Attacks on Suez shipping come when Egypt can least afford a disaster

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Egypt’s economy was transformed on Nov. 17, 1869, when French Empress Eugénie de Montijo, wife of Napoleon III, sailed her yacht through the Suez Canal. It was the first vessel to navigate the 195-kilometre artificial channel connecting the Red Sea to the Mediterranean.

The transit fees charged by the canal would become a big source of income for Egypt. The waterway, which shortened the route from Bombay to London by almost 4,500 kilometres, created new industries and three new cities, helping develop a middle class in the process. An early governor of the Suez Canal, Khalil Bey Riad, used his wealth to build a neo-Renaissance mansion in Cairo, on the Nile island of Zamalek, that has been the official residence of the Canadian ambassador since 1962.

Today, the seemingly endless income generated by the canal as world trade rises from its pandemic low is at grave risk.

The Houthis, an Iranian-backed Shia political and military force that occupies western Yemen, at the entrance to the Red Sea, have attacked dozens of commercial ships that they claim, sometimes mistakenly, have connections to Israel or its allies.

On March 6, three crew members of the Barbados-flagged cargo ship True Confidence were killed in a Houthi missile attack. A month earlier, the Belize-flagged Rubymar, a bulk carrier loaded with 21,000 tonnes of fertilizer, was hit by two missiles. It slowly took on water and sank. In November, Houthi commandos, equipped with a helicopter, hijacked a Japanese-operated ship with alleged links to an Israeli businessman.

The upshot is that canal traffic has plummeted as ship owners send hundreds of vessels around the Cape of Good Hope, in South Africa, to avoid the attacks. The route adds thousands of kilometres and many days to the journey from Asian cities to European and North American ports, and vice versa.

Europe’s supply chains strained

Cargo shipments are being disrupted by continued attacks by

Houthi militants on vessels in the Red Sea, with many businesses

in Europe reporting lengthening delivery times for supplies

to reach their factories

Shipping routes

As of January, 2024*

Rotterdam

Attacks forcing most

shipping lines to divert

to longer route around

Africa, increasing fuel

costs, insurance fees

and crew wages

19 days

Suez Canal

YEMEN

Red Sea

Bab-el-

48 days

Mandeb

Arabian

Sea

Cape of

Good

Hope

March 2: British-

owned bulk carrier

Rubymar becomes

first ship to sink as

a result of

Houthi attack

ETHIOPIA

Bab el-Mandeb Strait: transit trade volume

Seven-day moving-average, in millions of tonnes

6M

Oct. 19: Houthis

begin targeting

ships, saying they

are responding to

Israel’s war

in Gaza

5M

Oct. 7, 2023:

Hamas launches

surprise attack

on Israel

4M

Dec. 18:

Attacks against

vessels intensify

3M

2M

Jan. 11, 2024:

U.S. and Britain launch

wave of airstrikes against

Houthi targets in Yemen

1M

0

April

July

Oct.

Jan.

April

2023

2024

*Voyage time calculated for laden Suezmax tankers travelling

at 14 knots (25km/h) without delays from bottlenecks

:

THE GLOBE AND MAIL, Sources: graphic news; imf port watch; Reuters;

U.S. Central Command (Centcom); Washington Institute; ISW;

getty images; google earth

Europe’s supply chains strained

Cargo shipments are being disrupted by continued attacks by

Houthi militants on vessels in the Red Sea, with many businesses

in Europe reporting lengthening delivery times for supplies

to reach their factories

Shipping routes

As of January, 2024*

Rotterdam

Attacks forcing most

shipping lines to divert

to longer route around

Africa, increasing fuel

costs, insurance fees

and crew wages

19 days

Suez Canal

YEMEN

Red Sea

Bab-el-

48 days

Mandeb

Arabian

Sea

Cape of

Good

Hope

March 2: British-

owned bulk carrier

Rubymar becomes

first ship to sink as

a result of

Houthi attack

ETHIOPIA

Bab el-Mandeb Strait: transit trade volume

Seven-day moving-average, in millions of tonnes

6M

Oct. 19: Houthis

begin targeting

ships, saying they

are responding to

Israel’s war

in Gaza

5M

Oct. 7, 2023:

lHamas aunches

surprise attack

on Israel

4M

Dec. 18:

Attacks against

vessels intensify

3M

2M

Jan. 11, 2024:

U.S. and Britain launch

wave of airstrikes against

Houthi targets in Yemen

1M

0

April

July

Oct.

Jan.

