How has Red Sea trouble impacted India? 

The Houthi militia, also known as Ansar Allah (Partisans of God), is a powerful military and political group dominating large parts of northern Yemen. Their complex history, beliefs, and actions within the ongoing Yemeni civil war warrant closer examination.

Origins and Rise

• The Houthis trace their roots back to a Zaydi Shia revivalist movement in the 1980s, advocating for social justice and economic empowerment for Zaydis, a minority sect in Sunni-majority Yemen.
• Initially focused on religious revival, the Houthis gradually formed a militia under Hussein Badreddin al-Houthi, clashing with the Yemeni government over political marginalization and economic neglect.
• Following al-Houthi's death in 2004, his son Abdelmalek al-Houthi took over, leading the group through a series of rebellions against the government, culminating in their capture of the capital Sana'a in 2014.

Ideology and Political Aims

• The Houthis combine Zaydi Shia beliefs with anti-imperialist and populist rhetoric, presenting themselves as champions of the poor and marginalized against a corrupt government and foreign interference (particularly Saudi Arabia and the US).
• They advocate for an independent Yemeni state based on Islamic principles and social justice, with a strong role for Zaydi Shias.
• Some analysts view them as a proxy force for Iran, though the Houthis deny direct Iranian influence.

Role in the Civil War

• The Houthis' capture of Sana'a triggered a nationwide conflict with the internationally recognized Yemeni government backed by a Saudi-led coalition.
• The resulting war has been devastating, causing a humanitarian crisis, mass displacement, and thousands of civilian casualties.
• The Houthis control large swathes of the country, including major cities and ports, while the Saudi-led coalition carries out airstrikes and supports pro-government forces.
• Despite facing international pressure and sanctions, the Houthis have remained a resilient force, launching cross-border attacks on Saudi Arabia and threatening key maritime routes in the Red Sea.

Challenges and Uncertainties

• The Yemeni conflict remains deadlocked, with no clear path to a peaceful resolution.
• The Houthis face criticism for human rights abuses and attacks on civilians, while the Saudi-led coalition's airstrikes have also caused significant civilian casualties.
• The international community grapples with finding a political solution while addressing the humanitarian crisis.

2. Importance of the Red Sea in World Trade

The Red Sea, a narrow body of water stretching between Africa and the Arabian Peninsula, is much more than just a picturesque backdrop for ancient stories. It plays a crucial role in global trade, serving as a vital artery for the movement of goods between Europe, Asia, and Africa. 

• The Red Sea, with the Suez Canal at its northern end, offers the shortest sea route between Asia and Europe. It significantly reduces travel time compared to the alternative route around the Cape of Good Hope, saving time and money for shipping companies and ultimately, consumers.
• An estimated 12% of global trade passes through the Red Sea, with major commodities like oil, natural gas, consumer goods, and industrial products traversing its waters. This translates to billions of dollars in trade value annually, highlighting its economic significance.
• The Red Sea provides access to key markets in Africa and the Middle East. These regions are experiencing rapid economic growth and rising consumer demand, making the Red Sea a crucial link for companies seeking to tap into these markets.
• The Red Sea is a major conduit for oil and natural gas shipments, particularly from the Persian Gulf to Europe and Asia. This makes it a strategic location for energy security and has geopolitical implications for countries reliant on these resources.
• Any disruptions in the Red Sea, such as the recent Houthi attacks, can have significant consequences for global supply chains. Delays in shipping and increased costs can ripple through various industries, impacting consumers and businesses worldwide.

