WEBVTT - How Global Shippers Are Dealing With a Worsening Red Sea Crisis 0:00:10.119 --> 0:00:14.080 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.120 --> 0:00:16.439 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:16.560 --> 0:00:19.320 Tracy, I think we have to talk more about the 0:00:19.680 --> 0:00:22.000 disruptions in the Red Sea. We sort of hit on 0:00:22.040 --> 0:00:25.680 them briefly with Craig Fuller a couple of weeks ago, 0:00:25.960 --> 0:00:29.240 but they've escalated. They're not going away. There's been a 0:00:29.280 --> 0:00:33.160 military response, but so far the tension and strikes continued, 0:00:33.280 --> 0:00:35.640 ongoing and becoming a bigger issue. 0:00:35.800 --> 0:00:36.080 Yeah. 0:00:36.120 --> 0:00:39.640 I think there have been dozens of attacks at this point, 0:00:39.680 --> 0:00:42.240 and there have been people who are having to make 0:00:42.560 --> 0:00:46.400 hard decisions about whether or not to continue going through 0:00:46.600 --> 0:00:49.600 the Suez Canal, which is, of course this waterway that 0:00:49.720 --> 0:00:53.239 is incredibly important for global trade. Just before we came 0:00:53.280 --> 0:00:55.440 on the show, I was reading a figure saying something 0:00:55.480 --> 0:00:59.200 like the Suez Canal handles twelve to fifteen percent of 0:00:59.240 --> 0:01:01.880 global trade at least in twenty twenty three. So when 0:01:01.880 --> 0:01:04.560 we say a chunk of global trade has been affected, 0:01:04.880 --> 0:01:07.800 we do actually mean a significant chunk. 0:01:07.880 --> 0:01:10.600 A significant chunk, and we've all seen I guess those 0:01:10.760 --> 0:01:15.760 maps of ships being rerouted around the southern coast of Africa, 0:01:15.840 --> 0:01:18.720 the Horn of Africa. My understanding. I think there's been 0:01:18.760 --> 0:01:21.200 reports that started is just container ships, but it's been 0:01:21.240 --> 0:01:24.280 affecting other things. So it's starting to perhaps affect the 0:01:24.319 --> 0:01:28.480 oil trade and so forth. And look, maybe the attacks 0:01:28.640 --> 0:01:31.560 will go away, maybe they can be stopped. I don't know, 0:01:31.840 --> 0:01:34.200 but I mean I do think, you know, it's pretty 0:01:34.200 --> 0:01:39.520 striking that a fairly small military group is able to 0:01:39.560 --> 0:01:43.160 create such a big disruption, and there is no obvious 0:01:43.319 --> 0:01:46.160 solution from the biggest military power in the world, that 0:01:46.240 --> 0:01:47.640 being the US obviously. 0:01:47.400 --> 0:01:49.800 Right, and there is this overarching question of whether or 0:01:49.880 --> 0:01:52.960 not the US should be involved. And I think we're 0:01:52.960 --> 0:01:56.920 seeing some other governments, notably in Europe, start to make 0:01:57.000 --> 0:01:59.440 more noise about this as well. So yes, there is 0:01:59.440 --> 0:02:01.760 a sort of political aspect to this as well. 0:02:02.120 --> 0:02:05.120 Well, let's get right into it. We really do have 0:02:05.360 --> 0:02:07.400 the perfect guest we are going to be speaking with, 0:02:07.520 --> 0:02:12.240 sale Mercagliano. He is a maritime historian at Campbell University. 0:02:12.639 --> 0:02:15.360 He is the host of the YouTube show What's going 0:02:15.400 --> 0:02:19.359 On with Shipping and sometimes he has been a tracker 0:02:19.639 --> 0:02:23.320 Tracy of your own Furniture. The last time I think 0:02:23.360 --> 0:02:25.040 the only time we've spoken to him in the past 0:02:25.320 --> 0:02:28.240 was when your furniture was stuck. What was the ship, 0:02:28.320 --> 0:02:29.960 the ever Forward, the. 0:02:29.840 --> 0:02:31.320 One I think it was the ever Forward. 0:02:31.560 --> 0:02:34.400 When your furniture was stuck on the ever Forward, I 0:02:34.400 --> 0:02:37.120 guess that was in twenty twenty one. Returned to sail 0:02:37.200 --> 0:02:39.880 and now, of course this is so much more severe disruption. 