Updated January 6th, 2024 at 20:42 IST
Red Sea crisis may push costs for traders: GTRI
The government is urged to consider extending financial aid to affected exporters.
- 2 min read
Red Sea Crisis: The escalating Red Sea crisis poses a substantial threat to the trade, particularly impacting shipping costs and insurance premiums, according to a report by the economic think tank Georgia Tech Research Institute (GTRI) released on Saturday.
GTRI's analysis indicates that the crisis could drive up shipping costs by as much as 60 per cent and insurance premiums by 20 per cent, creating significant challenges for exporters. The situation demands urgent attention, and the government is urged to consider extending financial aid to affected exporters.
The report underlines the necessity for the government to prepare for potential long-term disruptions in shipping due to the prevailing crisis. Attacks on merchant vessels have already led to soaring shipping costs, severely straining exporters' margins.
In response, the report recommends various strategies. These include diversifying crude oil imports by exploring sources from West Africa, the Americas, and the Mediterranean. It also suggests utilising ports outside conflict zones, such as Oman and Djibouti, for regional trade and transshipment. Additionally, offering financial support and insurance schemes to companies facing trade disruptions is advised.
GTRI also highlights the importance of safeguarding maritime interests by forging stronger partnerships with key regional players like Saudi Arabia and the UAE.
Strengthening economic cooperation and stability with these nations could prove vital in navigating the ongoing crisis.
The Bab-el-Mandeb Strait, a vital shipping route connecting the Red Sea and the Indian Ocean, is at the heart of the escalating tension. Recent attacks by Yemen-based Houthi militants have triggered significant delays, forcing ships to divert through the Cape of Good Hope, resulting in delays of up to 20 days.
The report emphasises that government, heavily reliant on this crucial route for trade, faces substantial economic and security risks from any disruptions. It advises exploring alternative trade routes to reduce dependency on the conflict-prone Red Sea passage, emphasising the urgency of a balanced, strategic approach to addressing immediate and long-term concerns amid this escalating crisis.
(with PTI inputs)
Published January 6th, 2024 at 20:42 IST