The Red Sea Conflict Is Scrambling Shipping. Europe Is Bearing the Brunt. Europe is again on the front line of the latest geopolitical tensions, a development that threatens to widen the economic gap between it and the U.S. By Paul Hannon and William Boston Jan. 18, 2024 11:00 pm ET

Ships traveling through the Red Sea carry about 40% of the goods traded between Europe and Asia. PHOTO: LUKE DRAY/GETTY IMAGES For the second time in three years, a conflict in Europe’s unruly neighborhood is threatening to weaken an already struggling economy while a more robust U.S. is watching from a safer distance. This time, attacks by Houthi rebels in Yemen targeting cargo ships in the Red Sea have persuaded more carriers to opt for the safer but longer and more expensive journey around Africa via the Cape of Good Hope. Those detours are raising freight costs and leading retailers to worry about running out of stock. Some factories have suspended work in the absence of needed parts. Should the threat persist, economists think the decline inflation Europe enjoyed last year could slow down, pushing back a potential cut in key interest rates. “This is clearly one of the major downside risks to growth, and upside risks to inflation,” said Ana Boata, chief economist at insurer Allianz Trade. “We could talk about a recessionary risk.” Re-Route Shipping companies with vessels idling in or near the Suez Canal are considering taking a detour around Africa. The Cape of Good Hope route is considerably longer and burns more fuel, making it less popular than the Suez Canal option.

Major world shipping routes Suez route Cape of Good Hope route Other Example: Singapore-Rotterdam, Netherlands Rotterdam Med. Sea Suez Canal Atlantic Ocean Singapore Indian Ocean Cape of Good Hope Distance Round-trip voyage Suez route 8,301 naut. miles 34 days 11,758 43 Cape route Sources: Jean-Paul Rodrigue, Hofstra University (global routes); Bimco (distance, voyage) The latest geopolitical flare-up could cement a growing asymmetry between Europe and the U.S. As a large energy producer, the U.S. has emerged arguably stronger from the crisis sparked by the Ukraine war. And while some of its imports transit via the Suez Canal, their share is comparatively small, and the Pacific offers an alternative route for cargo out of Asia. For now, the interruptions to supply chains are on a modest scale compared with the more widespread blockages seen in 2020 and 2021, and their economic impact is likely to be proportionately smaller. Businesses have also learned lessons from interruptions during the Covid-19 pandemic, and have larger inventories than they did then. IKEA boss Jesper Brodin said the Red Sea conflict has lengthened its shipping routes by about 10 days or longer though its customers aren’t affected. “The huge difference at the moment is that we have recuperated after the pandemic,” he said at the World Economic Forum in Davos, Switzerland. “So that means our stocks in our warehouse are in good shape.”

Discount retailer Pepco said conflict in the Red Sea has had a limited effect on product availability, but could hurt supply in the coming months if it continues. The discount retailer—which houses Poundland in the U.K. and Dealz and Pepco in continental Europe—said Thursday that Houthi attacks on vessels were leading to higher spot freight rates and delays to container lead times. But coming in the wake of a global pandemic and the largest European war in eight decades, the escalation of the conflict that began with an attack on Israel by Hamas in early October is a reminder that the outlook for the global economy is increasingly shaped by developments beyond the reach of economic policymakers. Ships traveling through the Red Sea carry about 40% of the goods that are traded between Europe and Asia. The Houthis initially claimed to target Israeli ships or those bound for its ports but in practice, their attacks have been indiscriminate. That has prompted more operators to divert their traffic around the Cape of Good Hope.

Jesper Brodin said the Red Sea conflict has lengthened IKEA’s shipping routes by about 10 days or longer. PHOTO: DENIS BALIBOUSE/REUTERS Last week, Tesla said delays in delivery of components caused by the rerouting of ships would force it to suspend production at its only large factory in Europe, the GigaBerlin plant outside Berlin. Volvo Cars, the Chinese-Swedish automaker, said gearboxes needed to build conventional combustion vehicles at a plant in Belgium were delayed, forcing the company to halt production for three days. Volkswagen, Europe’s largest carmaker by sales, said its plants hadn’t been affected, but that it continued to monitor the situation in close contact with its suppliers. VW said it was rerouting shipments, which was causing some delay. Oxford Economics estimates that a ship traveling at 16.5 knots from Taiwan to the Netherlands via the Red Sea and the Suez Canal takes about 25½ days to complete the journey. But this rises to about 34 days if the journey is diverted around the Cape. Extra traveling time reduces the annual capacity of each ship, and can have a knock-on effect on freight costs on other routes, including those between Asia and the U.S. According to the Freightos Baltic Index, the average cost of transporting goods in a container across the globe doubled between Dec. 22 and Jan. 12.
Those times could lengthen even further if diverted ships have to wait to take on additional fuel to complete their unplanned journeys at overstretched African ports, of which South Africa’s Durban is the largest. “We haven’t seen tremendous congestion in Durban,” said Ami Daniel, CEO of shipping consulting firm Windward.