0:02:39.960 --> 0:02:42.120 We're going to have sail back so sale. Thank you 0:02:42.160 --> 0:02:44.120 so much for coming back on odd locks. 0:02:44.400 --> 0:02:45.240 Thank you for having me. 0:02:46.040 --> 0:02:50.680 Let's just start really big picture with how extraordinary and 0:02:50.800 --> 0:02:54.919 unusual is the scale of this disruption happening right now. 0:02:55.960 --> 0:02:59.520 You're looking at about eleven percent of the world's trade 0:02:59.560 --> 0:03:03.600 ghost through this vital maritime choke point, the Bob al Mandeb. 0:03:03.680 --> 0:03:06.000 This is the Gate of Tears. This is the very 0:03:06.040 --> 0:03:08.440 southern end of the Red Sea. This is the connection 0:03:08.639 --> 0:03:12.079 between Europe and Asia. But it's much more than that. 0:03:12.160 --> 0:03:14.960 You're looking at trade that goes not just between those 0:03:15.000 --> 0:03:17.200 two areas, but actually kind of like a hub and 0:03:17.240 --> 0:03:21.600 spoke system kind of radiates out around the planet. And 0:03:21.880 --> 0:03:24.919 this attack by the Huthi, which started off very small scale. 0:03:24.960 --> 0:03:28.560 You saw a helicopter assault onto a ship the Galaxy 0:03:28.639 --> 0:03:32.160 Leader back on November nineteenth, has now escalated and what 0:03:32.200 --> 0:03:35.520 we've seen is not just container ships that have started 0:03:35.560 --> 0:03:39.560 to divert around, but now liquefied natural gas carriers, liquified 0:03:39.560 --> 0:03:44.360 petroleum gas carriers, tankers and even bulk vessels are now 0:03:44.400 --> 0:03:47.440 moving around. And as you mentioned, this adds thirty five 0:03:47.520 --> 0:03:48.360 hundred miles. 0:03:48.720 --> 0:03:49.920 But the biggest thing is it. 0:03:49.880 --> 0:03:53.720 Creates massive delays and disruptions. And for the Huthi, which 0:03:53.760 --> 0:03:56.120 are a small player, you know, one part in a 0:03:56.160 --> 0:03:59.680 three way civil war in Yemen, they have created more 0:04:00.080 --> 0:04:02.800 eruption of global trade. Then you almost have to go 0:04:02.840 --> 0:04:06.080 back to the World Wars to find something similar to this. 0:04:06.800 --> 0:04:09.520 So sal you mentioned that the Hooties have sort of 0:04:09.600 --> 0:04:14.080 expanded their repertoire of attacks I suppose to now include 0:04:14.200 --> 0:04:17.960 LNG and bulk vessels and things like that. What is 0:04:18.160 --> 0:04:21.839 their strategy here and how has it evolved over time? 0:04:21.920 --> 0:04:25.600 Because we have seen an escalation since November, but there 0:04:25.640 --> 0:04:29.599 were sort of isolated attacks happening before then. So what 0:04:29.800 --> 0:04:30.680 is changing here? 0:04:30.960 --> 0:04:34.360 Yeah, so initially they were focusing on ships connected to Israel. I. Mean, 0:04:34.400 --> 0:04:37.919 the root of this issue is the houthis kind of 0:04:37.920 --> 0:04:43.400 solidarity with the Palestinians and Hamas in the Gaza strip. 0:04:43.440 --> 0:04:44.880 And then again it goes all the way back to 0:04:44.960 --> 0:04:48.280 the Israel Hamas issue. So, but we've seen the Houthis 0:04:48.320 --> 0:04:50.680 attack ships prior to this, go back to twenty sixteen, 0:04:50.720 --> 0:04:55.000 twenty seventeen. We saw attacks on UAE vessels, we saw 0:04:55.040 --> 0:04:56.880 an attack on a Saudi frigate, we even saw an 0:04:56.920 --> 0:05:01.520 attack on a US Navy destroyer. But this effort recently 0:05:01.720 --> 0:05:05.120 is focusing on Israeli owned Israeli flagships. So we saw 0:05:05.200 --> 0:05:09.240 ships of zim and other Israeli companies immediately divert But 0:05:09.320 --> 0:05:12.679 then the hoothy expanded. They