Red Sea and Panama Canal | 01 Jan 2024

Source: IE

Why in News?

Recent attacks on ships in the Red Sea trade route and the ongoing drought problem at the Panama Canal have raised worries about global trade disruptions.

What are the Key Issues in the Red Sea and Panama Canal Presently?

• Red Sea:
  • Issue: Chemical tanker MV Chem Pluto was struck by a drone attack, approximately 200 nautical miles off Gujarat's coast.
    • MV Chem Pluto is a Liberia-flagged, Japanese-owned, and Netherlands-operated chemical tanker. It had started its journey carrying crude from Al Jubail, Saudi Arabia and was expected to arrive in New Mangalore, India.
  • Alleged Involved Entity: It is believed to have been carried out by Houthi rebels based in Yemen, citing protest against Israel’s actions in Gaza.
    • Houthi rebels are also engaged in a decade-long civil conflict with Yemen's government.
  • Impact on India: Concerns arise for Indian oil importers and exporters of key commodities like basmati and tea due to disruptions in this critical trade route.
    • Disruption in the Red Sea route could increase Indian agricultural product prices by 10-20% as shipments reroute through the Cape of Good Hope.

• Panama Canal:
  • Issue: Due to drought conditions, shipping through the 51-mile stretch of the Panama Canal has decreased by over 50%.
    • A naturally occurring El Nino climate pattern associated with warmer-than-usual water in the central and eastern tropical Pacific Ocean is contributing to Panama's drought.
  • Impact: This shortage of water is compelling vessels traveling from Asia to the US to opt for the Suez Canal, adding six extra days compared to the Panama Canal route.
    • While the Bab-el-Mandeb Strait that leads to the Suez Canal in the Red Sea region connects Asia to Europe, the 100-year-old Panama Canal connects the Atlantic and Pacific Oceans.
      • Both these routes are among the busiest in the world.

What is the Significance of Maritime Transport in Global Trade?

• Unrivaled Volume and Value Carrier: Maritime transport shoulders a colossal 80% of global trade by volume and over 70% by value, far surpassing other modes of transportation as per the United Nations Conference on Trade and Development.
  • As of 2019, the total value of the annual world shipping trade had reached more than 14 trillion US Dollars.
• Environmental Considerations: While shipping does contribute to around 3% of global greenhouse gas emissions, it is relatively more fuel-efficient and emits less per ton of cargo transported compared to other modes of transportation like air freight.
• Energy Transportation: The majority of the world's energy resources, such as oil and natural gas, are transported by sea. Tankers carry these resources from production areas to consuming regions, playing a critical role in meeting global energy demands.

What Measures India can Adopt to Reduce Vulnerability to These Issues?

• Joint Maritime Security Initiative: Propose a collaborative security framework with key Red Sea stakeholders (Egypt, Saudi Arabia, UAE, Yemen) involving intelligence sharing, coordinated patrols, and joint exercises.
• Deploy Advanced Surveillance Systems: Install integrated radar and drone surveillance systems along India's western coastline to enhance early threat detection and response capabilities.
• Negotiate Preferential Access: Engage with Panama Canal authorities to explore preferential passage for Indian vessels or potential toll discounts for specific routes.