The Red Sea crisis: the economic costs for Italy and the Aspides mission

Translated by Michela Scappaticci

Due to the Red Sea crisis, which pits the Houti armed group against pro-Israeli powers, Italy is suffering many economic losses, seeing its trade severely damaged.

Attacks by the Yemeni armed group in the Red Sea against merchant ships belonging not necessarily to pro-Israeli powers have been going on for several months, in an attempt to retaliate against Israeli bombings in the Gaza Strip.

The stretch affected by the attacks is crucial for international trade, so much so that around 12% of global goods and 30% of containers are transported through the Red Sea channel, forming a focal point between Europe and Asia.

Due to the attacks, shipping companies are highly vulnerable and run many more risks when crossing the stretch of sea bordering Yemen. The high probability of seeing their ships and cargoes severely damaged requires the payment of much higher than normal insurance on the goods transported.

In order to avoid damage to ships and goods, many companies have opted for drastic situations, such as the Danish giant Maersk, which has decided to discontinue the route, choosing to circumnavigate Africa in order to transit goods from the Mediterranean to the Pacific, with a route that is several thousand kilometres longer and takes up to two weeks longer to travel.

Whether companies decide to use alternative routes or to take the risks of passage at higher insurance prices, in both cases the transports are much more expensive, with a considerable increase in expenses for ship owners that may also lead to higher prices for all consumers in the future.

What is certain, is that many productions are being damaged by this ongoing fight, and Italy is not left out.

According to data released by Confartigianato, the damage to Italian foreign trade between November 2023 and January 2024 due to the crisis in the Red Sea amounts to 8.8 billion, 95 million per day. This means 35 million a day for the impact on exports and 60 million for lost supplies.

In 2023, in fact, the passage through the Suez Canal and the Red Sea concerns about 40% of the goods that make up Italian trade with the rest of the world, for an annual value worth about 150 million euro.

In the last three months, however, the decline in merchant ship traffic between the Indian Ocean and the Red Sea has meant that Italy has lost '3.3 billion, or 35 million per day, for missed or delayed exports and 5.5 billion (60 million per day) for the lack of supply of manufactured goods' from the Asian continent.

The international trade crisis is also affecting Italian small and medium-sized enterprises, whose direct manufacturing exports to non-EU countries account for 32.7% of the European total. In 2023, in fact, the import-export flow of goods of the made-in-Italy sectors (with a greater presence of small and medium-sized enterprises) transiting through the Red Sea will amount to EUR 30.8 billion (equal to 1.5 GDP points).

Exports specifically concern food products (worth around 4.2 billion), followed by metal products (1.8 billion), other products, including jewellery and eyewear, again with 1.8 billion, fashion with 1.5 billion and wood and furniture with 1 billion. Added to these sectors is the machinery and equipment sector with 11.6 billion in 2023.

According to the President of Confartigianato, Marco Granelli, "The escalation of the crisis in the Middle East is penalising the 'Made in Italy' system and the supply of products that are essential for the transformation of Italian manufacturing, aggravating the slowdown in international trade.

ASPIDES Mission

Due to the heavy economic losses that Houthi rebel attacks are bringing to the country's economy, Italy, together with two other European countries, France and Germany, has launched a European mission to protect merchant traffic, the 'Aspides' mission. This operation, approved by the European Council of Foreign Affairs, will involve sending European ships to defend merchant vessels from Houthi attacks and will see Italy in tactical command. The mission will last at least a year, with possible renewal subject to a decision by the EU Council, will be defensive and will not involve attacks by land, but only the shooting down of drones, missiles and any other weapons directed against merchant ships.

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