started targeting vessels they said 0:05:12.800 --> 0:05:17.000 was connected to Israel either through their ownership. So for example, 0:05:17.120 --> 0:05:21.640 Mediterranean Shipping Company, what the largest container liner in the world, 0:05:21.720 --> 0:05:25.240 they started targeting their ships because the owner's wife of 0:05:25.400 --> 0:05:30.240 Mediterranean Shipping Company has dual citizenships Switzerland and Israel. And 0:05:30.400 --> 0:05:32.680 then we saw attacks that really had no connection at 0:05:32.720 --> 0:05:36.000 all to Israel, but they would try to make those attacks. 0:05:36.040 --> 0:05:39.360 And what these attacks are doing aren't really so much 0:05:39.440 --> 0:05:41.640 damaging vessels. We've seen ships hit and we had a 0:05:41.720 --> 0:05:44.480 very dramatic one just the other day with a ship 0:05:44.480 --> 0:05:47.360 called the Marlon Lwanda, which caught fire. But what they're 0:05:47.400 --> 0:05:50.119 doing is raising the cost to sail through this area 0:05:50.200 --> 0:05:53.480 by escalating war risk insurance. And we saw that very 0:05:53.520 --> 0:05:56.400 similar thing happened in the Red Sea between Russia and Ukraine. 0:05:56.720 --> 0:06:00.159 But by escalating war risk insurance, the added insurance you 0:06:00.240 --> 0:06:03.640 need to sail through an area, you make very expensive 0:06:03.680 --> 0:06:07.360 ships such as container ships, which have a value of 0:06:07.400 --> 0:06:10.800 between a quarter to a half a billion dollars cost 0:06:10.920 --> 0:06:13.679 prohibitive to sail through. We saw the war risks, for example, 0:06:13.760 --> 0:06:16.839 jump from point zero two percent the value of the 0:06:16.839 --> 0:06:19.760 ship up to one percent. And when you start doing 0:06:19.839 --> 0:06:23.479 the math on value of vessels, the very expensive vessels 0:06:23.520 --> 0:06:27.320 find it more costly economical to sail around Africa. 0:06:27.880 --> 0:06:31.800 Wait wait, let's uh, this is interesting. How is war 0:06:32.279 --> 0:06:35.800 risk insurance assessed? And when you say like one percent, 0:06:35.920 --> 0:06:38.760 is that per per trip? 0:06:38.920 --> 0:06:39.040 Like? 0:06:39.120 --> 0:06:41.400 How did those talk to us a little bit more 0:06:41.440 --> 0:06:43.360 about these deals and the math there? 0:06:44.240 --> 0:06:44.520 Sure? 0:06:44.560 --> 0:06:47.920 So, shipping insurance is done by a group of companies 0:06:48.000 --> 0:06:50.600 called clubs, and they get together and literally there's a 0:06:50.640 --> 0:06:54.480 committee in London that puts together areas of warrist They 0:06:54.520 --> 0:06:58.880 identify the areas that there are confrontations and basically whether 0:06:59.000 --> 0:07:01.320 or not you need this added insurance kind of like 0:07:01.360 --> 0:07:03.320 flood insurance for your house. If you don't have it 0:07:03.320 --> 0:07:05.400 in your house is damaged by a flood, your normal 0:07:05.440 --> 0:07:08.760 insurance wouldn't cover it. So they identified the area in 0:07:08.800 --> 0:07:11.800 and around the Red Sea as a potential war risk, 0:07:11.840 --> 0:07:14.600 initially down to a point zero two percent, but as 0:07:14.680 --> 0:07:18.800 the Hoothy attacked and then increase their level attacks, they 0:07:18.800 --> 0:07:21.400 have ratcheted up that war risk. We're seeing right now, 0:07:21.400 --> 0:07:24.080 for example up in the on the Black Sea, that 0:07:24.200 --> 0:07:27.160 war risk is right around one point twenty five percent. 0:07:27.240 --> 0:07:30.200 That's come down from about three percent. And so this 0:07:30.240 --> 0:07:32.760 committee will assess that. And if you want to sail 0:07:32.840 --> 0:07:36.760 through these regions, and they specify latitude and longitude and 0:07:36.800 --> 0:07:39.640 the distance you pay it for that one time voyage. 