January 1, 2024 - 3:00pm
Danish company Maersk has once again called a halt to shipping through the Red Sea, after another of its vessels was attacked by Iran-backed Houthi rebels. This is the first successful Houthi attack on a ship since the United States launched Operation Prosperity Guardian on 18 December, aimed at protecting commercial shipping in the Red Sea.
The Maersk Hangzhou was not an Israeli ship; rather, it was Danish-owned and operated, and was flying Singaporean colours. Clearly, it is not just Israeli ships which are under threat, and it is unsurprising that Maersk announced that it would once again halt shipping through the Red Sea. Even if it wanted to continue shipping, insurance companies would likely express serious concerns and hike premiums for ships travelling in the region.
This has been the problem with Operation Prosperity Guardian since its launch. While the US Navy should be able to provide protection for ships in the region, it cannot guarantee it all the time. That it took less than a fortnight for another ship to be hit by the Houthis raises serious concerns for other shipping companies which may now have to take the much longer route around Africa.
Now, an escalation does not just appear possible but likely. If wider conflict in the Middle East were to occur, this poses a major threat to the global economy too. The EIA states that the Red Sea is “critical” for international oil and gas flows, with around 12% of seaborne oil and 8% of worldwide LNG passing through the region. Any major disruption to the Red Sea transit routes would undoubtedly put upward pressure on energy prices, and from there, on inflation.
Oil makes up only around 20% of goods shipped through the Red Sea. In addition, approximately 12% of all global trade and 30% of container ship traffic pass through the region too. This means that price pressures would not just be felt via the energy markets, but also in the general market for goods imports — especially in Europe. Avoiding the Red Sea will require ships taking the alternative route around Africa, which adds around 40% onto their travel time. Thes
This is creating an impossible situation for the Western countries. Yesterday the British government stated that it was open to the possibility of striking the Houthi rebels using the Royal Air Force. Some reports suggested that this might be a joint operation with the Americans. But it is unclear what this means. The Houthis are effectively guerrilla fighters who, like the Taliban in Afghanistan, have no fixed bases. Extensive experience in the Middle East suggests that ground operations are required to deal with threats of this kind, and even then the success of such operations is limited. By committing to intervene with air strikes the British government is risking getting pulled into another Middle Eastern quagmire.
In the meantime, the Biden administration will likely move to put more pressure on the Israelis behind the scenes to resolve the crisis in Gaza. It is no secret that the Americans are becoming increasingly impatient with Israel. At the same time, the Israelis are clearly signalling that they view the war in Gaza as one they want to fight to the bitter end. This puts Biden in an impossible position. The President does not want to be seen to be going hard on Israel, but the last thing he needs is another bout of inflation and economic chaos. 2024, then, is shaping up to be Biden’s most challenging year yet.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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What bunch of nonsense this article is, over 50% of the military budget is salaries and benefits, unless Trump intends to fire tens of thousands of military personnel and eliminate their benefits there will be no cuts. Another 25% of the budget is maintaining the military bases in the country and around the world, does he really plan on closing many of those bases and letting go thousands in personnel and contractors that support them. Musk knows nothing about building planes and weapons, he ban barely build a decent electric car that most people want to buy and space x is a joke, so what if they built a useless rocket to go into orbit. Musk is a farce, military equipment like fighter planes and advanced missiles are at a whole other level, may beyond the Musk cult. And are they really going to cut procurement needed to replace aging and depleting equipment, and risk falling behind China and other countries in r and d. That is the other 25% of the budget. These people are a farce and their supporters need to get a grip and stop living in their alternate universe. Prediction: the military budget will increase to a trillion $ in 4 years.
Space X is no joke. It’s an amazing achievement, as are Tesla and his other enterprises. But, respecting his comments on the F35, I suspect that he is more focused on the procurement processes and a stripped-down number of suppliers that have little threat of competition. I agree that rocket science is less demanding than fighter plane and anti-missile science. Your numbers on where the defense budget goes are compelling.
