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Fears of the impact of the repercussions of the Red Sea on oil trade
Economical 03/06/2024
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Baghdad: the mainstay of the emirate
Economists believed that the change in international trade patterns due to the military repercussions in the Red Sea will have negative effects on Iraqi oil trade after it led to higher transportation, shipping and insurance costs and the adoption of longer alternative routes and corridors.
Academic and economic researcher Dr. Abdul Karim Al-Issawi told “Al-Sabah”: The military repercussions taking place in the Red Sea between the Houthi group in Yemen and the United States of America, Britain and the countries allied with them are very important for the Arab Gulf states, Iraq and the countries of Asia, including China and India, given that the Suez Canal The waterway represents the carrier of global trade.
He added that the current events in the Red Sea are of extremely complex geopolitical importance globally and regionally, as they have left profound effects on global trade, international financial and monetary markets, and insurance companies, and these effects are distributed among the parties to global trade due to the interconnected nature between them.
Al-Issawi pointed to the rise in the costs of transportation, shipping, and insurance, which is called “the sword” in international trade, after the shares of shipping companies declined, operational costs increased, and uncertainties about future revenue flows rose, in addition to changing global trade patterns.
He continued that shipping companies choose the longest and most expensive route for trade and the shift from the Red Sea corridor to the Cape of Good Hope corridor, in which the additional distance to deliver goods to their buyers in Europe and the Americas or vice versa to the countries of West and East Asia is estimated at about five thousand square kilometers and requires an additional 10 days, according to Shipping sources indicated that transport through this corridor increased by about 40 percent compared to transit through the Suez Canal. Al-Issawi pointed out that transit through the Suez Canal decreased by 23 percent, according to estimates, with the most noticeable decrease occurring for crude oil and liquefied natural gas after the prices of Super Max oil tankers increased from the Middle East to northwestern Europe and jumped by about half. Standard Brent crude oil rose by about 8 percent, stressing that these events have serious repercussions on Iraqi foreign trade, including oil trade.
He stated that these repercussions, especially on the part of European countries, led to some refining companies abandoning the purchase of Basra crude oil, according to what traders said, and shifting towards purchasing from the North Sea, as well as from the perspective of commodity imports to Iraq, which are the source of their partners from these parties. For his part, the specialist in economic affairs, Dr. Adnan Bahia, told “Al-Sabah”: The importance of the Bab al-Mandab Strait and the Red Sea, which is connected to the Mediterranean Sea through the Suez Canal, is very important for global trade, and up to 20 percent of global trade and oil trade between East and West pass through it, and hundreds cross it. Ships every day.
He pointed out that the Red Sea, with its two outlets, Bab al-Mandab and the Suez Canal, is considered an Arab sea and is at the forefront of Arab and regional national security concerns, and then the concerns of global security and its impact on the economy and global trade. Certainly, keeping this sea, with its outlets, Bab al-Mandab and the Suez Canal, open to global trade is important for the interests of all countries, whether The Arab countries bordering the Red Sea and other straits were interested in and benefiting from global trade and oil trade.
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