0:07:39.640 --> 0:07:41.360 So if you let's assume you have a ship of 0:07:41.360 --> 0:07:44.320 one hundred million dollars both the value of the ship 0:07:44.360 --> 0:07:46.800 and the cargo, then you have to pay a million 0:07:46.880 --> 0:07:50.520 dollars to go through there. And now you start weighing 0:07:50.560 --> 0:07:52.720 that against well, it's about a half a million to 0:07:52.760 --> 0:07:55.600 go through the Suez, but it's going to cost me 0:07:56.120 --> 0:07:59.000 over a million dollars in extra fuel to go around. 0:07:59.440 --> 0:08:02.040 What's the benefit here for doing it? And what we 0:08:02.080 --> 0:08:05.360 saw is on the higher end ships, the container ships, 0:08:05.400 --> 0:08:07.520 the LNG and LPG carriers. 0:08:07.920 --> 0:08:08.600 Then they were. 0:08:08.440 --> 0:08:11.640 Weighing, It's like, Okay, it's much more economical and safer 0:08:11.640 --> 0:08:14.480 for me to go around Africa than to take this risk. 0:08:15.000 --> 0:08:17.000 This is something that I wanted to ask, actually, But 0:08:17.080 --> 0:08:21.120 who makes the ultimate decision on what route to take? 0:08:21.240 --> 0:08:24.040 Because as I sit here and I sort of imagine 0:08:24.080 --> 0:08:28.360 all the different actors involved in one journey, any one 0:08:28.440 --> 0:08:30.520 of them would make sense, Like the captain could make 0:08:30.560 --> 0:08:34.880 the decision, the shipping company, maybe the insurer is ultimately 0:08:34.960 --> 0:08:37.840 the limiting factor by virtue of the costs that you 0:08:38.000 --> 0:08:41.400 just laid out. Maybe governments decide that it's just too 0:08:41.440 --> 0:08:43.880 dangerous to go this route. It could be anyone. So 0:08:43.960 --> 0:08:46.680 who's the sort of big decision maker in all of this? 0:08:47.640 --> 0:08:49.720 I mean, ultimately it comes down to the company, and 0:08:49.800 --> 0:08:52.600 the company will make those decisions of where to go. 0:08:52.920 --> 0:08:55.480 They'll consult with the insurance companies to see what kind 0:08:55.559 --> 0:08:57.640 of war risk insurance they can get, what kind of 0:08:57.640 --> 0:09:00.160 policy they can get, what deal they can get. Some 0:09:00.200 --> 0:09:02.640 insurance companies may not want to underwrite a vessel because 0:09:02.640 --> 0:09:05.160 it's too dangerous or they view it as you know, 0:09:05.200 --> 0:09:07.800 So we had this ship that got hit, the Marlon Lwanda, 0:09:08.240 --> 0:09:10.840 and that ship probably paid a million dollars in war 0:09:10.920 --> 0:09:13.280 risk insurance. We don't know for sure, but probably based 0:09:13.320 --> 0:09:15.480 on the value of the ship and the cargo. But 0:09:15.559 --> 0:09:17.760 the damage inflicted on the vessel was well over a 0:09:17.760 --> 0:09:20.320 million dollars And so if you're an insurance company, you 0:09:20.320 --> 0:09:22.760 get away. Am I getting enough premiums in from the 0:09:22.800 --> 0:09:27.080 other companies to continue to assess this and you know, 0:09:27.679 --> 0:09:30.640 registry comes into this. Maybe a national registry will sit 0:09:30.640 --> 0:09:33.160 there and say we don't want our ships to come 0:09:33.240 --> 0:09:35.880 through this area, and some companies will take the risk. 0:09:36.120 --> 0:09:40.280 We seen large container companies CMA CGM, for example, which 0:09:40.360 --> 0:09:43.480 is a French based container company. They have run some 0:09:43.600 --> 0:09:46.240 ships through there. They did that while paying a very 0:09:46.320 --> 0:09:49.679 high war risk insurance. But they think that the offset 0:09:49.800 --> 0:09:51.960 was the US Navy and the Royal Navy were there 0:09:52.000 --> 0:09:55.320 protecting them, and then they got the additional escort of 0:09:55.480 --> 