The economics that once kept things in order is breaking. The imaginings of neoliberal establishments that shouted free trade, connectivity, and efficiency have deteriorated quickly over the years. While the cross-border exchange of goods is an ancient practice, the rapid industrialization of the 19th century and the globalization movements of the 20th century have habituated people all around the world to consume more.

It is a simple fact that this rapid exchange of goods and information in any domain is viable only if the mediums of exchange are open, unobstructed, secure, and operate under established ‘rules-based order’.

However, the nature and volume of global trade do not allow its mediums of exchange to be diverse enough to eliminate the risks of security and regularity. Up till 2020, 80% of all cargo traveled through the maritime trading routes, automatically attaching grain importance and vulnerability to shipping networks. Hence for a ‘rational actor’, securitizing the trade routes is equivalent to economic sovereignty.

Technological innovation may appear to be a masterstroke of human brilliance, but its catalyzing agent is the complex and highly interdependent network of supply chain systems that allows creativity to become affordable. While the supply chain is global, it creates a parallel cycle of growth and development by maturing the aggregate supply of goods produced within the economy.

Therefore, in a globalized system, the mandate of a nation’s commander-in-chief is not restricted to the country’s territory, but it stretches to each end of the globe where economic interests may be involved. Often, a clash of interests and geopolitical rivalry is noticed in narrow waterways known as “chokepoints”.

A handful of chokepoints carry greater significance than others. This is because economies of scale operate under the principle of minimizing labor and transportation costs over large volumes of goods, which is accomplished by routing the shipments through small watersheds of man-made canals and natural straits.

This implies that to reduce the marginal time and expense for major contributors to the economy, like Apple Inc, the US government must safeguard the waterways around, Chile for Copper, Turkey for Boron, Rwanda for Tantalum, Taiwan for manufacturing, Philippines for testing and packaging, China for assembly, and North America to produce Apple processors.

The excessive involvement of multiple state and non-state actors in the territorial waters of sovereign nations fuels a geopolitical conflict that has detrimental effects on the global economy, and the mere function of society as well.

Experts around the world are baffled by the multitude of problems economies of almost every country face today. A majority of those crises are either initiated or intensified due to the blockades at chokepoints that restrict the supply of goods to meet the demands of the destined nation. The impact of disruptions in the chokepoints reverberates around the world, and it can be argued that the causes are unique to every region and its geopolitical climate.

Since the 1860s, the French and Egyptians have bypassed the long and costly journey from the Atlantic to the Indian Ocean, around the African continent, by building a man-made, 200 km long, canal west of the Sinai desert. The Suez Canal in the Egyptian territory connects the Mediterranean and the Red Seas by saving 3000 nautical miles and at least 10 days of sailing, accounting for the flow of 12% of global trade and 30% of all cargo traffic in 2023.

Despite its strategic importance and geographical value, it has been a home turf to the most economically consequential conflicts in recent history. Soon after its construction, the canal became an epicenter of the balance of power. First, the French had control, followed by the British who declared it a neutral zone, but later in the 1950s the nationalist movements in Egypt took back the canal, and ever since, the area has been a magnet for the Arab-Israeli wars.

However, the closure of the Suez, and the preceding supply-chain crisis, in 2021 was not due to conflict. A 400-meter-long container ship called the “Ever Given”, stuck around the narrow path of the Suez, halting global trade for more than 6 days. This blockage alone caused a $400 million loss per day to the global economy, impacting across all domains, from oil prices to cost of living. While the Suez is a major zone of concern for external powers, the Red Sea adjoining it is more critical among their foreign policy priorities.

The Red Sea has been the primary route of transporting Middle-Eastern oil and gas to Europe, but it only became actively involved in geopolitical commentary after the October 7th attacks in Gaza. When the Houthi group in Yemen decided to declare war on Israel and take siege of a cargo vessel, a dramatic effect was seen in the industry. According to SMP Global, the tonnage transiting the Bab-El-Mandeb strait between Yemen and Djibouti and Eritrea has more than halved since the beginning of December.

Moreover, the IMO reported that due to the armed attacks and hijacking attempts, 18 of the world’s leading companies have rerouted their vessels around the “Cape of Good Hope”, across the African continent, raising the freight costs from Europe to China by approximately 150% since mid-December.

The crisis has, and will further, hit consumer markets amidst economic meltdowns in various countries as producers pass down the increasing shipping costs.

Most importantly, a poly-crisis-ridden Egypt has been stunted from a major source of income as companies refuse to transit their vessels through the adjoining Suez Canal. Consequently, a crisis of such a magnitude invites a reaction from the regional and global actors with interests in the territory.

‘Military action as the last resort’ is merely diplomatic jargon when the economy is at stake. Long before the Houthis attacked merchant vessels, drylands around the Bab-El-Mandeb strait have been perhaps one of the most militarized zones in the world. Not surprisingly, the military presence through naval fleets and bases comes from the strongest of economies, and the major economic stakeholders in the Red Sea trading routes: are Yemen, Saudi Arabia, Bahrain, UAE, Kuwait, USA, UK, China, Japan, Italy, Turkey and Qatar.

Predictably, on the 11th of January 2024, the United States and the United Kingdom led the charge for a military resort to end the blockade by conducting air and naval attacks on Houthi bases in Yemen, vowing for further action if the Houthis don’t back down. Unless a rational stakeholder does not attempt to mediate the affairs, this has the potential to escalate into a Middle-Eastern regional conflict.

Perhaps a collectively manageable crisis is one caused by natural disasters and climatic events. The Panama Canal, in the state of Panama, connects the Pacific and Atlantic Oceans, accounting for 3% of global trade, worth $270 billion a year. The operations in the waterway that serves as the primary route between the East Coast of the US and Asia have been hampered by intense droughts, with 2023 being the driest year in the Panama Canal watershed’s recorded history. The lack of rainfall has depleted water to unprecedented levels.

In response, canal authorities have for the first time restricted the number of daily ship crossings from 36 to 24 ships. These restrictions, along with ship weight limits and higher transit fees, have resulted in less trade passing through the canal while the queue of ships is getting longer, prompting companies to either spend more money skipping the queue or taking a longer and costlier route. Once again, the disruption in a sovereign territorial zone of a nation is prompting a response from all regional and external stakeholders.

The resilient supply chain that anchored the spread of globalization is fueling conflict and crisis.

Regional and global actors are seeking to resort to the crisis as public pressures mount due to rising inflations and unemployment across the globe. What politicians tend to get wrong is that strategic chokepoints are better securitized through cooperation than deterrence. The threat of an oil spill due to the sinking of an oil tanker in the Red Sea in 2020 exemplifies that conflict can be resolved through successful mediation and cooperation. Even as staunch rivals as the Saudis and Houthis can be brought to the negotiation table, in the interest of the collective good. Today, as the world battles climate, hunger, and terrorism, politicians must engage in ‘good diplomacy’ to settle matters of mutually inclusive importance.

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