European Economies Hit by the Red Sea and Suez Crisis
The disproportion between the actual security threat posed by the Houthis and the disruption in the world economy caused by the Red Sea crisis raises the question of whether we are witnessing another version of the “Nord Stream” tactics. As in the case of the sabotage of the Nord Stream gas pipeline, which was blown up with the complicity of NATO and Anglo-American secret services, the big loser in the Red Sea crisis is Europe, given the amount of its foreign trade that transits through the Suez Canal.
In terms of world trade, 12% goes through the Suez Canal, including 10% of the oil, 8% of the gas and 30% of container traffic. A full 40% of Asia-Europe trade normally takes this route, including a huge amount of oil and diese fuel, as well as food products such as palm oil and grain, and anything else transported on container ships, which means most of the world’s manufactured products.
According to the Suez Canal Authority (SCA) Chairman Osama Rabie, ship traffic has decreased by 30% since the beginning of 2024 compared to 2023. As for container traffic, it has declined by 66%, according to the Kiel Institute for the World Economy (IfW). We are not yet back to pre-1869, before the canal was built, but an increasing number of shipping companies are falling back on the longer route around the Cape of Good Hope, which has resulted in adding two weeks to travel time and increased costs (between 150% and 250%). The cost to ship a standard 40-foot container from China to Northern Europe has jumped from $1,500 to $4,000, according to the IfW.
For those companies that are still sending their ships through the canal, insurance costs have increased by 400%. Already before Christmas, coverage had surged to about 0.5% of the value of a ship’s hull, according to the American Journal of Transportation. That’s a sharp increase from earlier that month, when costs were about 0.1% to 0.2% of the hull value. For a vessel carrying goods valued at $100 million, an expense of 0.5% translates into an insurance cost of $500,000 per voyage. This applies to merchant ships entering routes in the Southern Red Sea or Gulf of Aden.
An energy and supply shock is exactly what European economies do not need at a time when, as a result of sanctions and of the insane “green” transition, they are threatened with de-industrialization. Like in all crime stories, the question to be raised is: cui bono?