0:09:59.040 French vessels riding right alongside of them taking them through 0:09:59.080 --> 0:10:01.800 this area. And the reason they're doing that is because 0:10:01.880 --> 0:10:06.560 in economics they saw the redeployment of containers from Europe 0:10:06.600 --> 0:10:09.760 to Asia of being such high value that it offset 0:10:09.800 --> 0:10:11.840 the potential downside of it. 0:10:12.040 --> 0:10:12.600 So there's a. 0:10:12.520 --> 0:10:14.920 Lot of factors that are going into this. But what 0:10:14.960 --> 0:10:18.480 we're seeing now is because of those attacks and the 0:10:18.640 --> 0:10:21.480 escalation of the attacks and the severity of the attacks, 0:10:21.920 --> 0:10:24.480 more and more ships are now shifting away. We've seen 0:10:24.520 --> 0:10:27.920 a reduction in the total number of ships going through 0:10:28.000 --> 0:10:32.240 the Suez Canal about thirty percent downward, but where we're 0:10:32.240 --> 0:10:35.160 seeing in terms of tonnage, it's almost fifty to sixty percent. 0:10:35.200 --> 0:10:38.839 So the very large vessels, very expensive vessels, you're making 0:10:38.880 --> 0:10:39.920 that diversion around. 0:10:56.440 --> 0:11:00.800 Let's get into the military component. You mentioned the French Navy, 0:11:00.840 --> 0:11:04.480 the escorts. What are the different strategies that whether it's 0:11:04.520 --> 0:11:08.560 the French the US military have taken in trying to 0:11:08.760 --> 0:11:11.200 protect the ships. Is it all like they sort of 0:11:11.320 --> 0:11:13.480 one for one escorts, Like, how does that work? 0:11:14.400 --> 0:11:15.920 Well, that was a big issue. How are you going 0:11:15.960 --> 0:11:17.720 to do this? Are you going to do Tom Hanks 0:11:17.720 --> 0:11:21.200 and Greyhound and run these escorts through and tell you truth, 0:11:21.240 --> 0:11:24.360 the militaries don't like this mission. It's not a very glamorous, 0:11:24.400 --> 0:11:27.400 sexy mission, but it's one that's really essential and it 0:11:27.520 --> 0:11:29.800 really was bread and butter for the US Navy for 0:11:29.920 --> 0:11:32.760 years literally the founding. So what the Navy decided and 0:11:32.800 --> 0:11:36.840 when they initiated Operation what they called Prosperity Guardian, was 0:11:36.920 --> 0:11:40.440 to take their very sophisticated destroyers. These are the arly 0:11:40.480 --> 0:11:45.599 Burk class destroyers supplemented by Royal Navy type forty five destroyers, 0:11:45.880 --> 0:11:47.760 and what they have done is basically set up a 0:11:47.800 --> 0:11:52.320 series of fence posts between Yemen and the main shipping channel. 0:11:52.320 --> 0:11:55.560 And these destroyers are there to catch the missiles that 0:11:55.600 --> 0:11:58.520 fly overhead, and so they're shooting down drones and these 0:11:58.559 --> 0:12:02.280 anti ship either cruise means missiles, or what's really amazing 0:12:02.280 --> 0:12:05.160 about this is ballistic missiles. Something we have not seen 0:12:05.240 --> 0:12:08.800 before is these missiles that fly a very high trajectory 0:12:08.800 --> 0:12:10.959 and come down. There's a lot of debate whether or 0:12:11.040 --> 0:12:13.080 not you can even hit a ship with a ballistic missile. 0:12:13.440 --> 0:12:16.160 So these destroyers, the US and the British are providing 0:12:16.160 --> 0:12:19.600 these gatekeepers. And then you have other navies, the French Navy, 0:12:19.679 --> 0:12:23.120 the Italian Navy, and most interesting of all, I would 0:12:23.200 --> 0:12:25.400 argue that the Indian Navy which has come out in 0:12:25.440 --> 0:12:29.680 big force to provide kind of direct escorts. And the 0:12:29.720 --> 0:12:33.320 problem you have is it's very defensive they're reacting to 0:12:33.520 --> 0:12:36.880 the situation that we saw military strikes take place. And 