The Houthis are borrowing from the Iranian playbook in the Red Sea

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is principal analyst at Lloyd’s List Intelligence

A European naval officer recalled at a Hamburg shipping conference in 2012 how the Somali pirates captured by his warship were so malnourished that handcuffs were too large to properly restrain them. Twelve years later a newly assembled, US-led naval mission is tackling a much more sophisticated threat than impoverished Somalis on skiffs. 

Iranian-backed Houthi rebels based in Yemen are using drone vessels packed with explosives, anti-ship ballistic cruise missiles, airborne drones and fast boats to hijack or disrupt commercial ships passing through the Bab-el-Mandeb strait linking the Gulf of Aden to the Red Sea and Suez Canal. 

These tactics show how swiftly the vulnerabilities of key trade chokepoints can be exploited to upset global supply chains, causing maximum disruption to the movement of cars and consumer and manufacturing goods from Asia bound for Europe.

Five warships from the US and UK now patrol the Red Sea alongside aircraft under Operation Prosperity Guardian, launched by the US and its allies in December in response to the attacks (two more are on their way from the Danes and Greeks). Yet so far this effort has failed to secure safe passage for the 12 per cent of world trade that crosses Bab-el-Mandeb to the Suez Canal. 

Most of the world’s biggest container lines have now suspended traffic through the Red Sea, unwilling to transit via the canal that links Asia to Europe and through which about 30 per cent of the world’s consumer goods are shipped. Nine of the 26 attacks on vessels since November 19 have targeted the biggest, highest-profile container ships owned by the world’s three biggest lines, Maersk, MSC, and CMA CGM.

Boxships from China’s state-owned Cosco are also making costly and time-consuming re-routings around the Cape of Good Hope. Lloyd’s List Intelligence data shows that by the first week of January, Red Sea vessel transits had dropped almost 20 per cent year on year.

Shipowners are now having to make day-by-day, case-by-case assessments of whether to make the perilous transit. Risk appetite, geopolitics, charter party obligations, insurance costs and arbitrage economics, not just the naval presence, are driving their decision-making. 

It is clear that the Houthis have copied and amplified the retaliatory and retributory playbook used by their Iranian sponsors. Iran has repeatedly threatened and disrupted maritime trade in the Strait of Hormuz, through which a fifth of the world’s oil passes, as a means of exerting geopolitical pressure. 

Two tankers are currently held hostage in Iranian waters, two of five vessels hijacked in the strait last year in retaliation for the US seizing ships loaded with Iranian crude. 

In 2019, Iran’s Revolutionary Guard Corps sparked a diplomatic and maritime security crisis in the world’s busiest energy waterway. The hijacking of UK-flagged product tanker Stena Impero in the Strait of Hormuz came in direct response to the seizure two weeks earlier of Iranian-owned Grace 1 by UK marines in Gibraltar. 

In the end, western powers blinked first. Gibraltar freed Grace 1 after six weeks and its courts rejected attempts by the US to take the ship and its cargo, which ultimately discharged at its intended Syrian destination. The Stena Impero was then freed. 

Yet, despite everything, the global supply chain is remarkably resilient. Freight forwarders, factories, manufacturers and retailers worldwide are rejigging logistics to manage the biggest interruption to trade since the Covid pandemic led to congested ports around the world. 

Container freight rates on east-west trades have more than doubled in four weeks. Additional vessel capacity can shield the global economy from inflationary costs, although this depends on the duration and reach of Houthi attacks. 

More than a decade ago, a multinational anti-piracy naval task force improved maritime security in the Bab-el-Mandeb strait and Gulf of Aden. Yet military support did not deliver the ultimate solution to the problem. That depended on commercial shipowners, who paid for armed guards on their transits through Somali piracy hotspots. The willingness of these guards to shoot and kill attackers proved a successful deterrent.

The responsibility for keeping the trade artery open between east and west no longer lies with commercial shipping companies. The increased intensity and co-ordination of attacks require intervention beyond their capabilities, which means governments wishing to deter Houthis and keep the oil flowing may need to revisit tactics last used in the Middle East back in the late 1980s during the “tanker war”.