The Red Sea crisis is inflicting severe economic damage across the region, an African shipping executive said, as soaring risk premiums force massive cargo reroutes and prompt new bilateral security pacts to safeguard critical oil exports.
In an interview with China Global Television Network (CGTN), Elijah Mbaru, chief executive officer (CEO) of the Kenya Ship Agents Association, underscored that a vast majority of regional cargo networks have been forced to shift their routes due to severe disruptions at key maritime chokepoints.
The Red Sea crisis has escalated sharply as Yemen’s Houthi forces launched a major offensive and seized the strategic port city of Mocha and Mayyun Island in Bab al-Mandab, a vital global maritime chokepoint connecting the Red Sea to the Gulf of Aden and the Suez Canal, earlier this month. Fighting between Yemeni government forces and the Houthi group has since intensified across southwestern Yemen.
“I think we all know the fair share of difficulties and disruptions that have come with this Red Sea, Persian Gulf, and that region, the UAE region, the disruptions that have come.
I think if you look at the choke points, the Strait of Hormuz, Bab el-Mandeb in that area, and additionally the Suez Canal and the Red Sea as well, the Bab el-Mandeb transshipment cargo and the normal regional cargo that passes from around that place, we have seen a shift of about 70 to 80 percent of cargo, and that means it’s very diverse and difficult situation,” Mbaru said.
The shipping executive noted that surging war risk insurance premiums are making lengthy detours around the African continent financially preferable for most major shipping lines.
“There is a flip coin to that, and the carriers would look at the cost of detouring, could maybe averagely cost like 300,000 USD. The war risk surcharge on the other side if it exceeds 0.7 percent to 1 percent of the haul value, I mean of the ship’s value, then it’s better to detour than to pay for war risk surcharges, and that is what the majority of the liners are opting to do,” he said.
Beyond general cargo, the crisis also threatens regional energy supplies, prompting affected nations like Sudan and South Sudan to seek alternative arrangements to safeguard their crude oil exports through high-risk maritime theaters.
“I think for Sudan and South Sudan, their relationship is very peculiar. They have not been spared by the quagmire that has been experienced by all of us, but if you look at South Sudan and Sudan you are seeing they are more entering into a bilateral security pact to ensure that they manage the situation and that the oil reaches their destination when and as required,” Mbaru said.
Yemen’s conflict began in late 2014 when the Houthis seized the capital Sanaa and much of northern Yemen, prompting a Saudi-led coalition to intervene in March 2015 in support of the internationally recognized Yemeni government.