The Journal. - ‘We Were Attacked’: Militants Upend Global Shipping

Episode Date: January 10, 2024

Houthi rebels have been attacking ships in the Red Sea for months. Now the U.S. and its allies have given the Yemeni militant group a final warning to stop the attacks. WSJ's Nancy A. Youssef explains what's motivating the Houthis and what the attacks mean for a region already on edge. Further Reading: -U.S., U.K. Warships Shoot Down Houthi Barrage in Red Sea  -Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up  -U.S., Allies Give Houthis Ultimatum: Stop Ship Attacks or Face Consequences  Learn more about your ad choices. Visit megaphone.fm/adchoices

Early one morning in December, a commercial cargo vessel was traveling through the Red Sea, when suddenly, a flying object slammed into it. We were attacked with a drone. The drone only hit some containers. Two containers fell in the sea. Some containers were on fire. That's Nils Haupt, a spokesman for Hoppog Lloyd,

the owner of the ship. It's the fifth largest container shipping firm in the world. Nils watched the situation unfold from the company's headquarters in Hamburg. It is not hard to imagine that this is a very shocking event for the crew and, of course, also for the entire shipping line, because this is something we have never experienced. And this is also something where you are basically totally helpless,

because against a drone or a missile, a crew of 23, 24 people is basically helpless. Was the crew caught off guard by this attack, or did they see it coming? Well, it's very difficult to see it coming. I mean, seeing yourself under attack was something unimaginable. But yeah, then the crew was caught by surprise. The group behind the attack, the Houthis, a militant group based out of Yemen. And the attack on the Hapag- a militant group based out of Yemen. And the attack on the Hapag-Lloyd vessel wasn't an isolated incident.

The Houthis have launched more than two dozen attacks on commercial ships over the past few months, destabilizing an important commerce route. As a result of the attacks, major shipping companies have decided to avoid the Red Sea and are now rerouting ships thousands of miles away around the southern tip of Africa, delaying shipments by weeks and adding millions of dollars in additional costs. And how would you characterize the situation with shipping in the Red Sea right now? The situation is extremely difficult until today. Hardly any container shipping line is crossing the Red Sea and passing the Suez Canal. So this is pretty unique. And we basically face a very challenging

time for world trade and for shipping. And last night, U.S. and British warships shot down the largest barrage of Houthi missile and drone attacks yet, stoking concerns about a wider conflict in the region. Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Wednesday, January 10th. Coming up on the show, the militant group in Yemen that's upending commercial shipping in the Red Sea. Your teen requested a ride, but this time, not from you. It's through their Uber Teen account.

It's an Uber account that allows your teen to request a ride under your supervision with live trip tracking and highly rated drivers. Add your teen to your Uber account today. The group that's attacking cargo ships in the Red Sea, the Houthis, is based in Yemen. They're an Islamist militant group that's been fighting a civil war against the government since 2014. Today, the Houthis control most of the country. Here's our colleague Nancy Youssef, who covers national security. I would describe it as a movement that has been around for at least 30 years or so. They took part in the revolution during the Arab Spring in Yemen,

and they have attracted followers by presenting themselves as fighting for economic development and for more inclusion of Shias in Yemen. It's hard to verify how many Houthi militants there are, but some estimates suggest the group could be larger than 100,000. How sophisticated are they as a militant group? Like what kind of weapons do they have? Compared to a military, not sophisticated. Compared to other militant groups, pretty sophisticated because they have armed drones. They have anti-ship missiles. They have missiles that can reach all the way to Israel in terms of geography.

So in that regard, they're quite sophisticated. And so that's kind of why they pose a threat. They have enough capability to threaten the Yemeni government and to have been a force for the past decade. They have not been put down. any government and to have been a force for the past decade. They have not been put down, but they're not the kind of force that I think would be formidable against a Western style military. So they're kind of in the middle. Are the Houthis well-funded? Yes, in that they have local support, that they're backed by the Iranians,

and that they're armed by the Iranians. And they govern. They govern territory, and that in and of itself is a source of revenue. So I don't think of them as having a funding issue per se. The Houthis have mainly acted within the borders of Yemen until the war broke out between Israel and Hamas. The Houthis support Hamas. Both are radical Islamist militant organizations, and they both get significant funding from Iran. When the conflict in Gaza began,

the Houthis issued statements of solidarity with the Palestinians. Then, the Houthis started firing missiles. At first, in October, they aimed directly at southern Israel. But the missiles were intercepted and never reached their targets. So the Houthis changed tactics and shifted focus to a different target, commercial cargo vessels, civilian ships that had no direct role in the war. What is the Houthis' goal with their attacks on these ships in the Red Sea? So there are several theories. One is that they want to sort of punch above their weight, right?

