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April 23, 2024

Importance of Red Sea for Global Trade and Geopolitics

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By: Barsha Hazarika, Research Analyst, GSDN

Red Sea: source Encyclopaedia Britannica

The Red Sea, situated between Africa and Asia, stands as a vital inlet of the Indian Ocean with its strategic importance primarily anchored in the Suez Canal. Operating as a global trade conduit since its inception in 1869, the Suez Canal connects the Red Sea to the Mediterranean Sea, rendering the Red Sea a pivotal artery for global trade.

In the geopolitical landscape, Egypt, Israel, and Saudi Arabia emerge as dominant powers, while the remaining four states grapple with economic weakness, poverty, volatility, and vulnerability. This scenario has prompted a steady increase in the involvement of both regional and global military players in the region.

The Red Sea’s strategic importance extends beyond being a link between the Mediterranean Sea, the Suez Canal, the Strait of Hormuz, and the Indian Ocean. It serves as a maritime domain with military chokepoints, facilitating efficient supply routes for oil and gas, trade, information cables, and military operations.

The Horn of Africa’s maritime domain boasts valuable natural resources, including oil and gas reserves, marine life, shipping, and port services. Somalia, in particular, is estimated to possess significant oil and gas reserves, potentially ranking it as the world’s seventh-largest holder of oil reserves and the fourth-largest holder of gas reserves.

The competition for influence over the Red Sea and the states relying on it for trade and transit has integrated the Horn of Africa into the security systems of the Middle East, the Indo-Pacific, and the Mediterranean. Consequently, developments in the Horn not only shape these regions but also directly impact their political, economic, and security environments.

Importance of Red Sea for Trade

The Red Sea is a crucial economic lifeline for global trade, poised to gain even greater significance in the next decade. Each year, over 10% of the world’s trade flows through this vital waterway, navigating two of the planet’s top ten strategic passages: the Bab-al-Mandab in the south and Egypt’s Suez Canal in the north. Its pivotal role as a key sea route for commercial traffic between Europe and Asia, along with its integral role in transporting oil from the Persian Gulf to the Mediterranean, underscores its immense importance.

Historically, the Red Sea has been a vital link in a global network of waterways connecting the Mediterranean to the Indian Ocean and the Pacific, earning it the name “Interstate 95 of the planet.” Its strategic and economic significance has attracted the attention of historical conquerors, from Alexander the Great to Napoleon, making it a focal point in geopolitical affairs.

Functioning as a primary trade route linking Asia, the Middle East, and Europe, the Red Sea witness’ substantial global traffic. Estimates by Clarksons indicate that around 10% of world trade by volume utilizes this route, including 20% of container shipping, nearly 10% of seaborne oil, and 8% of liquefied natural gas (LNG). The Red Sea’s enduring importance as a critical economic conduit highlights its pivotal role in shaping global trade dynamics.

The ongoing Israel-Palestine conflict serves as a noteworthy case study due to its indirect repercussions on worldwide trade. The Houthi blockade, a focal point in this context, affects approximately 12% of global trade passing through the Red Sea. Challenges in this region prompt shipping companies to adapt their routes, diverting traffic through the Cape of Good Hope, South Africa.

This rerouting of maritime transport entails a substantial extension of travel time, ranging from ten to thirty days based on vessel speed and destination. Consequently, even a minor segment of a company’s supply chain reliant on Red Sea routes could significantly disrupt overall operations and diminish profits. The increased shipping durations also elevate costs and impact ship availability. Sea Intelligence estimates that the shift to circumventing Africa would necessitate an additional 1.5 million twenty-foot units of ship capacity.

The repercussions of this disruption extend beyond direct impacts on Europe-Asian trade, affecting US-Asian trade as well. A substantial portion of Asian trade destined for the East Coast of the United States typically traverses the Suez Canal, crosses the Strait of Gibraltar, and proceeds across the Atlantic Ocean.

Given these multifaceted challenges, the imperative for security and military presence arises to ensure the freedom of navigation, regulate trade, and safeguard critical chokepoints, notably the Bab-al-Mandeb Strait – the strategic southern entrance to the Red Sea. This imperative is particularly pronounced in Eritrea, Djibouti, and Somalia, which not only host crucial sea routes but also serve as logistical bases for international commercial activities. As the Red Sea’s significance in global trade continues to burgeon, addressing these challenges becomes paramount for maintaining the integrity of maritime activities in the region.

