Addressing the Red Sea crisis and its impact on the EU economy

The ongoing Red Sea crisis, driven by Houthi attacks on shipping vessels, has far-reaching consequences, extending beyond the immediate security concerns to the broader economic well-being of the European Union. Thus, the problem is both political and economic. The European Shippers’ Council has urged the European Commission to coordinate closely with member states and allies to effectively respond to the crisis and restore stability.

Considering the economic impact, the attacks have resulted in rising shipping costs, with carriers imposing surcharges that average €1,000 per container. These surcharges far exceed the actual additional costs incurred due to the crisis, raising concerns about profiteering by shipping companies. ESC has called upon a university for an independent assessment of the actual costs associated with the crisis.

In addition to inflated shipping rates, the attacks have also led to a decrease in container capacity, further disrupting supply chains and exacerbating inflationary pressures in the EU.

ESC calls for measures that would allow for greater accountability from shipping companies, including providing accurate explanations for surcharges and adhering to fair pricing practices. ESC has approached the World Shipping Council. Regrettably, they refereed to this issue as a commercial one and stated that they could not represent their members. ESC has also addressed this issue to the Directorate-General Mobility and Transport of the European Commission. Shippers look at the European Commission as a body setting up transparency rules and assisting supply chain partners to improve their collaboration. Higher shipping costs will likely translate into higher prices for consumers, leading to increased inflation. Moreover, the disruptions to supply chains could stifle economic growth and hinder EU businesses’ ability to compete globally.

The Red Sea crisis has highlighted the vulnerability of the EU’s economy to geopolitical instability and the need for proactive measures to address maritime security and economic resilience.