Houthi attacks threaten world economy including India
Yemen’s Houthi rebels have increased their attacks on ships passing through the Red Sea. The Houthis are doing this because they are against Israel’s attack on Gaza and are supporting Hamas. Houthi rebels have the support of Iran. Iran has also been supporting Hamas on a large scale, hence America is directly holding Iran responsible for these attacks. These attacks are more worrying because it can have a very bad impact on the world economy because a large amount of consumer goods including oil and grains are transported through the Red Sea.
About 10 percent of the world’s trade traffic passes through the Red Sea. Amidst the continuous attacks, Maersk, the world’s largest shipping company, has asked its ships passing through the Southern Red Sea to stop until further orders. A ship of the German shipping company Hapag Lloyd has also been attacked and this company has also asked its ships passing through the Red Sea to stop their journey till Monday.
Oil companies stopped sending their tankers through the Red Sea
Along with shipping companies, oil companies like BP have also stopped sending their oil tankers through the Red Sea. Stopping cargo ships and oil tankers or diverting them means higher transportation costs and delays in supplies. For the alternative route except the Red Sea, one will have to travel the whole of Africa and come via Cape Town. Due to this, the time taken to transport goods will increase by 15 days. This will lead to a huge increase in oil transportation rates. Goldman estimates that it will cost an additional $1 per barrel to transport crude oil and an additional $4 to transport refined products.
According to Brent crude, oil prices have increased by eight percent till mid-December. It is obvious how bad an impact it will have on the world and India’s economy if freight transportation through the Red Sea stops.
Oil tankers from Gulf countries reach Europe via Red Sea
The Suez Canal and the Bab el-Mandeb Strait, located at the two ends of the Red Sea, are major energy supply routes. According to Goldman Sachs, 7 million barrels of oil passes through the Bab el Mandeb Strait every day. Liquefied natural gas coming from America to Asia passes through the Suez Canal. Tankers coming from Gulf countries like Iraq and Saudi Arabia reach Europe only through the Red Sea.
There are many types of sanctions on Russia due to the Russia-Ukraine war. Because of this, European countries have become more dependent on West Asia for their petrol and diesel needs.
It is noteworthy that India is a big importer of oil. The oil tanker MV Chem Pluto which was attacked by drone was going to Mangaluru with oil from Saudi Arabia. This means that whatever impact the Houthi attacks will have on the supply in the world will be on India too. This will not only make oil expensive, but it will also have a far-reaching impact on other things. Everything will be expensive. The problems that have arisen in the supply chain in the world due to first Covid and then the Russia-Ukraine war, have been further aggravated by the Houthi attacks.
