To begin with, the Houthi attacks on commercial ships on Red Sea trade routes began in mid-November 2023, and the organization linked them to the demand to halt the Israeli offensive in Gaza and deliver aid to Palestinians under “siege”.[i] “Ansar Allah fired volleys of rockets and kamikaze drones at merchant ships with alleged Israeli ties, but though virtually virtually any ship passing through the narrow Bab al-Mandab Strait. Alarmed shipping companies have suspended traffic in the Red Sea, diverting ships bound for the Suez Canal around the southern tip of Africa.
About 14% of the world’s maritime trade normally passes through this region,[ii] and gas and oil prices have risen along with insurance and shipping costs; the number of ships entering or leaving the Red Sea has plummeted. The rerouting of ships means that the transportation time of goods between Asian production centers and European consumers is increased by 20 days. This is reflected in the lower trade figures for Germany and the EU, as the transported goods are still at sea and have not yet been unloaded in ports as planned. In particular, electric car manufacturer Tesla announced on January 12 that it would interrupt production at its Grünheide plant in the German state of Brandenburg for two weeks from the end of January “due to component shortages”. Prolonged disruptions have disrupted global supply chains.
It is also worth noting that the Association of German Shipowners (VDR) has recognized that this situation leads to longer delivery times, higher CO2 emissions and higher costs for transport companies. Shipping company Hapag-Lloyd estimates that the rerouting will increase ship travel time by seven days (for shipments from the Far East to the U.S. East Coast) or up to 12 days (to destinations in Northern Europe). In total, the additional costs per month will amount to a double-digit million-dollar sum, Hapag-Lloyd said. Denmark’s Maersk, the planet’s largest shipping company, said the lengthening of the itinerary refers to round-trip ship traffic. That plus “about 10-12 days of travel in one direction (about three weeks round trip) and up to 7,000 kilometers,” which raises the cost per passage by about 50%.
India has trade problems due to the Red Sea crisis. The problems have not spared India either. An Indian think tank estimates that shipping costs could rise by 40-60% and insurance premiums by 15-20%. An official think tank of India’s Ministry of External Affairs has warned that Indian exports could fall by $30 billion – 6.7% – in the coming year if normal shipping does not resume.[iii] Even if shipping costs are not the largest component in the final price of most exports, the uncertainty that a possible transit around the Cape of Good Hope adds is bad news.
In the context of this, India has received an interesting proposal. During the international political science conference Raisina Dialogue[iv] in New Delhi, the Armenian government proposed to India to set up an alternative route to supply goods to Europe, bypassing the Red Sea. “The Armenian government is committed to forming partnerships in major regional and global projects such as the North-South Transport Corridor (INSTC), the Gulf-Black Sea Transport Corridor, the transit corridor and the development of Chabahar Port, which is a joint project between India and Iran” – stated Minister of Labor and Social Affairs Narek Mkrtchyan.[v]
It should be noted that these ideas of cooperation are taking place against the backdrop of India’s increasing interaction with Armenia in the spheres of trade, security and improving political relations, forming a common position on many key issues.
Drawing conclusions it can be said that this initiative can be implemented, because India needs alternative routes for trade and interaction with Armenia and Iran can play an important role in stabilizing the situation with logistics routes.
[i] “Who are the Houthis and why are they attacking Red Sea ships?”, BBC, https://www.bbc.com/news/world-middle-east-67614911, (Accessed: 05.02.2024).
[ii] “Houthi Missiles Are the World’s Problem”, Bloomberg, https://www.bloomberg.com/opinion/articles/2023-12-22/houthi-missile-and-drone-attacks-in-red-sea-are-world-s-problem, (Accessed: 22.12.2023).
[iii] “India Isn’t Rising to the Red Sea Challenge”, Bloomberg, https://www.bloomberg.com/opinion/articles/2024-01-11/india-hasn-t-met-challenge-of-houthi-attacks-on-red-sea-shipping, (Accessed: 12.01.2024).
[iv] India’s flagship conference on geopolitics and geo-economics, designed to address the toughest issues facing the global community.
[v] “Armenia Offers Alternative Sea Trade Route To India Amid Red Sea Tensions, NDTV, https://www.ndtv.com/india-news/armenia-offers-alternative-sea-trade-route-to-india-amid-red-sea-tensions-5110113, (Accessed: 23.02.2024).
