“China is warning the U.S. against escalating its attacks on Yemen’s Houthi rebels, as the conflict in the Red Sea increasingly threatens both Beijing’s economic and diplomatic interests.
The Houthis’ months-long campaign to restrict maritime traffic moving through key Middle East waterways is a particular threat to China, which is heavily reliant on the Suez Canal and Bab-el-Mandeb Strait to move Chinese products to European markets. China is also more dependent than the U.S. on oil and gas imports from countries like Saudi Arabia, the United Arab Emirates, Iran, and Qatar.
“China is concerned about the escalating tension in the Red Sea and calls on relevant parties to exercise calm and restraint to prevent the conflict from escalating,” Beijing’s Foreign Ministry spokesman Mao Ning told reporters on Friday. “China calls on relevant parties to play a constructive and responsible role in keeping the Red Sea safe and stable, which serves the common interests of the international community.”
China declined to join a U.S.-led coalition of forces, called Operation Prosperity Guardian, which began policing the Red Sea last month.
On a broader level, the growing military exchanges between the U.S. and Houthis threaten China’s Mideast diplomatic interests. Last spring, Beijing stunned Washington by brokering a normalization of relations between Saudi Arabia and Iran, the Houthis’ primary military backer. The deal was based, in part, on Iran’s commitment to China to cut off military supplies to the Yemeni militia and constrain Houthi attacks on Saudi and international targets.
But Tehran in recent weeks has praised the Houthis’ Red Sea operation, and Iran’s elite military unit, the Islamic Revolutionary Guard Corps, has embedded personnel among the Yemeni militia’s forces, according to U.S. and Arab officials.”
…
“The Pentagon announced Tuesday that they interdicted a vessel off the coast of Somalia last week that was ferrying Iranian-manufactured ballistic missile and cruise missile components to the Houthis.”
“The U.S. launched a preemptive strike against Houthi targets in Yemen early Tuesday morning Yemen time, destroying four anti-ship ballistic missiles being prepared for launch, a U.S. defense official told The War Zone. This is the first time the U.S. has launched what a second U.S. official called an “imminent self-defense strike” against Houthi missiles being prepared to launch. The first official, speaking on condition of anonymity to discuss operational details, declined to say how those strikes were carried out, citing operational security concerns.”
“The Middle East war is widening, but that may be better than the alternative: new inflationary pressure from an obscure fundamentalist militia 8,000 miles from US shores.
The US and UK militaries finally struck back at Houthi forces in Yemen on Jan. 11 and 12, in response to at least 27 Houthi attacks on commercial ships navigating the Red Sea between northern Africa and Saudi Arabia. There were legitimate military reasons for the retaliatory strikes, given that the Houthis have targeted US and allied forces, including Israel. But there was a powerful economic incentive too: The attacks on commercial vessels were starting to drive up shipping costs and threatening to reignite inflation, just as the Biden administration feels it is finally taming the biggest barrier to a second term for President Biden.
The Red Sea is a crucial shipping lane because the Suez Canal, at its northern tip, connects waters that serve Western markets with the Indian Ocean and routes to Asia. Ships unable to transit the Red Sea need to take the much longer and costlier journey around the southern tip of Africa. About 15% of world trade transits the area.”
“”the [Biden] administration declassified intelligence indicating that Iranian paramilitary groups were coordinating the Houthi attacks, providing targeting information about commercial shipping passing through the waterway and the Suez Canal.””
“That Reuters report doesn’t include a specific mention of the Jones Act—the century-old law that effectively bans foreign-built ships from operating between American ports, and that subsequently drives up the cost of shipbuilding and shipping in the United States—but the subtext is pretty clear. In a call with reporters a few days after the project was canceled, Ørsted CEO Mads Nipper cited “significant delays on vessel availability” caused “a situation where we would need to go out and recontract all or very large scopes of the project at expectedly higher prices.”
That’s what the Jones Act does. As Reason has reported on many other occasions, the Jones Act is a nakedly protectionist law that severely limits competition in the American shipping market by requiring that ships operating between U.S. ports are American-built, American-crewed, and American-flagged.
Building offshore wind farms requires ships that can deliver supplies to the construction site and some specialty ships that serve as a base for building the turbines. While there are plenty of ships around the rest of the world that can do that work, companies like Ørsted can’t use those ships to build wind farms in American coastal waters.”
“Russian ports and ships on the Black Sea — including tankers carrying millions of barrels of oil to Europe — could justifiably be attacked by the Ukrainian military as part of efforts to weaken Moscow’s war machine, a senior Kyiv official warned Monday in the wake of two recent attacks on Russian vessels.
