The day after the Houthis, the Western world will wake up more insecure, hasty and doubtful than before. The West will be more insecure because of the collapse of one of the pillars of globalisation, the Red Sea passage, that the American military proved unable to protect, writes Emanuel Pietrobon, a participant in the Valdai – New Generation project.
Houthi guerrilla activity in the Red Sea has caused Israel more damage than Hamas and Hezbollah combined, and in a few months, has turned what had been the main route of globalisation since the construction of the Suez Canal into a selective entry zone where Western vessels are not welcome. This war on commerce will eventually come to an end, but its geo-economic repercussions are destined to endure.
Marxist thinkers would certainly describe Cold War 2.0 as a revolt of the world’s largest proletarian powers against the dominant bourgeois powers — and they would have a point: it’s an increasingly bitter conflict between ‘haves’ who own and ‘have nots’ who were owned. In fact, while the G7 and the Western bloc as a whole are essentially import-based service economies, the BRICS+ are an ensemble of resource-rich, export-oriented economies.
The Houthi guerrilla group, which some countries list as a terrorist organisation, joined Cold War 2.0 by accident and in a very short period of time established itself as a disruptive force to be reckoned with. The Yemenite fighters weren’t supposed to survive the Western-backed, Saudi-led international coalition which bombed their positions non-stop from 2014 to 2022, but they did. They survived, thrived, and built a low-cost, high-impact arsenal that was poured into the main river of globalisation, the Red Sea, shortly after the outbreak of the Great Middle Eastern War.
The Houthis successfully achieved the aim of selectively closing the Red Sea to Western vessels, and causing Israel more damage than the rest of the so-called Axis of Resistance combined. What they perhaps did not foresee is that the transformation of the Red Sea into a war zone would have hastened the death of globalisation as we know it.
The Red Sea crisis and its costs
Re-routing and route-building have become the most used words among international investors and shipping lines since the Red Sea crisis erupted. Numbers are the best way to understand the damage the Houthis inflicted, not only to Israel and the European Union, but to the current model of globalisation as a whole. In the twelve-month period stretching from October 2023 to October 2024, the Houthis carried out more than 130 attacks against merchant and military vessels crossing the Bab al Mandab Strait-Gulf of Aden-Hanish archipelago area, that is, approximately one assault every three days.
Armed with low-cost firepower largely comprised of drones costing $2,000 and missiles costing $5-10,000, the Houthis have cost the United States military more than $1 billion and inflicted three billion dollars in damage to the Israeli port of Eilat. The drone-missile swarm has almost emptied the Red Sea, which usually handles 12-15% of global trade annually, causing the total number of vessel transits to fall “56% year-on-year as of September”.
Asia-Europe shipping lines have mostly responded to the Red Sea crisis by sending traffic via the centuries-old Cape of Good Hope route, finding it a safer alternative to the risky Bab al Mandab strait, although more expensive — up to $1 million in extra costs — and time-consuming — up to two weeks in extra duration. Given that, according to the Suez Canal Authority, more than 6,600 vessels were re-routed to the Cape of Good Hope in the November 2023-September 2024 period, it shouldn’t be hard to figure out why the Yemenite chapter of the Great Middle Eastern War came to cost globalisation $1 trillion.
The rerouting-driven inflationary wave has been felt by more than 60 countries and especially by European consumers, who have witnessed rising prices on a wide range of commodities, from clothes to home appliances. This development has prompted governments and shipping lines to look for alternatives to the alternative, with Russia, India, China and the countries in between poised to win the most from the Houthi effect on global transportation routes.
From a worldwide globalisation to a region-based globalisation
World trade-dependent countries started looking for alternatives to the Red Sea route three years before the outbreak of all-out Houthi missile and drone warfare against Western vessels, with the alarm bell being the 2021 Suez Canal obstruction. Since then, Eurasia’s largest economies have sped up existing work or unveiled new initiatives aimed at introducing a new geography of interconnectivity. Russia took advantage of the Suez Canal incident to remind Eurasian investors of the Arctic route, which is becoming increasingly viable due to climate change, and to hasten negotiations with Azerbaijan, India and Iran to create the International North—South Transport Corridor (INSTC). Turkey backed the building of the Turkey—Iraq Development Road, an ambitious corridor which is supposed to be a modern-day version of the once-fabled Berlin—Baghdad railway. China and partners opened new working sites across the Trans-Caspian International Transport Route, also known as the Middle Corridor. Lastly, in September 2023, India and a collective of EU and Arab countries announced the India—Middle East—Europe Economic Corridor.
