Tipsheet

Biden's Failure to Deter Houthi Attacks Is 'Going to Cause Chaos'

Spencer Brown
Spencer Brown  |  December 18, 2023 12:45 PM

Despite President Joe Biden's claimed attempts to deter attacks in the Middle East, a growing number of shipping companies are suspending operations in the Red Sea amid escalating attacks on shipping vessels from Iran-backed Houthi rebels in Yemen.

As Katie reported last week, Maersk was the first company to announce it would no longer have its ships operate in the Red Sea on journeys transiting the Suez Canal in a move that Bloomberg said "threatens to undermine the global economic recovery and adds to pressure on the US to improve security along one of the worlds most important trade routes." Recalling the grounding of the Ever Given in the Suez Canal in 2021, Bloomberg emphasized that the week-long disruption threw ships "off schedule for months" and "was estimated to have cut capacity by 20% to 30% for several weeks."

Now, it's not just Maersk that's stopped using the Suez and Red Sea shortcut to shave thousands of miles off the trip between Europe and Asia as a result of Houthi attacks.

As of December 18, the following shipping companies have altered their routes to avoid the Red Sea entirely (via Reuters):

BP

Oil major BP on Dec. 18 said it had temporarily paused all transits through the Red Sea.

CMA CGM

French shipping group CMA CGM on Dec. 16 said it was pausing all container shipments through the Red Sea.

EQUINOR 

Norwegian oil and gas firm Equinor on Dec. 18 said it had re-routed some vessels that had been heading towards the Red Sea.

EURONAV 

Belgian oil tanker firm Euronav said on Dec. 18 it would avoid the Red Sea area until further notice.

EVERGREEN 

Taiwanese container shipping line Evergreen said on Dec. 18 its vessels on regional services to Red Sea ports would sail to safe waters nearby and wait for further notification, while ships scheduled to pass through the Red Sea would be re-routed around the Cape of Good Hope. It also temporarily stopped accepting Israeli cargo.

FRONTLINE 

Norway-based oil tanker group Frontline said on Dec. 18 that its vessels will avoid passages through the Red Sea and the Gulf of Aden in the time ahead, boosting the rates customers must pay for crude transport

HAPAG-LLOYD 

German container shipping line Hapag Lloyd said on Dec. 18 it would re-route several ships via the Cape of Good Hope until the safety of passage through the Suez Canal and the Red Sea could be guaranteed.

A projectile believed to be a drone struck its vessel Al Jasrah on Dec. 15, while sailing close to the coast of Yemen. No crew were injured.

MAERSK 

Denmark's A.P. Moller-Maersk on Dec. 15 said it would pause all container shipments through the Red Sea until further notice, following a "near-miss incident" involving its vessel Maersk Gibraltar a day earlier.

The ship was targeted by a missile while travelling from Salalah, Oman, to Jeddah, Saudi Arabia, the company said.

MSC

Mediterranean Shipping Company (MSC) said on Dec. 16 its ships would not transit through the Suez Canal, with some already rerouted via the Cape of Good Hope, a day after Houthi forces fired two ballistic missiles at its MSC Palatium III vessel. The decision will disrupt sailing schedules by several days, the Switzerland-based group said.

OOCL

Orient Overseas Container Line (OOCL) has stopped cargo acceptance to and from Israel until further notice, the shipping company owned by Hong Kong-based Oriental Overseas (International) Ltd (0316.HK) said on Dec. 16.

YANG MING MARINE TRANSPORT

Taiwan's Yang Ming Marine Transport said on Dec. 18 it would divert ships sailing through the Red Sea and the Gulf of Aden via the Cape of Good Hope for the next two weeks.

That list means that, in addition to goods heading to markets around the world, vital oil and gas shipments are now also being diverted around Africa or held indefinitely in safer waters, setting up the possibility of shortages and price spikes — the likes of which the U.S. is less prepared for as a result of slashed energy independence and a significantly reduced inventory in the Strategic Petroleum Reserve. 

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According to the Wall Street Journal, "traders and brokers said they were concerned that even more shipping and trading companies could follow suit" and, if the "Red Sea becomes a no-go zone for most tankers, it would redraw the global oil market for the second time in two years after the war on Ukraine and related sanctions forced Russia to find new markets for its petroleum." 

The result of more companies avoiding the Red Sea and the 16-mile-wide Bab el Mandeb Strait between Djibouti, Eritrea and Yemen "could send oil prices and tanker rates vaulting higher," according to E.A. Gibson Shipbrokers Research Director Richard Matthews. "All you know is it’s going to cause chaos, and everything is going to get a lot more expensive."

To be clear, it's not that President Biden is powerless to do anything — it's just that he hasn't done more than tell Iran-backed terrorists "Don't." As a result of Biden's commands that aren't backed up with action, attacks on U.S. forces in the Middle East have risen past 100 and shipping vessels continue to be attacked. The presence of American military might, such as the USS Dwight D. Eisenhower, isn't a deterrence unless those launching attacks think it might be used against them. 

As the escalating aggression at U.S. and international targets in the region demonstrate, the Houthis aren't yet worried that there will be consequences for their attacks that have allowed the terrorists to begin establishing a blockade of the Red Sea.