In the latest iteration of the Daily Update’s round-up of Middle Eastern trade news, we cover the impact of the Israel-Gaza war on commercial shipping, Putin’s planned visit to Saudi Arabia and the United Arab Emirates (UAE), and how the international market reacted to a decision to cut oil production.
Red Sea shipping strife
Three commercial vessels have been attacked in the Red Sea over the last week, prompting alarm in shipping circles.
US Central Command, a US military taskforce that is focused on the Middle East, said that three vessels – the Unity Explorer, the M/V Sophie II and the M/V Number 9 – were attacked while passing through the Red Sea.
A naval vessel, the destroyer USS Carney, reportedly assisted the ships.
No casualties were reported and the damage to the vessels was not thought to be serious.
Central Command said the attacks were “a direct threat to international commerce and maritime security” and engendered the lives of crews “representing multiple countries around the world”.
The US blamed Iran, which purportedly supports the Houthi rebels who have claimed responsibility for the attacks. The rebels have said they would continue to attack Israeli shipping.
According to ABC news, a US official said that some of the vessels involved are believed to have connections to Israel.
The US has said it is considering “appropriate action”, including the creation of a multi-national task force.
Israel shipping
Shipper Hapag-Lloyd has become the latest to add a war risk surcharge to shipments to and from Israel.
In a notice to customers, the German shipping company said that, from 1 January 2024, it would start charging customers an additional surcharge for any shipments.
Exports and imports via the Mediterranean and North Europe would cost an additional $40 or €35 per twenty-foot equivalent unit (TEU) and $80 or €70 for other locations.
Other shippers, such as Zim and HMM, had previously added a similar premium following the outbreak of violence in the region.
The Israeli government said it would provide compensation for any ships damaged due to the war in Gaza, but Reuters reports that insurance premiums still rose tenfold and the region was still regarded as “high-risk” by marine insurers.
Putin trip
The UAE and Saudia Arabia will host Russian president Vladmir Putin today (6 December).
Putin has rarely left Russia since he launched his country’s illegal invasion of Ukraine, receiving an International Criminal Court arrest warrant and sanctions in response to the movement of Ukrainian children into Russia .
Russian media confirmed the trip, as reported by ABC, with one presidential aide saying that the negotiations with both countries were “extremely important” to Russia.
All three countries are members of OPEC+, an alliance between the Organization of Petroleum Exporting Countries (OPEC) and other major oil producers, and energy exports remain vital to Russia’s economy.
Bloomberg reports that the UAE in particular is playing host to many Russian companies that have left Russia in response to sanctions.
The Moscow Times also notes that Iranian president Ebrahim Raisi will visit Moscow on Thursday (7 December).
OPEC
OPEC+ has agreed voluntary cuts in oil, although doubts remain about countries fully committing to this.
Last Thursday (30 November), the oil cartel agreed to cut the amount of oil supplied to the market by about 2m barrels a day.
Saudi Arabia, Iraq and the UAE were the largest reducers, with the Saudi industry reducing their output by 1m barrels a day.
However, as the cuts are voluntary and only around half of the restrictions are actually new, doubts have arisen about the policy.
Crude prices have remained the same as before the OPEC+ meeting, as watchers remained unconvinced.
Saudi energy minister Prince Abdulaziz bin Salman insisted to Bloomberg TV that the cuts would be delivered in full, and could be continued past the first quarter of next year.
OPEC+ had already reduced their output several times over the last year.
According to Reuters, repeated cuts to production by OPEC+ have provided an opening for US companies to challenge the cartel’s mastery of the crude energy market.
Turkey Trade
Tukey’s trade deficit has narrowed once again, according to trade figures released on Saturday (2 December).
The Daily Sabah reported that exports rose 5.2% year-on-year to more than $23bn, while imports fell 5.6% to $28.93bn.
Trade minister Ömer Bolat said the preliminary figures showed a fourth consecutive decline in the trade deficit, which stands at $5.9bn in November.
Turkey’s top export destinations in November included Germany, the UAE and Iraq, while it imported heavily from China, Russia and Germany during the same month.
According to Bloomberg, the downturn in imported goods matches Tukey’s central bank’s interest rate strategy, as the country continues to battle high inflation rates.