Attacks by Houthi rebels in Yemen have disrupted global shipping. PHOTO: YAHYA ARHAB/SHUTTERSTOCK For Europe, the impact of the crisis would largely depend on the extent and duration of the disruption. Economists at Allianz Trade calculate that a doubling of freight costs sustained for more than three months could push the eurozone’s inflation rate up by three-quarters of a percentage point and reduce economic growth by almost a percentage point. With the eurozone’s economy already weakened, that could push it into contraction during 2024. Paolo Gentiloni, the European Union’s top economic official, told reporters on Monday that the situation in the Red Sea “should be monitored very closely” because it could cause energy prices and inflation to rebound. There are several reasons why the crisis’s impact on Europe’s economy might be less severe than previous episodes of surging freight costs. For one, businesses have been through a number of supply-chain disruptions over recent years and believe they are better prepared. “We are affected by the crisis,” said Matthias Zink, CEO of Schaeffler Automotive Technologies. “But it’s under control. Maybe the explanation is that we have a lot of experience now in this resilience or in the reaction to these crises.” Stellantis, the French-American-Italian maker of Fiat, Peugeot and Jeep, said it was compensating for delays in rerouted ships “by using some limited airfreight solutions,” adding that the delays had “almost no impact on manufacturing to date.” Patrick Lepperhoff, a consultant with Inverto, a unit of BCG, said past crises had made companies better prepared for sudden shocks. Many companies invested in IT to gain better visibility on their supply chains and got closer to their main suppliers, he added. In addition to greater preparedness, the economic environment is also different from during the pandemic—a global event affecting supply chains around the world. The current crisis is local, leaving suppliers with more alternatives and many businesses now hold bigger inventories than they did before the pandemic struck. In Europe, weak consumer demand has padded this cushion. “The Red Sea is not as dangerous to global trade as the events were a few years ago,” said Lepperhoff.

Yea, is there a ‘best of’ yet?

The last Firefox on android that really worked for me with the about:reader?url=http://… Ability to force pages into it was 68, which I keep around for that reason.

Can 117 do it on all pages?

I really wish they brought back Reader mode. I kept the old version of firefox side by side just so I can force some pages into it. Makes reading soooo much easier.

Not disagreeing, but isn’t there also protectionist incentives to at least assembly them in the US too? Benn a while since I remember reading it, but seem to remember there are many tarrifs, tax incentives, and etc that make it a complex situation for auto makers.

As comment in thread points out, the subpoenaed info was essentially useless.

To quote some of it:

The Wagner Group has established operations in several African countries, where many of its operations focus on security issues. It has often provided security services and paramilitary assistance and launched disinformation campaigns for troubled regimes in exchange for resource concessions and diplomatic support. Wagner is most active in the Central African Republic (CAR), Libya, Mali, and Sudan, all of which have a tenuous relationship with the West due to colonial legacies and inherent political differences.

What does it do? Wagner’s services vary based on the needs of its clients, which include rebel groups and regimes, and its funding ranges from direct payment to resource concessions.

Evaluating the U.S. Military Contribution in Afghanistan Combat operations. Wagner troops have supported African governments in combat operations against rebel groups, and vice versa. Approximately one thousand Wagner troops entered CAR in 2018 to defend the government of President Faustin-Archange Touadéra against rebel attacks on the capital, Bangui. In return, Wagner subsidiaries received unrestricted logging rights and control of the lucrative Ndassima gold mine. Similarly, Wagner Group forces deployed to Mozambique in 2019 to help fight the self-proclaimed Islamic State in the northern Cabo Delgado province. However, the group failed to contain the insurgency and withdrew from the area after a few months.

Security and training support. Wagner acts as a security service for vulnerable regimes. The group served as a part of a personal protection detail for Touadéra and helped train CAR’s army to prepare for possible coup attempts. Wagner has operated in Sudan since 2017, training Sudanese troops, guarding mineral resources, and suppressing dissent against the government of President Omar al-Bashir, all in exchange for gold exports to Russia. In many cases, Wagner’s support is supplemented by official Russian military assistance, such as in Mali, where the armed forces received combat and surveillance aircraft from Moscow.

Disinformation campaigns. Prigozhin also owns the Internet Research Agency (IRA), an online “troll farm,” and the Association for Free Research and International Cooperation (AFRIC), both of which are under U.S. sanctions and have worked alongside Wagner. The IRA previously outsourced work to individuals in Ghana and Nigeria that sought to inflame political divisions in the United States ahead of the 2016 presidential election, while AFRIC has sponsored “phony election monitoring” in several African nations, including Mozambique and Zimbabwe. Prigozhin has also been accused of co-opting Pan-Africanist movements to promulgate anti-French and anti-Western messages.

