The Economist: Colossal damages done to global economy by Red Sea cargo disruptions

The actions of Yemeni Houthi rebels that caused the disruption of cargo shipments through the Red Sea have caused significant losses to the global economy, estimated at $200 billion. 

These figures have been calculated and published by The Economist outlet, who have interviewed dozens of people familiar with the Houthi's operations, Caliber.Az reports.  

According to the article, shipping costs have increased fivefold as commercial vessels are now forced to reroute around Africa due to the risk of Houthi attacks in the Red Sea. This detour has resulted in higher fuel consumption as journeys have lengthened by approx. 6,000 kilometres, or 10-14 days. Insurance premiums for vessels traveling through the Red Sea have risen 20-fold.

The biggest direct loss has been for Egypt, which recorded unearned revenue of $7 billion from missed opportunities for the Suez Canal, while the article believes the US spent $5 billion on protecting its ships in the region. 

In the meanwhile, Russia and China have supposedly benefited from the Houthis’ actions. As the Economist puts it, most of the oil that previously passed through the Suez Canal now belongs to Russia, and the number of Chinese ships in the Red Sea has increased, accounting for 20% of the total traffic.

As Caliber.Az recalls, the Houthi rebels, an organization believed to be closely affiliated and sponsored by the Iranian government, have regularly attacked military and commercial vessels in the Red Sea since the war between Israel and Hamas broke out in October 2023. Although the latest ceasefire that has come into effect on January 19 may lead to a temporary pause in these attacks, the article warns that the threat from the Houthis is unlikely to be fully eradicated.

By Nazrin Sadigova