The Red Sea war is officially at War. On the 19th of November, a ship named Galaxy Leader was hijacked by a group called The Houthis in the Red Sea, and while most people thought this to be yet another Rebel attack, What followed next was so crazy that this incident is on the verge of putting the entire world economy on the edge of disruption again because it’s not one or two attacks there have been 37 attacks on commercial ships by the Houthis using drones. Now, this war has come very close to India.
the Red Sea war in this photo released November 20, 2023. Photo: Houthi Military Media/Handout via Reuters
Now, just like any other geopolitical conflict, this conflict has Iran and Russia on one side and the US, Israel and UAE on the other side. Since the Red Sea has two critical choke points of World Trade, It has already impacted both the world trade and Indian trade to Europe and the USA. The rice exports from India could get more expensive, and the cost of basmati rice could increase by 15 to 20%.
If this conflict escalates any further, we all know what will happen oil prices will shoot up inflation will Spike, and economies worldwide will suffer.
Red sea war
Let’s dive deep in and understand who exactly are these Houthi Rebels why they are attacking the ships in the Red Sea why is the Red Sea so so important, how this conflict is putting the entire world economy at the edge of disruption and most importantly how is the business in India and the world being affected due to this red sea-war
Let’s start from the basics and first try to understand who exactly these Houthis are and why they are attacking the ships in the Red Sea. Well, if you look at the history of the Houthi’s, Houthis emerged in the 1990s as an armed group in Yemen to fight against the corruption in Yemen and to oppose the then president Ali Abdullah.
Taliban was used as a proxy Army by us to fight Russians in Afghanistan. Even the houthis are being used by Iran to fight its enemies, and because Russia is Iran’s Allies you will see that the houthis are not attacking Russian ships at all when we look deeper, we find out that in Yemen, on one side there is Yemen’s govt that is backed by Saudi Arabia and the United States and on the other side the Houthis are backed by Iran and Hezbollah.
So, in today’s context they are entirely against Israel, the US, and Western allies. Now if you look at which ships they were targeting initially they were targeting only those ships that were either headed to Israel or were owned by Israelis so until November, the impact was restricted only to Israel but now several Reports say that they are targeting ships of other countries to exert pressure on those countries to stop Israel from attacking Palestine. Let’s go deeper and understand why this random Rebel attack is so critical for the entire world economy.
The country of Yemen and the Houthi rebels have taken control of the part of Yemen which even includes the capital of Yemen and as you can see the Houthis are so strategically placed that they can block the access to the Red Sea at the Bab al Mandeb this means if they block the part of Yemen they can cause a catastrophe in World Trade why because the Red Sea is by far one of the most important trade regions in the world.
The Red Sea is like a massive water Highway of around 2,000 km, connecting Europe and Asia by linking the Mediterranean Sea with the Indian Ocean. And if you pass through the Suez Canal, it is a shortcut from Asia to Europe but if this region is blocked then the ships will have to go all the way down to the Cape of Good Hope and then go around Africa to Europe and this route adds another 8,900 km to the shipping route and 2 more weeks to the shipping time so the Red Sea is super super important because it saves both time and fuel cost.
This critical route has two choke points one is the Suez Canal and the other is the Bab al Mandeb Strait and this street is only 26 km or 16 Mi wide at its narrowest point so it’s very easy for someone to disrupt the shipping traffic by blocking this little gap of Bab al Mandeb
So this is such an important region that $1 trillion worth of goods pass through this region every year, 30% of all containers that move around the world pass through this region and lastly 7 to 10% of the entire world’s oil and 8% of the entire world’s liquefied natural gas are shipped through this water highway so if you remember the last time the Suez Canal trade route was blocked it led to the blockage of $9 billion worth of goods each day which is equivalent to $400 Million worth of trade per hour and in just 6 days the world lost $54 billion worth of trade.
If 6 days could cause so much chaos, you can imagine what a month-long blockade could do right.
Let’s understand India’s position in this conflict for us in India this route is super critical this route is like a Lifeline to Europe and the West, and it’s vital for our energy needs also why because 20% of our exports or 200 billion worth of exports pass through this pathway and just like India many other countries have their essential imports and exports passing through the Bab al Mandeb Strait.
So this conflict threatens the trade of all countries who ship their goods through the Red Sea. This is how, by attacking the ships in the Red Sea, the Houthis are creating pressure on not just India but all nations across the world to stop Israel from continuing their attack on Gaza. If you want to know how Indian businesses were affected by this war. click here
