Impact of the Houthi Blockade on the Suez Canal and Egyptian Economy
On October 7, 2023, war was initiated between Hamas, the de-facto rulers of the Gaza Strip, and Israel under Prime Minister Benjamin Netanyahu, after Hamas launched an assault into Israel resulting in hundreds of seized captives and deaths. The attack was condemned by Israel's allies as an act of terrorism.
It did not take long for Israel to harshly retaliate for the Hamas attack, enacting a severe blockade on the Gaza Strip, invading it using IDF ground forces, and heavy bombing of civilian areas. The Israeli Air Force leveling of Gaza neighborhoods with high loss of civilian women and children lives have been widely described as acts of genocide in many countries.
Photo credit: Container ship traffic on Egypt's Suez Canal
Uploaded to iStock by vale_t August 2020
Some factions and countries voiced support for the Gaza Palestinians, with either taking Israel to the International Criminal Court in the Hague, banning Israeli business interests on their soil, or attempting to negotiate ceasefires. But one faction in particular based in Yemen offered Gaza military support – using their own methods.
Who Are the Houthis?
The Houthis are a predominantly Shia organization in Yemen who have been engaged in civil war against the Saudi-backed government since 2014, with the active phase of the conflict generally decreasing and ceasing by the year of 2020. They are supported by Iran, but are not recognized as the legitimate government of Yemen by any Western power.
Since October 19th, the Houthis became active participants on the global stage regarding the war in Gaza, by launching drones and missiles against Israel, none making any major damage. But the participation of the Houthis escalated, and instead of limiting themselves to targeting Israel proper and its port of Eilat on the Gulf of Aqaba, they decided to wage a new type of naval guerrilla warfare. With a hijacking on November 19, followed by strikes on December 11th, when the Houthis targeted their first commercial ship using missiles, the Norwegian oil tanker Strinda.
The Suez Representing 12% of Global Maritime Trade Has Become a Chokepoint
The Suez Canal has made up over 12% of all of global trade, due to its strategic location. It is accessed through the Mediterranean coast of Egypt in the North and the Bab-El-Mandab (Gate of Tears) Strait In the south, between the East African nation of Djibouti and Yemen. The Houthis stated that as the major European powers the British and French as well as the United States aid the Israeli aggression in Gaza through military aid and economic means, their vessels will be considered legitimate targets and will be struck.
Over 40 freighters, oil tankers, and other oceangoing vessels have suffered under Houthi attacks or were directly seized, such as the seizure of Galaxy Leader car transporter on November 19, as mentioned above. Two ships were sunk, on February 18 and June 12, 2024.
The Houthis Have Humiliated the Pentagon and its NATO Allies at Sea
All attempts to contain the Houthi attacks in the Red Sea have failed, as the EU, US, and other nations have scrambled to protect their shipping interests. Limited US and British air strikes have proven powerless to stop the missiles and drones onslaught, while the Pentagon appears wary of a potential quagmire ground intervention in Yemen. The Americans have reportedly spent well above one billion dollars on expended naval air defense missiles and fuel for their surface fleet. The Houthis are continuing drone and missile attacks towards Israel with many missiles and drones shot down over Eilat, and also expanding the reach of their attacks with explosives-packed surface drone boats. One of these Toofan-1 watercraft reportedly sank the bulk carrier Tutor on June 12.
Photo credit: Container ship viewed from the Suez Canal shoreline
Uploaded to iStock by Peter Schaefer May 2021
By ships transitioning to taking the long way around South Africa, merchant vessels have added 11,000 nautical miles to their journey, with an extra 10 days and an extra cost of $1 million in fuel and crew expenses. The maritime insurance sector concentrated in the City of London also suffered large losses, with insurance premiums and interests increasing due to the increased threat from the Houthis.
The Cold War 2 Angle to the Houthi Confrontation with the Western Powers
In terms of the ongoing NATO-Russia confrontation in Ukraine that has become a hot battlefield of the Second Cold War, it's noteworthy that Russian tankers continue to transit the Red Sea, as do a few cargo ships squawking that they have Chinese crews.
Several Russian voenkors or military correspondents and Telegram-ers have advocated for Russia to arm the Houthis, with a goal of punishing NATO for its Ukrainian intervention. It's true that Russian anti-ship missiles such as the supersonic P800 Onyx could theoretically help the Houthi in targeting and striking US and British warships or the French base in Djibouti. But the Houthis primary sponsor of Iran is likely to provide their own similar, if less effective subsonic weapons. Thus far, there is no evidence that Moscow has joined its Iranian ally in providing direct military aid or targeting data to the Houthis.
Egypt's Economic Losses Are Mounting
It is no secret that Egypt has suffered heavily from this economic blockade of the Houthis, as a decline of 90% of all container shipping through the Red Sea by February has been reported. Thus, a heavy blow was struck to the Egyptian economy, which relies in no small part of revenues attained by the Suez Canal. The Egyptian government already stated in January that revenues fell by 40% compared to January of 2023, and that ship traffic was down 30%, with a decrease of 233 vessels transitioning the Suez Canal, from 777 to 544. The Egyptian government has not released any more information or data since January 2024, but it is a safe assumption that similar stats are also noted across the other months since January.
Houthi actions towards Israel also led to direct assault on Egypt, as Houthi drones have crashed into Egyptian hospitals and towns leading to 6 injured people. Even if the Houthi did not target Egyptian people deliberately, their actions have directly violated Egyptian airspace, with our Air Defense crews taking the necessary steps to protect lives and property on the ground.
The pressure enacted by the Houthis on the Suez Canal can be felt by all Egyptians, especially with the rolling blackouts, debt crisis, and interest on external Canal-related companies and industries debts piling up.
Conclusion: The Houthis Stand-Off With the Western Powers Could Hurt Egypt for Years
The Egyptian economy, while too big to fail as far as our closest allies the Saudis and Emiratis are concerned, is certainly no guardian of the average Egyptian. Thus the grinding of the lower classes will lead to anger and dissatisfaction, with the distinct possibility of instability growing across the Egyptian Arab Republic.
Overall, the economic future of Egypt is not looking very bright. While we cannot blame it all on the Houthi blockade, as Egyptian pound devaluation preceded it, the Houthis actions and the ongoing Israeli war in Gaza have both played a major part in creating instability for our people.