War risk insurance for tankers linked to Saudi Arabia’s Red Sea ports has risen sharply in recent weeks, Reuters reported on September 24. Ethiopia still depends on the Djibouti corridor for sea trade. That corridor reaches the open sea through the same Red Sea approaches. Reuters said quoted war risk premiums for tankers with a Saudi link calling at Yanbu rose to about 3 percent of a ship’s value. They had been below 1 percent in early July. London’s marine insurance market had listed that stretch of water as high risk after attacks near the Bab el-Mandeb strait by Yemen’s Houthi movement, which is aligned with Iran.
For ports south of Yanbu, including Jizan near the Yemen border, quoted premiums of about 1 percent in early July can now reach 7 percent, four industry sources told Reuters. That is close to the Strait of Hormuz, where premiums range from 6 to 9 percent. Tankers that move through the Red Sea without a Saudi link usually pay 0.2 to 0.3 percent, the sources said.
Pankaj Khanna, chief executive of the shipping group Heidmar Maritime Holdings, told Reuters that Hormuz can be easier to use now because the United States gives some cover there. He said there is nothing like that in the Red Sea for ships linked to Saudi Arabia. Heidmar is staying away from Saudi ports. It still trades in Hormuz and the Red Sea.
Saudi Arabia had used its East-West pipeline to send about 4 million barrels a day to the Red Sea after Iran limited Gulf exports through Hormuz from March, Reuters reported. Saudi Arabia closed the pipeline on September 11 after drone attacks that it said came from Iraq. Loadings at Yanbu had not started again when Reuters published. Industry sources, satellite images and shipping data pointed to that halt.
Reuters said the Houthis had taken stretches of the Yemeni coast and captured Perim Island in the middle of Bab el-Mandeb this month. The group has said it will target ships linked to Saudi Arabia because Riyadh backs Yemen’s government. The Saudi led coalition said Saudi Arabia stopped six ballistic missiles fired by the Houthis toward areas that include Yanbu.
Almost all of Ethiopia’s seaborne imports and exports still move through Djibouti. They then pass through Red Sea approaches that insurers now price as more dangerous. Corey Ranslem, chief executive of the maritime security firm Dryad Global, told Reuters that traffic through Bab el-Mandeb stays difficult. Only a handful of tankers pass each day. Most ships that still move carry dry bulk cargo, some products, and a small number of tankers with no Saudi link.
The Europe External Programme with Africa (EEPA) said in its September 28 Horn situation report that General Abebaw Tadesse, deputy chief of the Ethiopian National Defence Forces (ENDF), spoke about taking back Assab in Eritrea to reach the Red Sea. Ethiopia lost access to the Assab port after Eritrea became independent. EEPA also reported fighting in Afar Zones 1, 2 and 4. It said troops linked to the Alliance for Survival had taken Abala and Erebti. Those places are near routes tied to the Djibouti corridor. Al Jazeera said in a September 29 explainer that an offensive in Afar could threaten supply routes from Djibouti. Most Ethiopian imports, including fuel, use those routes.
Field Marshal Berhanu Jula, the ENDF chief of general staff, accused Eritrea, Sudan and Egypt of paying for and backing Alliance for Survival groups, EEPA reported. Sudan rejected the claim.
Saudi Arabia has named the Saudi Reinsurance Company to lead a national marine war risk insurance pool, Reuters reported. The move came after the crown prince asked the United States for military help against the Houthis. Sources told Reuters that the United States has given some air support in recent months to ships that sail through Hormuz. No such automatic support exists in the Red Sea. There the European Union gives security and says it needs more ships.
Reuters said war risk premiums are usually quoted for short trips and checked each day. A trip from Yanbu can now cost millions of dollars for cover, far above the cost before the war. Industry estimates in the same report say oil producers also pay high daily charter rates for tankers and for fuel during the trip. Ethiopia does not load Saudi crude at Yanbu. Its cargo and fuel still must pass Bab el-Mandeb or wait for a safer time.
Reuters reported higher quoted cover for Yanbu and for ports south of it. EEPA reported Assab remarks by a senior ENDF officer and fighting in Afar. Neither report says Ethiopia will gain its own port. Neither says Djibouti’s share of Ethiopian trade has fallen sharply.
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