Shipping must shoulder the burden, absorb the costs and carry on calmly
This week, Intertanko has issued advice to its members following the latest eruption of violence in Gaza and Israel. The advice says, “Following the recent attacks on Israel by the Iranian-backed Hamas, tensions can be expected to rise even further in the Red Sea, Gulf of Oman and Persian Gulf (including the Strait of Hormuz). Historically, ships connected to Iran have been attacked. Similarly, those ships and cargos with a connection to Israel or Israeli nationals (however tenuous) have also been subject to attack. For all ships operating in this region, a ship-specific voyage risk assessment should be undertaken, particularly if the ship has any link to the belligerent States, and all ships are recommended to:
Identify a safer area (usually the central stairwell) above the waterline to be used in the event of an attack from loitering munitions (LMs)
Undertake a drill prior to entry to reinforce the use of this area
Keep the AIS on
Comply with the advice in the BMP5 as far as possible
Report to UKMTO and keep IMSC and EMASoH updated on movements
Identify any updated information from the Flag State and from other information sources
Avoid Iranian waters as far as navigationally possible
Sail close to the Omani coast
Report any suspicious events
If hailed by a naval vessel, follow the IMSC bridge cards
Report any suspicious activity including the sighting of any drones, UAVs or other LMs to UKMTO/IMSC/EMASoH as appropriate and when safe to do so
Masters should keep all crew informed of the situation.”
Once again, shipping has to operate calmly and responsibly as geopolitics affects the potential safety of seafarers, ships, cargos and the ocean environment.
It is only a month since the Economist magazine ran a cover entitled “The New Middle East” and opined that “the chaos shows signs of receding….geopolitical realignment has led to a desire to de-escalate conflicts…it is possible to imagine how a virtuous cycle of stability and peace might lead to more investment and trade that raises living standards and broadens prosperity.” That hope has aged badly, while a reminder that “in a world with fewer rules and principles, no one is coming to the rescue” sounds more prescient.
This conflict looks like one of the unresolved wars of the 20th century, along with the conflict in Yemen in which a dated truce just lapsed, or the war in Ukraine, the root cause of which is Mr Putin’s desire to resurrect the USSR, or the “unpeace” in the Western Pacific focused on Taiwan, which is a consequence of China’s 1949 civil war.
As the US turns inwards to focus on its culture wars, it is slowly relinquishing its role as global policeman. Moreover, an increasing number of nations reject the pax Americana, while political philosophers point to the West’s loss of the moral high ground over its Middle East adventurism in particular.
There is no international body with the power (sorry, UN) to make a difference when regional disorder and conflict rear up. China is only warily stepping into the vacuum left behind by the US as a guarantor of peace, though it has been acting in self-interest by intermediating in the Saudi-Iranian agreement, through involvement in Afghanistan and Pakistan and via other Belt and Road Initiative projects.
As a consequence of these changes to the global political order, nations, states, corporations and individuals and are going to have to get used to more geopolitical disorder even as they might prefer to be focused on the energy transition.
Geopolitics shapes global trade and shipping. For instance, Russia’s invasion of Ukraine has perhaps irrevocably altered global LNG and oil shipping. Trade routes for both energy commodities have lengthened. The US has become a more important exporter of both oil and gas, including to its chief political rival, China. Russian oil is sent to India and China to be refined, with the refined products then exported to the West.
It is not only conflict which changes global trade patterns. The UN, the World Trade Organisation and other international bodies designed to foster agreement, stability and peace are quickly losing relevance as nation states, led by the US, Russia and China, prefer bilateral and club deals.
US – China tensions have led to a realignment of Pacific trade lanes such that this year Mexico has overtaken China as the leading exporter to the US, whose imports from China are down around 20 per cent year on year so far. The EU is muttering darkly about its own trade relationship with China on the basis of espionage fears and its proposed carbon border.
China has only recently reinstated coal imports from Australia, which were banned as a political response to Australia’s support for US calls for an international investigation into the origins of the Covid 19 virus.
This year, Nigeria has remembered that it charges a tax on freight for goods being exported including oil and gas. The Federal Inland Revenue Service says that ship owners have until the end of 2023 to pay all back taxes owed and that ship arrest won’t start until 2024. Few countries – and none of the big international registries like Panama or Liberia – have dual tax arrangements with Nigeria which exempt their ship owners from the freight tax. A number of ship owners have indicated that they won’t load Nigerian cargos from January. This points to further disruption in global energy markets, even though Nigerian oil exports are a smaller proportion of global oil trade than they were 10 or 20 years ago.
Without a global trade organisation to manage such discussions, world trade deals are devolving into regional trade clubs and bilateral agreements. The notion of freewheeling independent states dealing with everyone is losing out to the reality of safety in numbers and the pulling up of trade barriers everywhere (take note, Brexit Britain).
You can see this in trade growth numbers, all of which are slowing down, while container trade has dipped by 1 Mn TEU per month, losing all of the gains in demand that accrued during the pandemic lockdowns as consumer spending switched from nights out to nights in and commuters switched to working from home.
Politics is even harder to forecast than shipping, but the current political trends are not positive for international trade or for the shipping industry which enabled globalisation with ever safer, ever cheaper and ever more reliable carriage of raw materials, energy and goods over ever longer distances and in ever greater volumes. An era of deglobalisation has definitively begun and nobody can say how long it will last. If Donald Trump wins the presidential election in 2024, perhaps the US will become more isolationist and the pax Americana will dissolve even faster.
Being optimistic and looking forwards to 2030, we can say that there is a good chance that most of the gang of so-called strong men will be out of power. Time will eventually run out for all of Xi, Putin, Kim, Khameni, and the marginally more moderate Trump, Erdogan, Modi, Orban and a dozen other national leaders who rely on populism, the politicisation of the judiciary, social media gaslighting and occasionally violence to maintain their positions. The obvious corollary is that whoever follows them may be no better. Furthermore, any changes to trade policy made in this decade may become entrenched and harder to unwind.
Modern warfare is asymmetric. There is no distinction between combatants and civilians, as the events in Ukraine, Israel and Gaza, or in the Sahel have demonstrated in 2023 - except that civilians are unarmed and unable to defend themselvs. Those who promote disorder can spread it across continents at the flick of a switch, using conflict in one region to distract their enemies from their actions in another place.
The blurring of lines between active participants and bystanders has moved into the corporate space too. Western companies have exited Russia. Chinese companies have been forced out of Western markets. INTERTANKO reminds ship owners that their vessels may become targets for state militaries and (even more so) for militias, gangs and terrorists.
Meanwhile ship owners and operators face a bewildering array of regulations and reporting requirements around the environment and sustainability, governance and sanctions, diversity and inclusion, stakeholder relations…the list goes on. There is no alternative to shouldering the burden, absorbing the cost, carrying on calmly and professionally – apart from exiting the business altogether, but when was surrender ever a preferred business strategy?