“Everything the Russians are moving back and forth on the Black Sea are our valid military targets,” Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelenskyy, told POLITICO, saying the move was retaliation for Russia withdrawing from the U.N.-brokered Black Sea grain deal and unleashing a series of missile attacks on agricultural stores and ports.
“This story started with Russia blocking the grain corridor, threatening to attack our vessels, destroying our ports,” Ustenko said. “Our maritime infrastructure is under constant attack.”
Over the weekend, Ukraine declared the waters around Russia’s Black Sea ports a “war risk area” from August 23 “until further notice.” The zone includes major Russian ports like Novorossiysk, Anapa, Gelendzhik, Tuapse, Sochi and Taman.”
…
“On Saturday, Russia’s federal maritime agency, Rosmorrechflot, reported that a Russian tanker, the Sig, had been hit in an apparent strike by Ukrainian forces while sailing close to Ukraine’s occupied Crimean peninsula.
“The tanker received a hit on its engine room, close to the waterline on the starboard side, presumably as a result of an attack by a sea drone,” officials said.
Ukraine’s defense ministry said that as long as Russians “terrorize peaceful Ukrainian cities and destroy grain condemning hundreds of millions to starvation,” there would be “no more safe waters or peaceful harbors for you in the Black and Azov Seas.””
…
“Last month, Russia shipped almost 59 million barrels of crude oil, a third of its overall exports, from the strategic Black Sea port of Novorossiysk, according to intelligence firm Kpler. Of that, 32 million barrels went to EU countries. The port also handles other fuels like diesel, gasoil and naphtha in addition to grain destined for the global market.”
“the cost of sending goods across the Pacific is still more expensive than it was before the pandemic. This price surge is a product of not only the delays and bottlenecks in the supply chain created by Covid-19 but also the huge increase in demand for consumer goods that followed. This demand was far greater than what shipping companies or American ports could handle. As a result, the price of shipping went up, creating increases in costs for importers and retailers within the United States. Those costs have now been passed on to consumers, which is partly why many everyday items are more expensive lately. (Surging gas prices, the war in Ukraine, and pandemic-era financial policies may also be driving inflation.)
Experts told Recode it’s unlikely that Biden’s crackdown on the shipping industry will significantly reduce the cost of products, even if it will make some meaningful improvements to operations at America’s ports. The small group of companies that dominate the shipping industry remain extremely powerful: They still benefit from longtime exemptions from antitrust laws and continue to wield enormous power.
The situation serves as a reminder that, while specific segments like the ocean shipping industry can play a massive role in influencing the prices of everyday goods, they’re also participating in the much larger economic system of supply and demand. This system involves everyone from the companies that build ocean vessels that shipping companies use to parents desperately trying to buy Barbie Dreamhouses for their kids. This complexity can make price increases extremely hard to rein in, even if you’re the president.”
…
“Factories, understandably, closed because of Covid-19, and that created manufacturing delays, threw schedules off course, and ultimately led to shortages of all sorts of products. The pandemic also meant that people spent more time at home, stopped buying services, and cut back on travel. As a result, they started to spend a lot more on consumer goods, goods that typically needed to be shipped to the US from abroad, primarily from countries in Asia. Shipping became harder to provide and much more in demand — which sent shipping prices skyrocketing.
Now these shipping companies are facing a lot more scrutiny as well as growing concern that they’ve used their longtime antitrust immunity to profit during a crisis. Before the pandemic, these carriers had an average operating margin of just under 4 percent, but during the third quarter of last year, that margin grew to more than 50 percent. This has made importing goods in the US much more expensive: At the end of June, it costs nearly $7,600 to rent a 40-foot shipping container traveling across the Pacific compared to about $1,300 in early 2020, according to one shipping industry index.
“Today, the top nine companies control 85 percent of the trade. Go back 15 years ago, the top 10 companies controlled 50 percent of the trade. They basically ran companies out of business and bottom up,” Sal Mercogliano, a maritime history professor at Campbell University, said. “They were in a pretty vicious rate war, and then all of a sudden Covid happens and rates go through the roof.””
…
“Enter the Ocean Shipping Reform Act, which the president claims will lower costs and help fight inflation. The law, which was signed by Biden in June, empowers the Federal Maritime Commission, the agency that regulates shipping into the US, to investigate carriers’ practices and help craft new rules. The government will also create a more formalized way to track chassis, the metal frames that are used to carry shipping containers at the ports, and expand the commission’s powers when the ports are extremely congested. Finally, the law targets the increasingly common practice of ocean carriers transporting empty containers back across the Pacific instead of waiting to fill their cargo with American exports, including agricultural products that American farmers have sold to customers in Asia.”