This is a group that is having tremendous impact on shipping in a critical area of the sea and forcing big, big companies to redirect how they conduct business. The Houthis have said that they are targeting Israeli flagged ships or those that are carrying Israeli products, products to Israel or mariners from Israel. And they've said that this is their way of sort of expressing the frustration of the Yemeni and broader Middle East over Israel's conduct of the war in Gaza. The geography of Yemen is one reason these attacks are possible.

The country is located at the narrow mouth of the Red Sea, which at that spot is just 20 miles wide, close enough for the Houthis to easily launch attacks. The Red Sea connects the Indian Ocean to the Mediterranean Sea via the Suez Canal. It's one of the busiest shipping routes in the world. It's the waterway separating Africa and the Arabian Peninsula. 12% of the world trade passes through there. And it's an area where oil, natural gas, grain, toys, electronics, all sorts of products travel through en route to the Suez Canal. And so it's a really critical waterway

for container transit. And so it's really, I think, central to how commercial ships send goods and services throughout the world. The Houthis started attacking ships in mid-November. In one of their first dramatic assaults, fighters landed a helicopter on the deck of a cargo ship and hijacked it. Houthi armed forces from Yemen stormed the vessel by reportedly rappelling down from a helicopter. Yemen's Houthi rebels say they've seized an Israeli-linked cargo ship in the Red Sea. Since then, the Houthis' main tactic has been launching assaults from shore, aimed at vessels in the water. And in early December, they carried out a bold string of attacks in a single day.

A U.S. warship in the region responded to distress calls. The USS Kearney, which is a destroyer, strikes down a drone that was headed towards the destroyer and sees a ballistic ballistic missile attack. On a Bahamas flag cargo ship. So the carny tries to go and see. What's happened with this cargo ship. While it's there. The cargo ship comes over. A second ballistic missile attack. And then it spots a drone operating nearby.

Shoots it down again. Then three hours later. A Panama flag carrier was struck by a missile. It spots a drone operating nearby, shoots it down again. Then three hours later, a Panama flag carrier was struck by a missile, also launched from Houthi-controlled territory, but did no damage. That same day, yet another commercial ship came under another missile attack, and the USS Kearney responded to that call as well. And on the way, the Kearney shot down a different armed drone that happened to be flying nearby. And that was a day,

which I just think was such an extraordinary number of attacks in such a narrow area. And you can only, I've been on a destroyer and I can just imagine the activity. Remember, destroyers have like a crew of 300. So you can just imagine the activity of moving from site to site, shooting down drones. And look, shooting down drones is not easy.

Now, one of the busiest shipping lanes in the world has become extremely hostile. It's become very unpredictable. And you can imagine in an industry like shipping, it doesn't lend itself to unpredictability when it comes to security because there are no easy security options. There are hundreds of ships. This is not something where you could have military ships escorting everybody in.

You could arm your sailors, but that only provides so much security. In response, the U.S. military and its allies announced that they were sending warships to the area to guard commercial vessels. So this morning, we've launched Operation Prosperity Guardian. Ships and aircraft from multiple nations are and will continue to join the United States in conducting maritime surveillance and taking defensive action as appropriate. But the military presence hasn't been enough to make commercial shippers feel safe. How these companies are responding? That's after the break. DQ presents

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You can enjoy free beer, wine, and premium snacks in economy class. Now extended to flights within Canada and the U.S. Cheers to taking off this summer. More details at AirCanada.com. After the Hoppog Lloyd ship was attacked with a drone in December, executives at the company gathered to discuss their next steps. Here's Niels Haupt again. Take me inside the room with the

company's executives after that happened. How did you react and what did your company decide to do? Well, we have four incidents at sea. We have a crisis committee. So we sat together in the crisis committee and discussed the issue. And we came to the conclusion that we would stop all ships which were currently on their way to the Suez Canal or to the entry of the Red Sea. We asked them to anchor and we reassessed the situation and deemed the situation too dangerous to pass the Red Sea and the Suez Canal. Why was it too dangerous? It was very clear that it is too dangerous for our crews to ask them to pass the Red Sea and the Suez Canal.

