Global Trade Explores Options amid Red Sea Turmoil

A Norwegian cargo ship was attacked in the Red Sea on December 12. (AFP)
A Norwegian cargo ship was attacked in the Red Sea on December 12. (AFP)
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Global Trade Explores Options amid Red Sea Turmoil

A Norwegian cargo ship was attacked in the Red Sea on December 12. (AFP)
A Norwegian cargo ship was attacked in the Red Sea on December 12. (AFP)

Exporters are scrambling to find alternative ways, whether by air, land or sea, to deliver key consumer goods to retailers, as a series of attacks in the Red Sea exacerbate problems in maritime shipping supply chains around the world.
The Iranian-backed Yemeni Houthi group has intensified its attacks on ships in the Red Sea since Nov. 19 to show support for the Hamas movement as the Israeli military offensive in Gaza continues.
The attacks disrupted a major trade route linking Europe and North America to Asia via the Suez Canal, and container shipping costs rose more than threefold at times as companies sought to transport their goods via alternative, often longer, sea routes.
Standard & Poor’s Global said in a report that if there are prolonged disruptions, the consumer goods sector, which supplies the world’s major retail companies such as Walmart and IKEA, will face the greatest impact.
Alan Baer, CEO of OL USA, noted that he has teams advising shipping and logistics clients to prepare for disruptions in the Red Sea that could extend for at least ninety days.
Jan Kleine-Lasthues, chief operating officer airfreight with leading German freight forwarder Hellmann Worldwide Logistics, said that companies were now trying to switch to what is called “multimodal transportation” to maintain global supply chains, which includes a common sea and air route.
He added that Hellmann has witnessed an increase in demand on the common air and sea routes for consumer goods, such as clothing, as well as electronics and technical materials. This could mean, for example, that the goods are first transported by sea to a port in Dubai, then loaded onto planes.
“This alternative route allows customers to avoid the danger zone in the Red Sea and the long voyage around the southern tip of Africa,” Kleine-Lasthues told Reuters.
For his part, Paul Brashier, vice president of Drayage and Intermodal for supply chain group ITS Logistics, told the agency that some companies might choose to use air freight for particularly urgent or critical goods, but the cost means that it is not a comprehensive solution.
Moving goods by air costs roughly 5-15 times more than by sea, where container shipping rates are still low by historical standards, said Brian Bourke, global chief commercial officer at SEKO Logistics.
Quoted by Reuters, he noted that if the time required to get goods to shelves doubled, more shippers would switch to air - especially for high value goods like designer clothing and high-end electronics.
Corey Ranslem, CEO of British maritime risk advisory and security company Dryad Global, said that around 35,000 vessels sail through the Red Sea region annually, moving goods between Europe, the Middle East and Asia, representing about 10% of global GDP.
“Under an extended threat you will see the price of fuel and goods into Europe increase substantially because of the increased costs of diverting around Africa, which can add roughly 30 days to a transit depending on the arrival port,” Ranslem told Reuters.
The agency noted that shipping companies remain in the dark over a new international navy coalition being assembled by the United States aimed at stabilizing the area.
A Spanish fashion industry source told Reuters shipping lines were telling customers a lot was riding on the US-led task force and whether it can prevent more attacks and make the route safe again.

 

 

 

 

 

 



Israel’s ‘Economic War’ Chokes Occupied West Bank

Palestinians queue to withdraw money from an ATM in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024.
Palestinians queue to withdraw money from an ATM in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024.
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Israel’s ‘Economic War’ Chokes Occupied West Bank

Palestinians queue to withdraw money from an ATM in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024.
Palestinians queue to withdraw money from an ATM in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024.

Palestinian teenagers bounced on trampolines and jumped through hoops inside a towering tent on the outskirts of Ramallah, the financial hub of the occupied West Bank.

But the circus students weren't the only ones bending over backwards in the pavilion: the school's director faced financial hurdles to buy the tent from Europe and trampolines from Asia.

"We are suffering with international payments," said Mohamad Rabah, head of the Palestinian Circus School, describing a bureaucratic process that could delay equipment delivery by up to a month.

Banking in the Palestinian territories is challenging, with the Palestinian Authority (PA) under scrutiny for potential terror financing, hindering transactions.

Israel has occupied the West Bank since 1967, with strong economic ties allowing two Israeli lenders to serve as correspondent banks in the Palestinian territory.

But this may change if Israel's far-right Finance Minister Bezalel Smotrich carries out threats to sever a vital banking route next month.

Since Hamas's October 7 attack triggered the Gaza war, Israel has imposed economic curbs on the PA, withholding tax revenues it collects on its behalf.

Smotrich said this week he had redirected $35 million in PA tax revenues to families of "terrorism" victims, a move condemned by the United States.

After three European countries recognized Palestinian statehood in May, Smotrich told Prime Minister Benjamin Netanyahu he would not extend indemnity to banks that transfer the funds from the end of June.

Israel's Bank Hapoalim and Israel Discount Bank need protection, expiring on July 1, to avoid sanctions for dealing with Palestinian lenders.

Israel's central bank and finance ministry declined to comment when contacted by AFP.

A Palestinian fruit vendor arranges his street cart in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024. (AFP)

- 'Humanitarian crisis' -

The banking channel used to pay for West Bank imports -- including essential goods like water, fuel and food -- handles $8 billion yearly.

Palestinian businesses receive nearly $1.7 billion annually for exports, according to the Palestine Monetary Authority.

"For us, because our economy is dependent on the Israeli economy, because Israel is controlling the border, the impact will be high," said PMA governor Feras Milhem.

The Palestinian economy is largely governed by the 1994 Paris Protocol, which granted sole control over the territories' borders to Israel, including the right to collect import duties and value-added tax for the PA.

Palestinian livelihoods have also been hurt by bans on laborers crossing into Israel and by a sharp downturn in tourism in the territory, including a quiet Christmas season in Bethlehem.

The United States has urged Israel to improve conditions, warning that severing the banking route would have a dire impact on the West Bank economy.

"I believe it would create a humanitarian crisis in due course if Palestinian banks are cut off from Israeli correspondence," US Treasury Secretary Janet Yellen said last month.

Western governments fear Israel's economic policies could destabilize the West Bank.

"The banking system may collapse and therefore the PA may collapse as well," a European diplomatic source in Jerusalem told AFP on condition of anonymity.

"The PA is in a financial crisis and it could collapse before August."

A Palestinian vendor unloads his stock in front of a shop in the main market in Ramallah city in the Israel-occupied West Bank on June 9, 2024. (AFP)

- Digital currency -

Palestinian businessmen say their bottom lines have been hit since October 7.

Imad Rabah, who owns a plastics company, said his net income had fallen 50 percent in one year.

Musa Shamieh, who owns a womenswear company said the Israeli policies were designed to push Palestinians to leave the West Bank.

"They want us to leave our land and they know it will be hard for us to stay if we can't do business," Shamieh said.

Israel's harsh economic policies could eventually drive Palestinian policymakers to pursue sweeping changes to the monetary system.

"We need to work on a plan B when it comes to the trade relations," said Milhem, governor of the PMA, which uses an image of the former Palestinian pound as its logo.

Yousef Daoud, professor at the West Bank's Birzeit University, said the territory could scrap the shekel as its de facto currency in favor of a digital alternative.

"We can make our e-currency, just collect all the shekels, issue an equivalent amount of Palestinian pounds, one-to-one fixed exchange rate, and have the Palestinians deal with e-currency," he said.

"Somehow, eventually, we'll get rid of the shekel."