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Shipping – Not a gentleman’s game anymore : Amitabh Kumar

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The United Nations Convention on the Laws of the Seas (UNCLOS) grants ships of all States, whether coastal or land locked the right of innocent passage through the territorial sea.

The convention further provides that the coastal State shall not hamper the innocent passage of foreign ships through the territorial sea or put unnecessary requirements that have the effect of practically denying or impairing innocent passage. This has enabled merchant ships of all countries to trade freely across the continents in the new world order.

Nearly 90% of worlds EXIM trade by volume is carried by shipping. The recent attacks on merchant ships by some forces inside the coastal states threatens to disrupt the world order on which seaborne trade has been built. The world may perhaps require a new mechanism to counter threats to the international seaborne trade.

Houthi’s were not an unknown lot, but their activities were restricted to the conflict in Yemen for a fairly long time. Yemen conflict was largely seen by the western media as Iran-Saudi proxy war, and Houthi’s were widely seen as Iranian backed local militia.

However, the Iranian backed outfit’s decision to join the Israel-Hamas war and use its presence in the coastal areas of Red Sea to target Merchant ships in the Red Sea, the Bab el-Mandeb Strait and the Gulf of Aden, has given Houthi’s a new identity and created a new challenge for the international maritime trade.

Merchant ships have become targets of indiscriminate drone and missile attacks. These attacks are no more restricted to ships with Israeli connection or to the Red Sea area.

The Indian Defence establishments woke up to the rude shock on 23 rd of December with news pouring in of an attack on a Liberian Flagged vessel ‘MV Chem Pluto’ with 21 Indian crew barely 217 nautical miles from the Indian coast possibly using “Uncrewed Aerial System (UAS)”.

Another vessel MV Saibaba, flagged in Gabon with 25 Indian crew, came under attack on the same day in South Red Sea. Both the ships were carrying Indian cargo.

The response of the shipping industry has been quite predictable. More that 500 ships re-routed, big players like Maersk & MSC postponed their services from Red Sea route and some ship owners preferred their ships to remain stranded in Red Sea.

The Seafarers’ Associations understandably feared for life, safety and welfare of their brethren.

Targeting Merchant Vessels as war tactics
While Houthi’s direct attack on Merchant ships during their innocent passage in international waters is a new low in the world order post WW2, unfortunately it is not for the first time that mercantile marine has become a victim of conflict between two countries.

In the Russia-Ukraine conflict also, the Black Sea has been mined to such an extent that the Ukrainian Port of Odessa has become completely non-operational. During the war, in March 2022, an Estonian-owned cargo ship sank off Ukraine’s major Black Sea port of Odessa, and on the same day a Bangladeshi vessel Banglar Samriddhi was hit by a missile or bomb at a port east of Odessa killing a crew member.

The only difference, however, is that in this conflict, shipping suffered collateral damage and none of the two sides targeted any merchant vessels directly.

Economic Sanctions to disrupt Shipping –
Though not as lethal as direct or accidental attack on the vessels, some countries especially the western block have also used their dominant position in shipping to disrupt maritime trade by imposing sanctions targeted to disrupt shipping activities.

Europe and the United States have the dominance in providing Insurance cover for shipping. These insurance providers have formed a group called International Group of Protection and Indemnity Clubs.

This 12 member western group (except for one from Japan and two from Bermuda) control more than 90% of shipping insurance and reinsurance business. Similarly in shipping there are specialised organisations called ‘Classification societies’ or ‘Recognised Organisations’ (ROs) which develop and apply technical standards for the design, construction and survey of ships.

They are also authorised by maritime administrations to carry out surveys and inspections on board ships and issue statutory certificates on their behalf. Ships trading without statutory certificates become liable for detention. These classification societies or ROs have also formed a group called ‘International Association of Classification Societies” (IACS).

Again this London headquartered organisation covers more than 90% of the world’s gross shipping tonnage. This dominance by the western world make economic sanctions a very potent weapon to demobilise shipping activities, as without internationally accepted P&I insurance and statutory certificates, the ships cannot call on the ports.

The Western nations have frequently used sanctions to destabilise shipping, including in recent Iran and Russia conflicts.

Impact on global trade-
Nearly 90% of the international Exim trade by volume is transported through ships. Analysts at S&P Global Market Intelligence estimate that nearly 15% of goods imported into Europe, the Middle East and North Africa are shipped from Asia and the Gulf by sea. That includes 21.5% of refined oil and more than 13% of crude oil.

