force. Moreover, the Houthis possess a potent anti-ship missile arsenal that is comparable to many state armies and includes sophisticated missile types alongside low-cost but effective Iranian-supplied UAVs. Recently, the Houthis reported to have acquired advanced hypersonic missiles (most likely via Iran) and claimed to have established a production facility to manufacture more of these missiles domestically. This formidable arsenal poses a serious challenge to the high-tech but overstretched resources of the US-led coalition, exacerbating the difficulty of protecting shipping routes.
Successive waves of US and UK missile strikes have not stopped Houthi attacks. This has been partly due to the group's expertise in concealing assets, in addition to US and UK’s relative lack of detailed intelligence on Houthi military assets resulting principally from a lack of intelligence focus on Yemen in recent years. Furthermore, depleting the Houthis’ munitions stockpiles in the long term is difficult as the group possess efficient resupply channels that combine domestic production with reliable sea smuggling routes from Iran. While it has been argued that the reduced frequency of Houthi attacks since 26 January indicates that airstrikes are working, this trend is equally attributable to Israeli, US and UK ships avoiding the Red Sea. Indeed, the recent attacks on the Rubymar, which has now sunk, and the True Confidence, which lost three sailors to a Houthi strike, demonstrates the continued potency of Houthi missile capabilities.
With a comprehensive ceasefire in Gaza not imminent and the Houthis making large political gains, the route to quick de-escalation in the Red Sea therefore lies in either an increased naval presence or expanded airstrikes. The US remains unwilling, however, to reduce its naval presence elsewhere to expand its forces further in the Red Sea. The EU has recently launched a small supporting naval mission, but its impact remains uncertain. The US also appears reluctant to substantially expand its aerial campaign, as suggested, for example, by US efforts to rein in the Houthis via Omani and Chinese diplomatic intercession with Iran, the Houthis’ primary state backer. The Red Sea crisis may therefore persist unchanged in the short-to-medium term, and may even deepen as the EU naval mission brings EU merchant shipping into the Houthis’ crosshairs. Indeed, the group has recently declared its intention to expand the geographical reach of its attacks to the Indian Ocean. Houthi coordination with other members of the Iran-aligned ‘Axis of Resistance’ in Iraq, Syria, and Lebanon may also increase, potentially raising the risk of further escalation of the conflict within the region. Indeed, there are already suggestions that moves toward greater coordination may already be underway.
Bilal Sabbagh is a director at risk management consultancy K2 Integrity.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.
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