Eurasia is abuzz. With the exceptions of Turkey’s Berlin—Baghdad railway and India’s Cotton Road, whose progress is being hindered by the Great Middle Eastern War, the Arctic route, the INSTC and the Middle Corridor all proceed at breakneck speed, against the backdrop of the EU’s derisking-framed friendshoring and of China’s investments in creating an integrated China-Southeast ecosystem. The Houthis and their assault on Western vessels played a prominent role in accelerating the pre-existing process of reglobalisation, which is emblematised by the aforementioned projects and which would have gone on even without them, albeit more slowly, since the main driver of this world-overturning re-routing of supply chains is the great power competition.
The Houthis made the world know the verb “re-route”. Russia made an over-confident West know the verbs “homeshore”, “nearshore”, and “triangulate”, prevailing over Ukraine conflict-related total economic warfare in a way resembling the British Empire grappling with Napoleon’s blockade. The United States mainstreamed the verb “de-couple”, under whose umbrella the supply chains of more than 2,400 critical goods, material and equipment are being somehow reshored away from China. The European Union popularised the politically correct version of “decoupling”, that is, “de-risking”. Many verbs, one meaning: globalisation as we know it is becoming a memory.
In a world which is increasingly bellicose, and which hadn’t seen so many interstate conflicts and civil wars since the Second World War era, governments and businesses are finding out that their certainties were as solid as castles in the air. From banks to enterprises, everyone with the ability to do so is setting up political risk units tasked with understanding how to secure investments from unknowns and turmoil. Western and non-Western countries obviously don’t agree on the means, but they do agree on the ends, that is, that globalisation needs correction. And this correction is represented by the establishment of nearer supply chains, as nearer, theoretically, means safer.
The post-Houthi geography of global transportation routes
The day after the Houthis, the Western world will wake up more insecure, hasty and doubtful than before. The West will be more insecure because of the collapse of one of the pillars of globalisation, the Red Sea passage, that the American military proved unable to protect. The West will be hastier in its search for new routes under the banner of friendshoring, with France, Germany and Italy more keen on nearshoring to Eastern Europe and the Balkans and with the European Union as a whole and the United States perhaps more willing to resurrect the dream of a Trans-Atlantic trade and investment area. The West will also be more doubtful about its actual position in the global hierarchy of power, having experienced firsthand that the world is no longer a playground for Westerners, who witnessed their vessels attacked by the Houthis while the Russians and the Chinese were sailing calmly and safely.
The day after the Houthis, part of the world will share some of the West’s concerns and will try to figure out how to take advantage of it. It’s already happening: Saudi Arabia and the United Arab Emirates have been strengthening their interconnectivity, Kazakhstan, Azerbaijan and China are going to improve the South Caucasus’ role as an inter-region connector by jointly building a new intermodal cargo terminal in Baku. Meanwhile, Russia and China are increasing the number of cargo services going through the Arctic, and work across the INSTC proceeds non-stop on every front.
The Red Sea will continue to be important, being for Europe what Panama is for the United States, but its centrality is destined to decrease concurrently with the world’s return to a Cold War-like era of bloc-versus-bloc confrontation. The Houthis only sped up an existing trend by highlighting the risks of doing business in areas where the great powers contend for control.
Politics and markets are heading in the same direction, which is an archipelagos-based globalisation, and their quest for new routes is likely to best benefit those who can grant shippers much more than a time-saving passage, that is, the best time-price-safety combination. By coincidence or fate, the geography of conflicts favours the increasingly navigable Arctic route, the relatively conflict-free INSTC and, to a lesser extent, the Middle Corridor. In other words, willing or not, the European markets will be obliged, much more than in the past, to deal with Russia and Iran.