The Houthi’s attacks and the threat of future assaults, has forced several of the world’s largest shipping firms, including Mediterranean Shipping Company and Maersk, to divert vessels away from Suez Canal to a much longer route around Africa’s Cape of Good Hope and then up the west side of the continent. If recent experiences during COVID 19 disruptions and grounding of container ship Evergreen blocking the Suez canal are any indicators, then the likely scenario that would play out in the coming days would be as follows:

  • Re-routing from the Suez Canal to the southern tip of Africa (Cape of Good Hope) would extend the length of the trip by roughly 30% or 10 days.
  • The increased travel time would reduce the supply of ships, since longer routes mean availability of fewer ships to carry goods at any given time.
  • The reduced supply would drive up short-term rates known as spot prices, which companies negotiate for the transport of their goods. CNBC already reports that spot prices are starting to rise.
  • Increased areas in Red Sea would be declared as High Risk Area or War Zone and P&I insurance rates would shoot up for transiting through these areas, and
  • More than $ 1 trillion trade will get impacted, as per BBC’s estimates.

The attacks on ships in Red Sea area were resorted to as a strategy to target seaborne trade of Israel, just like the blockade of Black Sea was targeted against Ukraine and the sanctions to disrupt maritime activities were aimed to thwart Iranian and Russian exports.

However, given the international nature of maritime transport all these attempts only ended up in disrupting trade and increasing prices for everyone in the world, with little evidence to show that the targeted countries suffered more than others.

In some cases, like Ukraine and Russia, alternate trade routes were found and operationalised giving long
term strategic advantage to these countries. The attempts, therefore, to disrupt shipping in any form should be stopped.

International Attempts to stop Red Sea madness
United States and the European Union have had strong naval presence in this region. However, they are reluctant to intervene directly for fear of being associated with any one group. On 5 th of March, United States announced the launch of a multinational force to protect trade in the Red Sea.

US Defence Secretary Lloyd Austin announced that Bahrain, Canada, France, Italy, the Seychelles and the United Kingdom would be among the countries joining the 10 nation “multinational security initiative”.

Reports were received that 10 more countries, including Greece and Australia have joined the coalition, but some of the countries have refused to be named publicly due to their domestic compulsions.

India has separately deployed some of its vessels to escort Indian vessels transiting through the High Risk Areas. The group has also met with some success, but doubts remain over its long term efficacy in dealing with the situation.

Already, voices are being raised for a UN led initiative to handle such situations not only in the Red sea but elsewhere also, if the need so arises.

What can United Nations do?

In the recent past, the United Nations Security Council had devised a multi- lateral framework to deal with Somali Piracy by forming a ‘Contact Group on Piracy off the Coast of Somalia”. CGPCS is credited with effectively eradicating Piracy from Somalian coast.

The UN Security Council passed Resolution 1851 on 18th December 2008, which encouraged ‘all States and regional organizations fighting piracy and armed robbery at sea off the coast of Somalia to establish an international cooperation mechanism to act as a common point of contact between and among states, regional and international organizations on all aspects of combating piracy and armed robbery at sea off Somalia’s coast.’

Even though CGPCS was set up by a UNSC resolution, it was formed outside of the UN system so that member states, NGOs, shipping associations, regional and international organisations like IMO, UNDP etc could all sit together and look for common solution.

The key to CGPCS’s success laid on the it’s multi-pronged effort to find a wholistic solution, e.g., its Working Group 1 (WG1) overseeing effective naval operational co-ordination; WG2 working on all legal aspects of counter-piracy; WG3 working with the shipping industry to develop ‘Best Management Practices’ for protection against Somali Piracy’ (BMP); WG4 focusing mainly on public diplomacy, and WG5 coordinating with international efforts to destroy the financial networks of pirate leaders and their financiers.

The only constraint of this international framework was that it became, too regional and geographic area centric. The leadership of the group also developed a very myopic regional view point. Nonetheless, this group has demonstrated a very successful model for international co-operation for elimination of crimes in international waters.

It is high time that an open ended group like CGPCS is formed quickly to deal with not only the crisis in the Red Sea area, but to prevent all such crimes disrupting international seaborne trade that may be committed by states or non-state actors anywhere in the world.
As the world economy becomes more and more integrated and pain from disruption of the supply chain is felt universally by one and all, the need to provide institutional support for providing ‘innocent passage’ to the merchant ships becomes more and more imperative.

Author :

Mr. Amitabh Kumar, a retired IRS officer is former Director General Shipping, Government of India

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