In his latest comments, he said that he would sit down with the Russians and the Chinese and make the case that they should all be spending less of their economic output on their militaries. Yeah, because we can trust the Russians and the Chinese. They seem like decent chaps after all….
Because you can trust western governments? (Not One Inch)
There is so much potential for radical change. When I think of all that Trump is doing and proposing, it feels like I’ve won the lottery. It’s breathtaking. I hope SCOTUS clears the path.
It really puts in stark relief all the self-serving leaders who have gone before. If they had even done a fraction of what Trump is attempting, we would be much better off.
What he is attempting is to ensure that the US loses the forthcoming war with China. Not sure how that’s a good thing though.
I just read somewhere else that F35 cost $2 trillion more than budget not just $2T total. Wonder which it was.
He won’t “take on” the Military Industrial Complex, he’ll merely transfer its contracts over to Musk & Co.
It’s amazing how Musks political convictions swung to Biden when he was in charge then pivoted 180 to Trump when it looked like he’d be getting the keys to the White House
Seriously? Musk became enemy number one in the Biden administration the day he bought twitter and relaxed the censorship rules. He suffered from as much lawfare as Trump. If Musk was only interested in enriching himself, he would have donated millions and stayed in the shadows. He has put a target on his back by being so public and active.
This is correct. A very important part of the Musk psychology is that he doesn’t like being picked on (as he was when he was young). He doesn’t seem to forget those who have done so.
Musk does not crave money. He’s got more than anyone. He craves the freedom not to be told what he can and cannot do, as well as admiration, though not necessarily acceptance.
Correct. He is the same creepy little kid that got the hell beaten out of him at school. His problem is that he still has the same personality defects that caused it to happen.
Really? Well, hopefully someone, somewhere is a halfway decent shot (speaking figuratively, of course).
The UK has a benefits-industrial complex. There’s no more capacious mammary gland than long-term sickness disability benefit.
The growling Lord Dannatt may urge Starmer to increase defence spending, but to judge from Ukraine’s experience, the main components required are drones and mines. And of course, in the UK’s case, an humanitarian flotilla to ‘rescue’ migrants from the French Channel.
Is there a way to downvote articles?
Definitely not Dennis you always press the green up button to support.
All the best Tony
Still early days, but he might turn out to be the first anti-MIC president since Kennedy. Apropos of that, do we know any more about the young chap who shot Trump’s ear?
Under JFK, military expenditures exploded, and not only for his entry into the Vietnam mess. Eisenhower kept costs down a bit by relying upon the nuclear threat. Military spending as a percentage of GDP was much higher than today. In the shadow of WWII and Korea, the public grasped the threat of the USSR. In any event, Trump’s statement needs to be taken along with him calling for an Iron Dome for the US. Billions have already been spent since Reagan proposed what opponents named “Star Wars”, which has led to current capacities. Better won’t be cheap.
We know what happened to JFK.
Is he really “taking on” the military-industrial complex, or the educated-progressive Marxian elite?
Are the congressmen advocating that parts of the F-35 be made in their districts Marxists? That’s a curiously broad brush.
“Marxian”?
Odd comment about Starmer being in a driverless train.
Quite the opposite. He is relishing what he is doing.
Hiding the Labour-Muslim-vote corruption. (Not reported on Unherd)
Preventing a national Pakistani rape-gang inquiry. (Silence from the shameful Unherd Feminists)
Defending the cv-lying Reeves while she crashes the economy. (Ignored by Unherd)
Imprisoning Facebook posters. (Ignored by Unherd)
Prioritising international law over British interests. (The Chagos scandal. All Starmer’s lawyer friends involved. The Starmer-Hermer-Sands team. All ignored by Unherd.)
He is fully in control.
Perhaps the author meant a runaway train? There are no brakes, the engine cannot be stopped, the sharp curve approaches.
Perhaps. But to me Starmer is in full control of his party. And this is the strange one, given a free pass by the media.
He doesn’t get a free pass on UnHerd though.