UN Warns Threat To Global Trade Due To Escalating Attacks On Ships (image-pixabay)
The United Nations Trade and Development body, UNCTAD, has raised its concern over escalating attacks on ships in the Red Sea which are now adding more strain to the shipping routes which have been already affected by climate change and conflict.
In a statement, the organization highlighted that geopolitical tension is affecting the Black Sea and recent attacks on shipping in the Red Sea have affected the Suez Canal and the impact of climate change on the Panama Canal.
The UNCTAD estimated that the trade volume going through the Suez Canal has decreased by 42% over the last two months. The organization also highlighted the ‘perfect storm’ emerging in the growing disruption around the world. The Ukraine war which has neared its second anniversary has also triggered substantial shifts in oil and grain trades reshaping established trade patterns. Adding another layer of complexity comes the crisis in the Red Sea due to the Houthi attacks on ships. And these issues combined have resulted in “reverberating in global food prices”.
Adding on to the geopolitical political problems, they pointed out the dramatic decline in the water level due to climate change in the Panama Canal and the ongoing drought. The statement says that there has been a “staggering 36% reduction” in December versus the year earlier.
While speaking to the reporters, the Chief of Trade Logistics at UNCTAD Jan Hoffman told reporters that it is having a “dramatic impact” severely disrupting shipping.
Due to the Red Sea crisis, major players in the shipping industry have temporarily suspended Suez transits. By UNCTAD calculations, containership transits are down by 67 percent at the Suez Canal versus a year ago. They stated that the ships are forced to opt for alternate routes and to travel faster to compensate for detours, burning more fuel per mile and emitting CO2, further exacerbating environmental concerns.
This prolonged interruption, particularly in container ships is expected to pose a direct threat to global supply chains, raising the risk of delayed deliveries and higher costs. The current container costs have reached approximately half of the peak seen during the COVID-19 crisis. Thus, the UN body warns that it will not take much time for the higher prices to hit consumers, with the full impact expected within a year.
They also expressed concern that energy prices are witnessing a surge as gas transits are discontinued. They worry that this is directly impacting energy supplies, especially in Europe.
“The cumulative effect of these disruptions translates into extended cargo travel distances, escalating trade costs, and a surge in greenhouse gas emissions from shipping having to travel greater distances and at greater speed,” warns UNCTAD.
The UN body concluded that the current challenges underscore trade”s vulnerability to geopolitical tensions and climate- challenges, demanding collective efforts for sustainable solutions especially in support of countries more vulnerable to these shocks.
