Red Sea Crisis’ Long-Term Ramifications

The U.S. destroyer Carney intercepted three cruise missiles and eight drones launched by Houthi militants in Yemen in mid-October 2023. A month later, a Houthi-owned helicopter hijacked the Galaxy Leader cargo ship in the Red Sea, with terrorists taking the ship’s crew of 17 Filipinos, two Bulgarians, three Ukrainians, two Mexicans, and a Romanian hostage (with the diversity showing the arbitrary nature of Houthi targeting).

The U.S. and UK struck Houthi targets in January 2024 in response to the months-long attacks on vessels in the Red Sea and Gulf of Aden.

Frustration had been building, as the Houthi forces have succeeded in significantly altering the trade routes of major energy companies and carriers, slowing the global supply chain by causing organizations to avoid the Red Sea area. Instead, many vessels are now taking the long detour around the Cape of Good Hope, adding 10-14 days to some voyages. The disruptions have spiked insurance costs, transit times, and shipping prices.

Events intensified in March, with the sinking of the Rubymar vessel and the resulting ecological destruction, followed by the first fatalities caused by the Houthis after a missile attack on the True Confidence vessel. The Galaxy Leader crew was still being held hostage in mid-March 2024.

The Red Sea crisis has meant a shakeup across the board, with almost everyone feeling the effects – from severe economic harm to companies and countries, security challenges that must be understood and addressed, and much more. 

Windward has been closely tracking the events happening in the Red Sea. While monitoring the immediate tactical changes and emerging trends is critical in such a rapidly evolving situation, it is important to step back and look at the bigger picture and future implications.

It is too early to know exactly how this conflict will develop, but it is the right time to consider existing AI insights on how a security event has had massive consequences on global security and geopolitics in notable and potentially long-lasting ways. 

This white paper highlights some of the geopolitical long-term implications caused by the Houthis’ severe disruptions to the shipping and maritime industries, including the geopolitical alliances that have been revealed and strengthened, as well as evolving deceptive shipping practices (DSPs).

Military and national leaders are contending with the troubling question of how to achieve economic resilience in a reality where, on the one hand, maritime shipping handles more than 90% of all global trade, while on the other hand, “silent sanctions” can be selectively applied to a country and global trade routes are deliberately blocked to inflict damage and create chaos.

Area visits in the Red Sea began to steadily decrease in October 2023. By February 2024, area visits in the area dropped by 36% (compared to the monthly average in the seven months before the Houthis declared war).

Disruptions to global trade can have significant consequences domestically: a drop in consumer confidence and dissatisfaction (critical in a year when elections are to be held in at least 64 countries), economic destabilization, food and energy insecurity, and worries about financial resilience in the face of threats to global trade.

The impact on ships moving through the Red Sea has been disproportionately felt by certain countries. 

• The Netherlands and Germany, which have the largest container ports in the EU, experienced a decrease in port calls 
• UAE and Qatar, whose trade in oil and LNG decreased significantly
• Egypt, which suffered a loss in revenue generated by the lost Suez Canal fees

Perhaps the most notable element driving different outcomes for different countries is the disparate impact felt by the U.S. and China, two superpowers competing for dominance. Since the Houthi attacks, trade volume to and from China has increased, in contrast to that of the Operation Prosperity Guardian coalition’s member states. 

According to insights from Windward’s Maritime AI™ platform, between mid-October 2023 to mid-March 2024:

• The weekly average of port calls in China by Chinese-owned vessels after having sailed through the Suez Canal (importing goods to China) increased by 73% after mid-October 2023 (when the Houthis started their violent attacks), compared to the weekly average over the 6.5 months before.
• When looking at Chinese exports (Chinese-owned vessels passing through the Suez Canal after previously making a port call in China), we note that following a sharp increase between mid-November to mid-October (a seasonal peak ahead of the winter holidays), the weekly average increased by 25%.

The Red Sea crisis has also flipped the nature of dark activities and deceptive shipping practices (DSPs) on its head, with many otherwise law-abiding crews choosing to go dark when traveling in the affected region. New hot spots for bunkering and illegal activities have emerged, port congestion has shifted, and some unintended consequences have resulted in emboldening certain bad actors who may be hoping that law enforcement agencies are mostly preoccupied with the Houthis.

Geopolitical turmoil has always been a driver of changes in illicit behavioral patterns and the current situation is no exception. 

With the Suez Canal being blocked, there has been increased traffic around The Cape of Good Hope, which is a known smuggling route for Russian oil. Unlike the Suez Canal, the Cape does not have checkpoints. Diverting a large number of ships there, rather than through the regulated Red Sea, may make illicit activities – such as oil and commodities smuggling, and illegal, unreported, and unregulated (IUU) fishing and its accompanying great power competition dynamics – easier and more common. 

Since the beginning of the attacks in the Red Sea area, we have seen several trends that indicate shifts in illicit behavior by vessels or make it more difficult to rely on established understandings and practices to track such behavior. 

The new Red Sea reality enticed otherwise law-abiding vessels and crews to go dark in attempts to avoid the Houthi threat. We’ve seen this phenomenon before, such as when vessels would disable their AIS to avoid Somali pirates. Still, the number of otherwise legitimate vessels that are currently utilizing this technique is noteworthy. 

The monthly average of lost AIS transmissions in the Red Sea and Arabian Sea by cargo and tanker vessels from October 2023 to February 2024 increased by 104% when compared to the monthly average of February-September 2023. 

The recent Houthi attacks demonstrate how interconnected countries are and the difficulties in punishing a single country (especially when an arbitrary terror group is doing the targeting) without widespread global impacts.

As the world waits to see where and when the next flare-up will be, Western leaders should recognize that these “isolated” maritime disruptions are becoming the new normal. First, it was the Russia-Ukraine war and its accompanying sanctions, now it’s the Houthi disruptions (while Russia’s war continues), and soon it will likely be another maritime conflict, unfortunately. 

After the Rubymar was sunk, Windward Co-Founder and CEO, Ami Daniel, noted: “To me, this incident is a stark example of the post-1945 world order unraveling. The ‘old’ world, one of clear insurance policies, owners, and flags, is quickly dissipating.” 

Indeed, there is far more at stake than hindered trade routes. It is alignment, or at least willingness to work with the West, that is the common factor among the countries most impacted by the Houthi attacks. 

An alarming lesson learned from the Red Sea crisis is the vulnerability of global trade routes to disruption. It is a sobering realization of just how quick and easy it is to practically paralyze one of the most important maritime passages in the world. With relatively little firepower, a small rebel group was able to create a massive disruption of global trade, making them the arbiters on who can and can not pass. 

The Red Sea crisis will, at some point, deescalate. But the reality it created is here to stay. As trade route blocking becomes a de facto measure of war, we are shifting to a reality where conflicts could be determined in large part by who retains access to global trade routes, who has the power to safeguard and guarantee the flow of goods, and who holds control over critical passageways – essentially having their finger on the switch of global trade.

Data analysis and AI play a critical role in understanding and responding to changing security conditions, especially when there is a critical need for all stakeholders to be well-informed and adaptable in the face of uncertainty.