Strikes on Houthis won’t soon end trade disruptions

Image: U.K. MOD

Overnight strikes on Houthi infrastructure by the U.S. and U.K. have not yet shut down the group’s attacks on merchant shipping. This morning the U.K. Maritime Trade Office reported an incident in which a missile was fired towards a vessel 90 nautical miles southeast of Aden, Yemen.

Al Arabiya cites U.K. based security company Ambrey as saying that the Houthis had mistakenly targeted a tanker carrying Russian oil.

Meantime another regional news source, Aljazeera, reported the Houthis as saying that the U.S. and U.K. attacks had killed five people and quoted the the Houthis’ Supreme Political Council as threatening that “all American-British interests have become legitimate targets for the Yemeni armed forces in response to their direct and declared aggression against the Republic of Yemen.”

Yemen’s Saudi-backed, internationally recognized government, however, blamed the Houthis for the U.K, and U.S. strikes on the country, saying the rebels bore responsibility for dragging Yemen into an arena of military confrontation with its attacks in the Red Sea, said Aljazeera.

All this raises the questions of how effective the strikes on Houthi infrastructure were, what comes next, and what are the implications for maritime trade and global supply chains.

U.S. Central Command said that the multinational action had targeted radar systems, air defense systems, and storage and launch sites for one way attack unmanned aerial systems, cruise missiles, and ballistic missiles.

OFAC ACTION

What further military action will follow remains to be seen. But the response to the Houthis also includes other actions and today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated two companies in Hong Kong (PRC) and the United Arab Emirates for shipping Iranian commodities on behalf of the network of Iran-based, Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF)-backed Houthi financial facilitator Sa’id al-Jamal.

OFAC is also identifying four vessels as blocked property in which these companies have an interest. The revenue from the commodity sales supports the Houthis and their continued attacks against international shipping in the Red Sea and the Gulf of Aden.

“The United States continues to take action against the illicit Iranian financial networks that fund the Houthis and facilitate their attacks,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Together with our allies and partners, we will take all available measures to stop the destabilizing activities of the Houthis and their threats to global commerce.”

The sanctioned vessels and entities are:

The vessel Mehle (IMO: 9191711), which is owned and managed by Hong Kong (PRC)-based Cielo Maritime Ltd, has shipped Iranian commodities to China in support of Sa’id al-Jamal. The Mehle used forged shipping documents to disguise the Iranian origin of the cargo.

Cielo Marine Ltd is being designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Sa’id al-Jamal. The Mehle is being identified as property in which Cielo Marine Ltd has an interest.

The vessel Sincere 02 (IMO: 9226011), managed and operated by Marshall Islands-registered, United Arab Emirates (UAE)-based Global Tech Marine Services Inc (Global Tech Marine Services), has similarly shipped Iranian commodities in support of Sa’id al-Jamal. The SIncere 02 similarly sought to disguise the origin of the goods using forged documents. Sa’id al-Jamal has shipped Iranian commodities onboard the Sincere 02 in coordination with Turket=y-based Abdi Nasir Ali Mahamud, who was designated on June 10, 2021 for his support to Sa’id al-Jamal.

Global Tech Marine Services also operates the vessels Molecule (IMO: 9209300) and Fortune Galaxy (IMO: 9257010), both of which have been involved in the shipment of Iranian commodities.

Global Tech Marine Services is being designated for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Sa’id al-Jamal. The Sincere 02, Molecule, and Fortune Galaxy are all being identified as property in which Global Tech Marine Services has an interest.

IMPACTS ON SHIPPING

“There is never a straight line to a resolution and perhaps the missile strikes in Yemen by the U.S. and U.K. is the beginning of the endgame in this crisis, but, short term, things will get worse before they get better for ocean freight supply chains,” says Peter Sand, chief analyst at ocean freight shipping rate benchmarking and intelligence platform, Xeneta .

The latest data from Xeneta shows ocean freight shipping rates from the Far East to the Mediterranean and North Europe are set to hit 200% increases since mid-December in the next seven days. Shippers are now using the Xeneta platform to evaluate these risks and take data-led decisions to protect their supply chains.

“Vessels are already avoiding the area due to the Houthi attacks and the U.S. and U.K. missile strikes are unlikely to change that,” says Sand. “The longer this crisis goes on, the more disruption it will cause to ocean freight shipping across the globe and costs will continue to rise.

“This means goods being delayed, or not arriving at all, and rising prices for the end consumer.”

Iran, which has supported the Houthi attacks in the Red Sea, has previously stated it would respond to any military intervention in the region by the U.S. or its allies with military action of its own in the Strait of Hormuz, notes Xeneta.

“Tension in the Middle East is nothing new and there has always been a level of risk for ocean freight shipping,” says Sand. “You cannot rule anything out, but it is unlikely we will see escalations of this kind in the Strait of Hormuz.

“But we are looking at months rather than weeks or days before this crisis reaches any kind of resolution.”