Geopolitical Dynamics in the Red Sea

In recent years, the Red Sea region has witnessed a surge in the establishment of military bases by both global and regional players, marking a transformative phase in geopolitical dynamics. The Red Sea, surrounded by seven littoral states, serves as a crucial nexus connecting Africa and Asia, with its western flank comprising Egypt, Sudan, Eritrea, and Djibouti, while Saudi Arabia and Yemen constitute the eastern shoreline.

In the past decade, major nations, notably China and Japan, have focused on the region, establishing overseas military bases in Djibouti, strategically located in the Horn of Africa. China’s experiences, particularly during the evacuations from Libya in 2011 and Yemen in 2015, have highlighted the strategic importance of maintaining forward operating bases. Russia has articulated its intentions to establish a naval base in Sudan, signaling an expanded presence in the region.

The United States, actively engaged in regional geopolitics, has solidified its position with a base in Djibouti, forming close strategic ties with Egypt, Israel, and Saudi Arabia. Additionally, its participation in multinational efforts, such as the Combined Maritime Forces (CMF), further emphasizes its commitment to shaping the evolving landscape of the Red Sea.

Djibouti, despite its modest size and barren landscape, has successfully capitalized on its geopolitical advantage, becoming a key location for military bases established by the US, Europe, and Asia to safeguard their interests in the Red Sea. The simultaneous presence of the U.S., China, and Russia signifies an escalating era of great power politics in the region. Additionally, Israel’s port of Eilat is strategically positioned in the northeastern corner of this vital waterway.

The Red Sea has also emerged as a critical link in China’s Belt and Road Initiative (BRI), playing a central role in the geopolitical competition in the Eastern Hemisphere over the past decade. Infrastructure investment along the route from Djibouti through the Red Sea to the Mediterranean has expanded alongside a growing Chinese military presence. A notable example of military build-up is Egypt’s recent major expansion of its Berenice naval base, inaugurated in 2021. Further south, ports in Sudan have developed in the context of regional geopolitics, with China rehabilitating and enlarging Port Sudan’s container terminal, integrating it into the BRI framework.

Struggles for footholds at strategic locations around the Red Sea are intensifying, with the U.S. also bolstering its naval fleet in the region. In a strategic move, the India-Middle East-Europe Economic Corridor (IMEC), unveiled in September, serves as a counter to the BRI. Bypassing the Red Sea altogether, the IMEC aims to connect India to the Arabian Peninsula and then link to Europe. This major geopolitical initiative draws regional states away from the Chinese initiative, despite Saudi Arabia and the UAE being signatories to the BRI. The IMEC, if realized, promises to cut transportation times for goods from India to Europe by 40% and could position Saudi Arabia as a global logistics hub.

Middle Eastern nations have actively involved themselves in the internal affairs of African states within the broader Red Sea region. The domestic politics of African nations are significantly influenced by regional rivalries among Middle Eastern powers, adding a crucial dimension to the geopolitics of the Red Sea. Notably, amid the Yemeni conflict since 2015, the United Arab Emirates (UAE) and Saudi Arabia have aimed to diminish the influence of Iran-backed Houthis and counter Iranian presence in the southern Red Sea region. Through strategic partnerships with Sudan, Djibouti, and Eritrea, they have expanded their influence and military footprint. Concurrently, Turkey seeks to enhance its regional presence by reconstructing the port of Suakin in Sudan, complementing its existing influence in Somalia.

The growing Iranian military presence in the Red Sea region, particularly to support Houthi rebels in Yemen, has become a matter of concern for Arab states and Israel. This presence has added a layer of complexity to the regional geopolitical landscape, fueling tensions and shaping strategic calculations.

As global powers continue to vie for influence, the Red Sea remains a focal point, shaping the geopolitical, economic, and security landscape in this critical maritime corridor.

Conclusion

In conclusion, the Red Sea holds pivotal significance in global trade and geopolitics, connecting major regions and facilitating the flow of goods. Recent tensions, sparked by the Gaza war, have led to increased clashes involving Houthi rebels, prompting Iran’s involvement and necessitating the establishment of a US maritime task force. Sudan’s war and attacks near Israel’s south have threatened Saudi Arabia’s strategic interests, resulting in heightened security measures and fleet upgrades. The stability of the Red Sea is vital for Saudi development plans, exemplified by the importance of the Yanbu pipeline terminal. Ongoing conflicts underscore persistent challenges, demanding Riyadh’s mediation efforts. As a focal point for strategic competition and conflict, the Red Sea’s stability remains crucial for global prosperity and the seamless functioning of the trade network, highlighting its enduring importance in shaping geopolitical landscapes.

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