The Winners and Losers in the Red Sea Crisis

The Winners and Losers in the Red Sea Crisis

Lam Lam
2 min read
Table of Contents

The biggest news in the shipping world in recent months is the impact on global shipping of the fight between the Houthi rebels and the US and its allies.

The crisis began when Yemen’s Houthis attacked Israel on October 19, with them formally announcing military operations against Israel on October 31. This was followed by attacks on ships that were said to be controlled by Israel.

On November 19, 2023, they seized their first ship, the Galaxy Leader, owned by Israeli Ray Shipping but operated by Japanese NYK. Afterwards, more ships were hijacked or attacked by drones or missiles, even against US Navy warships.

The Red Sea attacks are a part of a larger Middle East Crisis which is foreseen to last many years.

Over the past 3 months, we have seen the winners and losers in the conflict.

Winners

  1. Russia

Russia is friends with the Houthis and so its ships are not attacked. This gives it an advantage in shipping.

  1. Iran

Iran has influence over the Houthis. This gives Iran political power and significance, independent even of China.

  1. South African countries

The crisis forces some ships to go through South African countries, giving them revenue.

Losers

  1. Egypt and North Africa

Egypt has lost a lot of Suez Canal revenue because of the crisis, even as it copes with the refugee crisis from Gaza.

  1. Europe

Europe is dependent on the Suez to get its oil from the Middle East and products from Asia. The crisis raises the cost of getting those supplies.

  1. Japan

Japan’s NYK was the first major victim of the crisis. This has prompted Japanese shipping companies to stop plying the Red Sea route. This is on top of Japan’s decline to being the 4th largest economy.

  1. Australia

Australia imports about A$60 billion in manufactured products and equipment from Europe. It will not likely shift most of it to China as what Asian countries have done.

As you can see from the map, the world is split into two by a red line representing the three ongoing crises:

  1. Russia-Ukraine War

  2. Israel-Hamas War

  3. Houthi Attacks on the Red Sea

This creates a Western Zone and a Southeast Zone that is relatively free from conflict. The crisis splits the world into a conflict cauldron

We add a purple line to add a fourth crisis which will be the China-Taiwan war which is set to happen this decade.

What to do?

The division of the world is an effect of people focusing on differences and selfishness instead of having fellow-feeling and common goals, whether it be Russia versus Ukraine, Israel versus Palestine, and China versus Taiwan.

In the long term, people should spread the message of unity and selflessness.

In the medium term, people and companies should adjust their supply chains and source from and sell to places that are closer.

In the short therm, people should brace for higher prices by changing their spending habits. They can start recycling, repairing equipment, planting their own food, and reducing their expenses in order to mitigate the bad effects of the crisis.

Companies in Europe and North Africa can find new suppliers and markets within the Western Zone just as Japan and Australia can find new ones in the Southeast Zone. Here are suggested countries with increased GDP growth in 2024:

Southeast Zone 1: India (6.3%) and Bangladesh (6%)

India has grown because of Narendra Modhi’s nationalist policies, just as Bangladesh has grown because of remittances and local lending.

Southeast Zone 2: Vietnam (5.8%) and the Philippines (5.9%)

Vietnam has proven resilient during Covid, while the Philippines’ infrastructure improvements have provided an improved foundation for the economy.

West Zone: Guyana (26.6%)

The recent discovery of oil near Guyana has raised its GDP to

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