…
“The global supply chain is made up of many different countries, companies, and people, which means that the price of a single good is influenced by myriad factors that are incredibly hard to control. That means that, for now, you shouldn’t expect Joe Biden’s mounting effort to regulate the shipping industry to have an immediate impact on the price of the stuff you buy.
In reality, the best way to lower the cost of shipping is for people to stop buying so many things that need to be shipped. Given that the economy doesn’t seem to be in a great place right now, that just might happen sooner rather than later. For what it’s worth, imports to the US seem to be declining, and American consumers appear to be returning to their pre-Covid spending habits.”
“The largest fish on Earth is a shark. Capable of reaching a length of up to 60 feet — roughly the height of a four-story building — whale sharks, named for their size, are so large that they make great whites look like minnows.
But even giants can disappear. Over the last several decades, more than half of all whale sharks have vanished from the ocean. Some populations have fallen by more than 60 percent.”
…
“A study in the journal Proceedings of the National Academy of Sciences reveals that cargo ships are likely a leading cause of whale shark deaths. Often, where you find high densities of these endangered fish, you also find shipping traffic, the authors found, and ships are already known to strike and kill these animals.”
…
“Whale sharks are not the only roadkill. Vast cargo vessels harm many species of marine giants, such as the endangered North Atlantic right whales, and some smaller creatures, like sea turtles. Ships also emit loud noises that disrupt marine life and spew planet-warming carbon dioxide into the atmosphere.
“Shipping is a serious problem for giants of the sea,” said Robert Harcourt, a marine ecologist at Macquarie University in Australia who was not affiliated with the study. “We have an economy that’s derived from moving things around the world in a way that’s not taking into account the cost to the environment.””
…
“A good step toward decreasing collisions is figuring out where animals are most at risk, and that’s where this new whale shark study comes in. Large ships are required to report their locations, and the authors compared those points to the movement of hundreds of whale sharks, which they had previously tagged with satellite trackers. (This is no easy feat: “You’ve gotta have some nice long fins, a good pair of lungs, and sprint after it underwater,” said David Sims, a marine ecologist at the University of Southampton and a study co-author.)
The results revealed just how vulnerable these fish are: More than 90 percent of the ocean’s surface area that whale sharks use overlaps with the routes of tankers, passenger ships, and fishing vessels. Whale sharks tend to congregate near the coast, where shipping is especially busy”
…
“many of the sharks’ tracking devices stopped working when the animals entered busy shipping lanes, perhaps because they were killed by ships. (Some trackers even showed sharks swimming into dense shipping routes and then sinking slowly to the seafloor — “the smoking gun for a lethal ship strike,” as Womersley and Sims wrote in The Conversation.)”
…
“Making oceans safer for marine giants is conceptually simple, and one option is to route ships away from animal hot spots.”
…
“Even just slowing ships down can make a huge difference. The chance that a cargo ship will kill a whale falls to below 50 percent when it’s moving at around half speed (10 knots, or 11.5 miles per hour), compared to nearly 100 percent when it’s moving more quickly, according to one 2006 study.”
…
“there’s a big drawback to ships slowing down or going on a different route: It takes longer to deliver goods. That’s one reason studies like this don’t always translate into shipping restrictions. That drawback also makes alternative approaches, such as designing quieter ships or adding wildlife deterrents or propeller guards, appealing (although the benefits of these technologies aren’t well established).”
“The Jones Act, more formally known as the Merchant Marine Act of 1920, places extremely strict, deliberately protectionist rules in place that can help explain why shipping prices are high.
The Jones Act requires that goods traveling between U.S. ports be carried by ships constructed in the U.S. and owned and operated by U.S. companies and workers. The ostensible purpose of this old law was to give U.S. maritime companies a domestic advantage over foreign competitors. In reality, the law has backfired magnificently. The domestic shipbuilding industry has collapsed because it’s just cheaper to build ships in other countries, giving a handful of companies complete market dominance. This means that most new ships are not compliant with the Jones Act, and attempting to break into the domestic market is oppressively expensive. Only 2 percent of the United States’ own domestic freight is transported by sea due to this law.
It also means it’s incredibly costly to import goods to isolated parts of the U.S. like Hawaii, Alaska, and territories like Puerto Rico. Ships compliant with the Jones Act cost three times more to build and up to five times more to operate than foreign counterparts. These calculations, Cato Institute Policy Analyst Colin Grabow notes, originate from our own federal government’s analyses.
The Jones Act has essentially created the exact same noncompetitive domestic environment that the Biden administration is blaming on foreign companies. In response to the administration’s complaints, Grabow observes that just two domestic carriers are responsible for almost all Jones Act–compliant ocean shipping to Hawaii, Alaska, Puerto Rico, and Guam. And consumers there have to pay through the nose for goods.”