Yemen War Risk Could Strangle Sea Trade Routes

 

Millions of barrels of oil pass through the Bab el-Mandeb and Strait of Hormuz everyday to Europe, the United States and Asia - waterways which pass along the coasts of Yemen and Iran respectively. Insurance costs for shippers are likely to jump.

 

Last week Iran released Marshall-Islands container ship Maersk Tigris and its crew which were seized in the Strait of  Hormuz. This prompted the United States to send vessels to temporarily accompany U.S. flagged ships through the strait. Iranian patrol boats had shadowed a separate container ship earlier last month.

 

"The whole area is a tinder box now," said John Dalby of Marine Risk Management Ltd, which provides private armed security teams for ships in the area.

 

"The main tension appears to be between the navies - be it Iranian patrol boats or ships or other forces in the area. That in some ways creates more uncertainty than dangers from Somali pirates as we saw previously, and - more worryingly - far more firepower capability."

 

Iran's foreign ministry spokesman was quoted as saying on Wednesday that it would not led Saudi-led naval forces inspect an Iranian cargo ship bound for Yemen.

 

Saudi-led forces have imposed inspections on all ships entering Yemen in an attempt to prevent weapons being smuggled to the Iran-allied rebel Houthi group that controls much of the country.

 

"The question for us is: could the Bab el-Mandeb become so perilous to navigate that guns onshore - controlled by Houthis - might shoot at ships? ... If so, fasten your seatbelts, the insurance rates are going to go up," said Michael Frodl, of U.S. based consultancy C-Level Global Risks.

 

The likelihood of a sharp rise in the premiums on voyages could be as much a deterrent to trade as the conflict itself.

 

"The reality is that ships heading to the Gulf, the Red Sea and the Eastern Mediterranean will be obliged to reconsider their movements not simply because of the widening scope of the attacks on, and seizures of, commercial vessels but also because of prohibitive insurance premiums," said Jonathan Moss of law firm DWF, who acts for insurers.

 

Khalid Hashim of Precious Shipping, one of Thailand's largest dry cargo owners, added: "If gets really bad, insurers may altogether stop covering calls to the badly affected areas."

 

Hashim said if the Iranian cargo ship went ahead with its intention to deliver aid to Yemen despite a call by the U.S. to deliver it to neighbouring Djibouti, it may lead to a response by the Saudi-led coalition.

 

"That could possibly escalate tensions in a wide area including the Red Sea, the Gulf of Aden and through to the Straits of Hormuz. That would surely be bad for shipping, and for all the countries in the region," Hashim said.

 

The U.S. Maritime Administration and the Marshall Islands flag registry have both warned of increased risks for ships operating around Hormuz.

 

"If a boarding by Iranian forces occurs even after declining permission, the boarding should not be forcibly resisted by persons on the U.S. flag merchant vessel. Refraining from forcible resistance in no way indicates consent or agreement that such a boarding is lawful," one of the advisories said.

 

The region has already seen disruptions in recent years due to Somali piracy and attacks by militants.

 

A suicide bombing carried out by al Qaeda killed 17 sailors on the U.S. warship Cole in the southern Yemeni port of Aden in 2000. Two years later, al Qaeda hit a French tanker in the Gulf of Aden, south of the Bab el-Mandeb, which led to a tripling of insurance premiums.

 

"The tensions are rising, with some concern evident as tanker owners have long memories of the tanker war from the 1980s," said Phillip Belcher of tanker association INTERTANKO, referring to vessels that were fired at during the Iran-Iraq war.