April

2023

2024

*Voyage time calculated for laden Suezmax tankers travelling

at 14 knots (25km/h) without delays from bottlenecks

:

THE GLOBE AND MAIL, Sources: graphic news; imf port watch; Reuters;

U.S. Central Command (Centcom); Washington Institute; ISW;

getty images; google earth

Europe’s supply chains strained

Cargo shipments are being disrupted by continued attacks by Houthi militants

on vessels in the Red Sea, with many businesses in Europe reporting lengthening

delivery times for supplies to reach their factories

Shipping routes

As of January 2024*

Rotterdam

Attacks forcing most

shipping lines to divert

to longer route around

Africa, increasing fuel

costs, insurance fees

and crew wages

19 days

Suez Canal

YEMEN

Red Sea

Bab-el-

Mandeb

48 days

Arabian

Sea

Cape of

Good

Hope

March 2: British-

owned bulk carrier

Rubymar becomes

first ship to sink as

a result of

Houthi attack

ETHIOPIA

Bab el-Mandeb Strait: transit trade volume

Seven-day moving-average, in millions of tonnes

6M

Oct. 19: Houthis

begin targeting

ships, saying they

are responding to

Israel’s war

in Gaza

5M

Oct. 7, 2023:

Hamas launches

surprise attack

on Israel

4M

Dec. 18:

Attacks against

vessels intensify

3M

2M

Jan. 11, 2024:

U.S. and Britain launch

wave of airstrikes against

Houthi targets in Yemen

1M

0

April

July

Oct.

Jan.

April

2023

2024

*Voyage time calculated for laden Suezmax tankers travelling at 14 knots (25km/h) without delays from bottlenecks

:

THE GLOBE AND MAIL, Sources: graphic news; imf port watch; Reuters; U.S. Central

Command (Centcom); Washington Institute; ISW; getty images; google earth

The bad news for Egypt is that the diversions could rob the government, which owns the canal (it was nationalized in 1956), of billions of dollars in revenues. Mamdouh El Iman, a retired Egyptian admiral who is now a maritime transportation consultant, says traffic is down by 50 per cent since the Houthi attacks started on Nov. 21, a month and a half after the outbreak of the Israel-Hamas war. “The Houthis are hurting the Egyptian economy but they are hurting the global economy and the supply chains even more,” he said in an interview.

The revenue hit could not come at a worse time for Egypt, whose economy is suffering from high inflation that is making poor families miserable – nearly one-third of its 110 million people live on US$4 a day – with declining growth rates and four currency devaluations since 2022. External debt is surging.

At the same time, Egypt lives in a rough neighbourhood that has handed the country a refugee crisis and could produce another any day now. To the south, the war in Sudan between the Sudanese army and the opposition military forces sent an estimated 279,000 registered Sudanese refugees into Egypt by March, according to UNHCR, the United Nations refugee agency. Hundreds of thousands more may arrive.

Meanwhile, with Israel likely to invade Rafah in southern Gaza, Egypt is bracing for the exodus of potentially hundreds of thousands of Palestinians. Already, thousands of them are paying small fortunes – US$5,000 or more a head – to secure visas to enter Egypt.

The war is also scaring away tourists, as is the Red Sea-Suez crisis. S&P Global Ratings says Egypt’s tourism revenues are set to fall 10 per cent to 30 per cent this year, shrinking economic growth and foreign-exchange reserves.

In other words, Egypt is desperate for money, kept afloat by international assistance. Collectively, the United Arab Emirates, the International Monetary Fund, the European Union and the World Bank recently committed to pump about US$50-billion into the Egyptian economy.

The Suez Canal earned Egypt US$9.4-billion in shipping fees in the 2022-23 fiscal year. In some months since the Houthi attacks began, monthly revenues were down by half year-over-year.

The Houthis have vowed to attack shipping until Israel stops its attacks on Gaza. “Iran may be in no mood to try to stop the Houthi attacks on shipping since Israel bombed the Iranian embassy in Damascus,” said Cairo University political science professor Mustapha Kamel Al-Sayyid, referring to the killing of seven Iranian officials, including two top military commanders, in the April 1 air strike.

If the war does not end before December, the hit to Suez shipping fees could reach U$4-billion or more, based on the declines so far this year. Recent U.S. and British air strikes on Houthi weapon sites and air-defence systems have failed to end the attacks. The speculation is that some of the ship captains daring to travel through the canal have paid the Houthis a bribe to ensure safe passage.

The global economy will suffer somewhat too if the attacks continue. The shipping route from Tokyo through the Suez Canal to Rotterdam, one of the main ports in Northern Europe, is almost 21,000 kilometres long. Ships rounding the Cape of Good Hope to reach Rotterdam travel 27,000 kilometres. The extra fuel and crew costs far exceed the savings from not having to pay the Suez transit fees. The longer – and fewer – voyages will inevitably raise the prices of the delivered goods.

“Consumers are getting hurt,” Mr. El Iman said. “It will take some time to go back to normal, at least until the Gaza war ends.”