What's Happening East of Suez?

Global financial markets will experience panic attacks at the mere thought of conflict. However, when shipping companies declare that they are rerouting their fleets around the Horn of Africa, bypassing the Suez Canal, there is only a slight reaction. At the time of publication, AP Moeller Maersk is down less than one per cent over five days, with minimal news coverage. A. J. Rees provides insights on this issue.

Back in the blur that was the dark times of the global pandemic, there was a period where it seemed that disaster was following disaster, and everything was careening headfirst into farce. For me, the peak "what can possibly go wrong next" moment was when the Ever Given, one of the largest container ships in the world, blocked the Suez Canal, throwing the already creaking global supply chain into chaos. In the six days that it took to dislodge the Ever Given and get the backlog of ships moving again, billions of dollars in trade was lost. It was also ample fodder for meme-smiths and political pundits, eager to deconstruct the folly of globalised manufacturing and just-in-time delivery.

From an engineering standpoint, the global trade network is not optimal. However, unlike a game of Civilization where one can open the dev console and edit the terrain, it is a lot harder to reshape the world map. The Suez Canal and Panama Canal are some of the greatest engineering feats ever made and reshaped the world of trade, politics, and power. It could be said that "where trade goes, so does Empire." Trade routes and networks shaped the expansion of European powers and global trade. The clipper races to bring tea from India to the India Docks in London saw fortunes won and lost. Many do not realise that with the completion of the Suez Canal, the West Coast and Southern Africa lost a lot of their value as safe ports. This was mirrored in the opening of the Panama Canal, which caused economic damage to ports in Argentina and Chile.

Global trade, therefore, shapes our very lives; it is the modern world's lifeblood, and our trade routes should be of the utmost importance. When there were suspected Iranian-linked attacks on oil tankers in May and June, Gulf of Oman oil prices rose, and stock markets around the world dipped. The Strait of Hormuz is one of the most vital strategic points in the world, with almost 20 per cent of the world's oil supply passing through it. It is therefore of high priority to maintain the smooth flow of shipping for the world's navies. So why is there so little talk about the attacks off the Yemeni coast on the shipping route that connects Europe to the East, even after Western bombing of rebel positions?

What began with promises from Yemen's Houthi rebels (who are the country's de facto leaders) to target any Israeli-flagged ships passing near their waters and suspected missile attacks aimed at Israel has morphed into direct attacks on shipping vessels and warships. As was first showcased during the war between Azerbaijan and Georgia, where Turkish drones dominated the battlefield, to subsequent success by Ukrainian forces against Russian armour in Ukraine, drones are becoming the weapon of choice for smaller countries as a cost-effective threat multiplier.

Maersk and other global shipping companies have announced that until the situation is contained, they will be rerouting their ships to take the longer course around the Horn of Africa. These delays will have knock-on effects on manufactured goods getting into Europe and add to rising costs as fuel and late fees are passed onto customers. Given that Europe is still struggling with the post-pandemic hangover, mounting debts, and a myriad of other problems, not to mention tens of billions in lucrative trade at stake, you would be forgiven for expecting a more proactive approach than just diverting a few ships from the Israeli coast to the Gulf of Aden.

We must ask ourselves, why is this situation being allowed to persist given the threats?

The first and most obvious of the herd of elephants is financial. The global markets are still reeling from the pandemic, and another shock to the system is the last thing we need. Traders are not stupid and generally do not rely on the morning news to get their updates. That markets seem somewhat unphased – or even pleased – by the prospect of higher shipping fees that will be incurred, rather than free-wheeling at the potential loss of the Suez Canal, a route so vital that the British, French, and Israelis went to war over it in the '50s, seems to point towards something else. Time will tell as to whether the economic theory of the last century and a half is wrong about the importance of Suez, or if in the stock exchanges of London, New York, and Frankfurt, traders are sitting in the flames chanting “This is fine.”

The second is that with the Houthi “rebels,” to use the Western term for Yemen's Iran-backed rulers in control of most of the country, there is a real possibility of a conflict between Iran and Saudi Arabia on the cards. Given the only positives in Saudi Arabia's conflict with Yemen, which it launched in 2015, have been reflected in the death counts and the stock price of weapons manufacturers, any conflict between the two regional powerhouses would rapidly spiral into a religious conflict that would see clashes spread almost globally. Given the protests in Europe and America over Israel and Hamas, a Sunni/Shia conflict could dwarf these.

Finally, and most alarmingly, we could be faced with the more worrying case; that our politicians do not know what to do. Despite growing up under the shadow of the Cold War, the average age of European leaders is 53. That is not to say that age is a benefit, given the gerontocracy currently occupying the government of the United States. Despite some bumps, their lives have been quite smooth thanks to the steady hand of greater men than them. Could this all be down to a skill gap among career politicians?

Without access to hidden microphones, spy satellites, or Hunter Biden's smartphone, we can only make educated suppositions on why this news is being kept so quiet and pray that steady heads prevail