This is 23, 24, 25 people normally on board. They are fathers. They have families. They have kids. They have wives at home. Would you send them through an area where there's terrorism attacking merchant ships? No, we said we won't do that.

And so since the 21st of December, all our ships with destination Europe or East Coast US or Eastern Met to Far East are routed via the Cape of Good Hope without any exception. The Cape of Good Hope is at the southernmost tip of Africa. Going that route almost doubles the amount of time it takes to get from Asia to European ports. How much money is this decision costing your company? Well, I can just break it down to the 14 days or 13 days in December when we stopped going via the canal. Now, if you look at these ships and the additional fuel consumption, and we're just talking about fuel, just these 13, 14 days is a two-digit million amount of U.S. dollars additional just for fuel cost.

Neil says the amount of money Hpag-Lloyd spent on fuel over that two-week period added up to tens of millions of dollars. And that's not even counting other costs, like labor and increased time when the containers are sitting empty. Because, of course, the ship will need, like, four weeks longer until it's back in Asia. And that means, you know, we lose connections, customers lose capacity because ships are basically not there because it takes a much longer time for their

return trip. So was this a difficult decision to make? It is. On one hand, it is a difficult decision because it has huge consequences on your operation of the vessels you are operating. On the other hand, it is not a difficult decision because when I say, you know, the life of our seafarers is the most important thing we are looking at. I mean, yes, there are vessels being accompanied by military ships. But what we have seen in the last weeks, that terrorism is continuing, and it is far too dangerous to send ships through the canal at the moment. As more firms send their ships around the Cape of Good Hope, costs are piling up. The average fee to transport a container has nearly doubled in the last six weeks, and delays are mounting.

It's all added up to the biggest supply chain disruption since COVID. But the Houthis are celebrating. It's a next level for the Houthis. They have never been this successful in the past, in terms of the scale and types of attacks they've had. I think the impact was so popular so quickly that it just ballooned. And all of a sudden, this little country, poor country, is having kind of an impact. It kind of took off because it had such a profound impact so quickly because they've harassed ships in the past. But nobody, the whole world didn't stop and look and take notice. And that's kind of what happened. Last week, the U.S. and its allies issued an ultimatum to the Houthis.

Stop the attacks or we'll launch retaliatory strikes in Yemen. But the Houthi aggression has continued, including their largest attack yet, last night, when they engaged with U.S. and British warships. Here's U.S. Secretary of State Antony Blinken talking with reporters this morning. If these attacks continue, as they did yesterday, there will be consequences. Again, this represents a clear threat to the interests of countries around the world. If one of the Houthis' main objectives here is to put pressure on Israel and support Hamas, then is this having any effect? Is this disruption in the Red Sea

putting any pressure on Israel to end its campaign in Gaza? So I don't want to overstate it, but it's one of those factors, right? I think politically it has put pressure, some would argue, on Israel because there's so much fear of escalation that some may be pressuring Israel to wrap up this phase of the campaign in Gaza because of concerns over escalation. If there's so much concern about the risk of this expanding into a regional conflict, How close are we to reaching that point

with these Houthi attacks and a possible U.S. counter-strike? I think it's the essential question of the time right now because everybody's sort of chasing this invisible red line because what escalation to one person might not seem as something worth escalation to another, right? And so everybody's trying to find this sort of gray area where they can have an impact, express frustration, signal, but not do so in a way that draws them into this conflict in a way that is catastrophic for them. And so it's

quite a risk. It's a form of roulette, Russian roulette, right? Because the risk of miscalculation, if you find that line, can escalate very, very quickly. This episode has been updated. A previous version incorrectly said the U.S. and its allies sent battleships to the Red Sea. They actually sent warships. That's all for today. Wednesday, January 10th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Costas Paris, Gordon LeVold, Benoit Falcon, and Michael Gordon. Thanks for listening. See you tomorrow.