Iphone-to-iphone using iMessage and are blue. Iphone-to-SMS are green. Grey in an inbound message irrespective of source.

"The European Commission on Thursday unveiled its annual strategic foresight report, setting out its focus for the coming years.

The 21-page document illustrates the EU’s take on where the world is going. It’s also a rough guide to understand the ideology of Commission President Ursula von der Leyen, who still hasn’t indicated whether she intends to continue in her role for another five years.

Spoiler alert: There are no major surprises. The report includes many of Brussels’ favorite words: “open strategic autonomy,” “resilience,” “sustainability,” and “geoeconomics.” The overarching idea is that the EU needs to beef up its autonomy as the golden age of globalization comes to an end. But in so doing, it must push forward its green transition at the cost of €620 billion per year and clamp down on domestic inequality.

POLITICO unpacks the details and answers critical questions about the EU’s big-picture exercise.

1. The return of geopolitics The world is ever more divided between the West and China — and Europe cannot be a bystander. “The time where liberal democracy was the model of obvious choice is over,” said Commission Vice-President Maroš Šefčovič in a press conference on Thursday when the report was unveiled.

The Commission foresees a “battle of offers” as Europe and the U.S. jostle with Beijing to lure developing nations over to their side. The key takeaway is that the old model of globalization — built on free trade and global supply chains — is gone. Instead, we’re entering a new era of “geoeconomics.” In a nutshell, that means Europe must cut back its strategic dependencies on other countries and instead tap its domestic resources and boost production on the Continent.

2. A sustainable economic model The EU needs to adapt its capitalist model to a new age where net zero and sustainability are the overarching priorities. Though the Commission’s proposals might freak out hardcore neoliberals, they do reflect a new post-COVID economic consensus where the state plays a larger role. “It [the EU] should also consider how to reduce the tax burden on labour and to shift it to other tax bases less detrimental to growth, also to address inequality in a context of population ageing,” reads the report.

One of the most eye-catching ideas is to consider in GDP estimates noneconomic factors such as life expectancy. Šefčovič indicated that with these new rules, the size of the EU’s economy would exceed that of the U.S., China and India (separately, not combined).

3. Boosting investment The European Investment Bank (EIB) must scale up its role and cough up the lion’s share of the €620 billion needed to finance the Green Deal and REPowerEU each year. “[It] should provide stronger support to strategic investments relevant to the two [digital and green] transitions such as raw materials, green tech or biotechnology, especially for cutting-edge projects,” reads the report.

The document is thin on details — but senior officials told Playbook that one way to achieve this would be to review the EIB’s mandate and expand its role.

4. A more skilled workforce The EU’s workforce is more educated than ever — but new industries are struggling to fill vacancies. Problems include a mismatch in skills, rising numbers of low-quality jobs, and too few women studying STEM subjects.

5. Too much inequality Life is getting tougher for lower-income workers, who are bearing the brunt of climate change while paying more for food, and other goods and services. To make matters worse, inequality among EU countries is increasing, not to mention the wealth gap between young and old.

Record levels of wealth concentration are stifling social mobility and fueling political polarization. The answer? More redistribution, according to the report.

6. Crisis of democracy It is pretty rare for EU officials to analyze political headwinds — but that’s exactly what they do in the final section of the report. The argument is not exactly original: Polarization and disinformation are pushing EU voters towards populist parties. And for that, there is no easy solution.

Without the tracking… source

A transcript for those who prefer to read. (using flixier so forgive the lack of speaker indication and the few corrections I made.)

Transcription:

[redd]it is very unhappy that people are talking to us.

They have decided that their official position is that they will wait for us to make mistakes and then issue corrections in order to discredit our journalism.

That’s straight up what they’re doing.

I know this is what they’re doing because we have a statement because they told us.

They told us Tim Rami, who runs coms at Reddit. This is the blanket statement will no longer comment on hearsay.

Unsubstantiated claims or baseless accusations from the verge will be in touch as corrections are needed.

Oh, my God.

I’ve been playing this game a long time.

We’ll wait for you to make a mistake.

So then we can correct you and say your reporting was wrong is the oldest trick in the book and we are just not gonna fall for it.

So we’re just gonna print this statement in every story from here on out, like that’s the way it’s gonna go.

If they want us to get it right they can… They can tell us what is actually happening, but I will come back to we’re gonna take the people on the ground.

We’re gonna take the users.

We’re gonna take the moderators.

We’re gonna take the employees every time.

And if you think they’re wrong, you can tell us and you can explain why they’re wrong.

But we’re not gonna stop because you’ve you’re running like a 1920 press playbook.

Like whatever.

Like I’m we’re just gonna burn you every time and that it’s that attitude.

It’s this aggressive posture where people are worried and they’re coming to reporters and saying,

Here are our worries.

Here’s the communication we have received that makes us feel threatened.

And Reddit’s response is Shut up.

That’s what breaks your community.