3. Impact of Red Sea Attacks on Indian Trade

• After the Red Sea attacks, major cargo shipping lines ceased operations on this route, affecting the flow of Indian trade through the region.
• Approximately 90% of cargo from India destined for the western hemisphere, including Europe, the U.S. east coast, and North Africa, has been rerouted through the longer Cape of Good Hope route.
• Even smaller feeder vessels have discontinued operations in the affected waters, causing a significant impact on the movement of goods.
• The shift in shipping routes has led to complexities in buyer-seller contracts. For FOB (free on board) contracts, where the buyer bears the freight cost, consignments are being held back. In CIF (cost, insurance, and freight) or C&F (cost and freight) contracts, where the exporter covers the freight, they are requesting buyers to allow holding consignments due to increased costs.
• Buyers with comfortable inventory in FOB contracts are delaying consignments, while exporters in CIF or C&F contracts are negotiating with buyers to hold back shipments due to rising freight expenses, including peak season and contingency surcharges.
• Roughly 20-25% of consignments are being held up, with Container Corporation of India reporting that about 25% of its containers are being delayed by Indian exporters.
• All consignments are expected to face increased freight costs, with some experiencing up to a sixfold surge. The longer voyage time adds to the challenges.
• The impact is likely to be more pronounced for low-value, high-volume cargo and perishable goods due to the extended travel time and increased transportation costs.
• While stakeholders hope for a normalization of the situation, recent developments have left the industry cautious, and the full extent of the impact is yet to be determined.

4. Impact of Red Sea Crisis on India's Imports

• The crisis has led to longer import cycles due to the additional time required for cargo to navigate the lengthier route around the Cape of Good Hope.
• The prolonged journey and potential disruptions in shipping routes may result in higher import costs, necessitating a reevaluation of budget allocations for procurement.
• The situation calls for enhanced inventory management strategies to mitigate uncertainties arising from extended delivery times and potential cost escalations.
• The crisis's impact on critical imports is currently under assessment, with stakeholders closely monitoring the situation to understand the full extent of its implications.
• Both import and export cycles have elongated, requiring businesses to adapt to the evolving logistical challenges posed by the disruption in the Red Sea region.
• The crisis could contribute to price hikes for final products, affecting various sectors. For instance, plans to reduce pump prices of petrol and diesel may face obstacles due to the ongoing challenges in the Red Sea.
• India's import dependence on crude oil and petroleum products is substantial, constituting a significant share of gross imports. The crisis has prompted concerns about potential disruptions and cost implications in the energy sector.
• Petroleum Minister Hardeep Singh Puri has indicated that considering the turbulent situation, there are no plans to slash fuel prices. The crisis adds complexity to the pricing dynamics in the oil and energy markets.
• While freight rates for impacted routes have increased, there is no widespread re-routing observed in the overall tanker market. War risk premiums in the Red Sea contribute to higher freight rates, but these remain lower than the costs associated with re-routing through the Cape of Good Hope.
• Tankers operated by companies announcing diversions and those linked to U.S. and Israeli entities are predominantly diverting due to the current pricing dynamics and surcharge considerations.

5. International Response to the Red Sea Crisis

• The United Nations (UN) has unequivocally condemned Houthi attacks on freedom of navigation in the Red Sea. The international body asserts that no cause or grievance justifies such actions, emphasizing the importance of maintaining open and secure sea lanes.
•  The United States is actively seeking increased support for 'Operation Prosperity Guardian,' a multinational initiative aimed at safeguarding the Red Sea's sea lanes. The U.S. urges the international community to collaborate in ensuring the region remains free from threats that could disrupt navigation.
• India is vigilantly monitoring the evolving situation in the Red Sea. The Commerce Secretary has engaged in discussions with officials and trade bodies to assess the potential impact on India's trade routes and maritime activities.
• Spearheaded by the U.S., Operation Prosperity Guardian seeks to protect maritime interests and maintain the freedom of navigation in the Red Sea. The success of this multinational effort relies on collective support and cooperation.
• India's trade bodies are actively involved in discussions concerning the Red Sea crisis. Their engagement reflects the collaborative efforts between the government and private sector entities to address challenges arising from the disruption of sea routes.
• The Commerce Secretary's involvement in discussions underscores India's commitment to strategic diplomacy. By staying informed and engaging with stakeholders, India aims to navigate potential challenges to its maritime trade effectively.

6. Conclusion

The Red Sea crisis poses significant challenges for global trade, particularly for India's maritime activities. While international cooperation and effective diplomacy are crucial in addressing the immediate security concerns, navigating the long-term economic and logistical implications will require strategic planning and adaptation from both governments and private sector entities.