Red Sea Standoff

We are living in strange times. Countries that until yesterday were striving for the uninterrupted functioning of the global economy and, as a necessity of this, global supply chains have begun to exhibit a protectionist attitude, alienating other countries' products and antagonizing countries that are not on their side in the eyes of their own public opinion.

We are in a process where each country's right is considered right only for itself, international cooperation is discarded, and regional integration initiatives are stalled. Worst of all, before one international problem is resolved daily, a new one begins to occupy the global community. However, no country is so integrated that it can say, "What do I care about the position or attitude of other countries? I mind my own business."

Four years have passed since the US withdrew from Afghanistan. Aren't there thousands of Afghan citizens among us whom we employ daily as employers, porters, cleaners, etc., or do we meet in the bazaar or the market? So, we don't have the luxury of saying, "Afghanistan is over there. What do we care about the US withdrawal from this country?"

Israel at Bab al-Mandeb, the southern exit of the Red Sea. What do we care? They are even doing good. They are bringing that cheeky Israel into line" does not solve our problems. Because for one reason or another, Israel's Haifa Port has become the most critical logistics center in the Mediterranean. Inputs transported from the Far East to Turkish businesses are transferred to Türkiye through this port, and the export products that we send to Far Eastern countries are transported to Australia, the Philippines, Indonesia, China, India, Pakistan, Japan, or South Korea through this port. For example, when a ship loaded with 20,000 containers sails from the port of Shanghai to the port of Rotterdam, it stops at Haifa after crossing the Suez Canal. It unloads 2,500 containers destined for Türkiye, Bulgaria, Romania, or Georgia. Then it moves to the port of Rotterdam. A smaller ship carries them to the Aegean-Black Sea route.

Therefore, Houthi attacks are also attacks on ships carrying Turkish import or export products. There is also the freight costs dimension. Before the Houthi attacks began, China-Mediterranean container rates, which were $1,487 on November 21, 2023, skyrocketed to $5,440 on January 13, 2024. Interestingly, since container pools are filled and emptied over a certain period, rising prices on one route also affect other routes. Container prices on the Baltic Sea routes jumped from $1,157 on November 21 to $2,163 on January 13. According to the UK-based "Drewry's World Container" index, the spot freight price of a 40-foot container rose to around $4,000 as of January 25.

"Longer routes and increased security concerns have prompted insurance companies and suppliers to take action. Sea carriers also faced significant cost increases in freight insurance."

On the other hand, with the Red Sea transit in jeopardy, ship operators shifted their routes to the Strait of Good Hope in the south of Africa, and the Far East voyages started to be extended by 30 days. "My export product is consumer durables. Let it be a month late." Because the additional fuel oil consumed due to the 3,500 nautical mile route creates a cost item between 500 thousand dollars and 1 million dollars, the fact that the ship's personnel work overtime for a month longer for the transportation of the same goods leads to an increase in personnel expenses and thus transportation costs. On the other hand, prolonged routes and increased security concerns have also prompted insurance companies to take action. Sea carriers also faced severe cost increases in freight insurance.

Houthi attacks are not limited to the Bab al-Mandeb strait. On January 26, the 110,000 dwt product tanker Marlin Luanda was hit by a Houthi missile in the Gulf of Aden after crossing the Red Sea loaded with naphtha. According to initial reports, no crew member was injured in the explosion. The Marlin Luanda is the fortieth ship targeted by the Iranian-backed Houthis in Yemen in the last three months.

Finally, the Associated Press news agency, citing an unnamed US administration official, reported that US National Security Advisor Jake Sullivan, in a meeting with Chinese Foreign Minister Vang Yi in Bangkok, Thailand, on January 26-27, pointed out that the Houthis' attacks on ships sailing in the Red Sea hurt international trade and asked China to use its economic influence on Iran to stop the attacks and stabilize the region.