Attacks in the Red sea: Far-reaching economic and political consequences

Suez Canal _ Fabio, Flickr. Gabriel Fuentes NHH
`Norwegian-owned ships, many of which are operated from Bergen, are at risk of becoming targets for the Houthi militia, regardless of their actual connection to Israel,´ says NHH researcher Gabriel Moises Fuentes. He is an expert in shipping and logistics, AIS monitoring, and the 'dark fleet.' Photo: Suez Canal (Fabio, Flickr)
By Sigrid Folkestad

19 January 2024 12:03

Attacks in the Red sea: Far-reaching economic and political consequences

NHH researcher and shipping expert Gabriel M. Fuentes is a former officer in the merchant navy with experience in navigating through the Gulf of Aden and the Suez Canal. He closely monitors the crisis in the Red Sea.

`When there’s a disruption in a chokepoint like the Suez or Panama Canal, it can lead to delays in shipments. This, in turn, causes a ripple effect: Production halts, supply shortages, and increased costs. Importantly, in contexts like a U.S. presidential election year, these prolonged disruptions can contribute to inflationary pressure; a factor with far-reaching economic and political repercussions´ says Gabriel Moises Fuentes.

Fuentes is an Assistant Professor in shipping economics and analytics at the Department of Business and Management Science and affiliated with the Centre for Shipping and Logistics.

As former Merchant Marine Officers, Fuentes has in-depth knowledge of navigation and safety aboard ships.

PhD candidate Gabriel Fuentes Lezcano

Maritime transport applications in an operational efficiency perspective

On Tuesday 21 February 2023 Gabriel Fuentes Lezcano will hold a trial lecture on a prescribed topic and defend his thesis for the PhD degree at NHH.

Three Norwegian ships attacked

For the first time, ballistic anti-ship missiles have been used against civilian vessels, by the Houthi movement. Three Norwegian-owned ships have been attacked in the Red sea, in addition to several other international cargo ships. Norway has one of the largest merchant fleets in the world.

`Although the region of the Gulf of Aden and Bab-el Mandeb strait has historically been a hotspot for piracy, the current risks stem from different players than traditional and present a new risk profile. In the past, vessels were primarily targeted for ransom, but now they also face the threat of being hit by ballistic missiles´, Fuentes says.

Foreign Minister Espen Barth Eide describes the situation in the Red Sea as «very serious», in a press release.

Former NHH professor Roar Os Ådland was Gabriel M. Fuentes' main supervisor. Fuentes defended his thesis in February 2023, titled "Maritime transport applications in an operational efficiency perspective." Photo: Sigrid Folkestad

Risk and additional costs

`How do you assess what is happening and what consequences it will have?´

`The impact of the increased risks in the Suez Canal is somewhat softened currently due to the seasonal dip in container and oil transport. However, if these risks persist into periods of higher seasonal transport activity, the consequences could become more important. Shipping companies operating vessels that traditionally use the shorter route through the Suez Canal now face a difficult choice´, Fuentes says.

Shipping companies must balance the trade-off between taking the longer route around the Cape of Good Hope, which leads to higher fuel consumption, and the increased insurance costs associated with still attempting to pass through the Suez Canal with the increased risk of missile attacks.

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`In both scenarios, the additional costs — whether for extra fuel or increased insurance — are passed on to their shippers and then to the final consumer´.

And Norwegian shipping?

Norway, as a major player in the global shipping industry, is affected by this crisis:

`Norwegian owned or flagged ships, many of which are operated from Bergen, are at risk of being targeted, regardless of their actual affiliations. The Houthi rebels in Yemen, who claim these attacks, are targeting vessels they perceive as linked to Israel due to the Gaza conflict. This have in some cases affected ships that reportedly have no connection to Israel, as stated by the affected companies. The final take is that it is perceived that the attacks are random.´

Norway's involvement in maritime security in this region is not a new development.

`The country has been an active participant in Operation Atalanta, an EU-led mission focused on deterring piracy in the Gulf of Aden since 2009. More recently, Norway has joined Operation Prosperity Guardian, a coalition led by the US and UK, aiming to counter the Houthi rebels' threats and ensure safe passage for ships through the Bab-el-Mandeb strait and the southern Red Sea´.

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`The Suez and Panama canals are called chokepoints. Why do they make global trade vulnerable to disruptions?´

`The reason chokepoints like these make global trade vulnerable derives from the large volume of goods that are transported by sea through these passages. We're talking about a large part of everything we consume — from raw materials to finished products. The current global supply chain is heavily reliant on the efficient functioning of these routes.´

`For example, recent events have caused delays for major companies like Tesla, Michelin, and Volvo. They have experienced production stoppages due to a shortage of components, which are now rerouted and delayed in transit through West Africa.´

Vessels positions

Fuentes is an expert on Automatic Identification System (AIS). In A Spatial Framework for Extracting Suez Canal Transit Information from AIS, they present a method that automatically recognizes operational information of the Suez Canal almost in real time. It uses satellite data to track where ships are and applies machine learning to quickly understand what's happening in the canal.

`This is useful because it helps spot any problems or delays almost immediately. The data could also be used to identify seasonal patterns, or periods where the vessel would have trouble passing. Given that the Suez Canal Authority does not provide this information, our method fills an important gap.´

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For shipping operators, this means receiving advance notice of unusual delays in the Suez Canal, allowing them to make timely decisions, such as whether to wait or choose an alternative route for more reliable transit.


`Is it possible to misuse the AIS system?´

`Yes, AIS can indeed be misused, and what's happening in the Red Sea is an example of this. Some vessels are modifying their AIS data to indicate that they have no connections to Israel, in an effort to avoid being targeted by Houthi. This type of misuse is probably supported´.

The tactic is similar to what ships have historically done to deter pirates, Fuentes elaborates. 

Another misuse of AIS, which he currently is researching, involves ships turning off their AIS transponders to conceal their activities, often for illegal purposes. This is observed more frequently, especially following sanctions imposed on Russian oil after the invasion of Ukraine.

`These vessels, now part of what's termed the “dark fleet,” essentially disappear from AIS monitoring. Our research involves tracking these dark ships using satellite imagery where AIS signal goes dark. We've found cases where vessels, while not transmitting AIS data, are observed transferring sanctioned Russian oil.´