0:12:36.960 --> 0:12:39.680 the commander of the naval forces out there, Vice Adimal 0:12:39.679 --> 0:12:43.960 Brad Cooper, is very clear in differentiating the two. There's 0:12:44.000 --> 0:12:47.240 a defensive operation and then there's the offensive operation, and 0:12:47.320 --> 0:12:51.320 the offensive operation was trying to eliminate the potential for 0:12:51.480 --> 0:12:54.559 the Houthis to launch attacks. The problem is, the Houthis 0:12:54.600 --> 0:12:57.120 have been subject to attack for over a decade by 0:12:57.160 --> 0:13:01.840 the Saudis, and even these naval launched from the Carrier 0:13:01.880 --> 0:13:06.000 Eisenhower and from support bases ashore haven't been able to 0:13:06.040 --> 0:13:07.760 eliminate the threat of the Hoothies. 0:13:08.440 --> 0:13:11.120 What's it like going through the Suez Canal right now? 0:13:11.200 --> 0:13:12.920 Because one of the reasons we wanted to talk to 0:13:13.000 --> 0:13:16.680 you is, you know, you are speaking to people within 0:13:16.800 --> 0:13:19.240 the trade. I imagine they are telling you some very 0:13:19.240 --> 0:13:23.439 interesting and exciting stories right now, which would be very 0:13:23.480 --> 0:13:27.320 different to what going through the Suez Canal has historically been. 0:13:27.400 --> 0:13:27.480 Like. 0:13:27.640 --> 0:13:30.959 I remember reading this one book about global shipping. What 0:13:31.000 --> 0:13:34.200 was it called, I think ninety Percent of Everything something 0:13:34.240 --> 0:13:38.080 like that, and the author wanted to write about shipping 0:13:38.160 --> 0:13:40.320 and she wanted to do a sort of first person narrative. 0:13:40.400 --> 0:13:42.840 So she went on a container ship that went through 0:13:42.840 --> 0:13:45.560 the Suez Canal, and from what I remember, it was 0:13:45.920 --> 0:13:49.800 really boring, literally dry as dust. Nothing happened, there's really 0:13:49.840 --> 0:13:51.959 not that much to see, but it was still a 0:13:51.960 --> 0:13:55.120 good book. But I think things must be different right now. 0:13:56.040 --> 0:13:59.000 Yeah, that was Rose George's book, an excellent book on it. 0:13:59.000 --> 0:14:01.400 It's usually pretty rude, but this is also the area 0:14:01.480 --> 0:14:05.040 where we saw Somali piracy. And so right now, when 0:14:05.040 --> 0:14:07.240 you come out of the Suez Canal and you're heading southbound, 0:14:07.240 --> 0:14:07.720 you're heading for. 0:14:07.720 --> 0:14:08.480 The Indian Ocean. 0:14:08.880 --> 0:14:11.200 You'll get to a point about midway down the Red 0:14:11.240 --> 0:14:14.600 Sea around the port of Jetta and Port Sudan, where 0:14:14.679 --> 0:14:17.120 you'll stop and meet an offshore vessel. And what ships 0:14:17.120 --> 0:14:20.400 are doing right now are taking on board security detachments. 0:14:20.920 --> 0:14:24.280 These are private security detachments. They come on board and 0:14:24.320 --> 0:14:26.800 they will ride the ship out until you're about off 0:14:26.800 --> 0:14:29.520 the coast of Oman, and then those crews will get 0:14:29.560 --> 0:14:32.240 off onto another supply boat and then they'll probably board 0:14:32.280 --> 0:14:34.120 another vessel and go the other way. And those crews 0:14:34.520 --> 0:14:37.120 do that for about two to three months. And these 0:14:37.320 --> 0:14:42.760 security detachments provide guards against small boats, kind of against drones, 0:14:42.840 --> 0:14:46.400 but they're really geared more to the smaller boat threat. 0:14:47.080 --> 0:14:49.120 And right now what you're seeing is is you get 0:14:49.160 --> 0:14:51.160 down to the very southern end of the Red Sea. 0:14:51.240 --> 0:14:52.920 The southern Red Sea is like a funnel when you 0:14:52.960 --> 0:14:55.480 get down to what's called the bob El Mendab and 0:14:55.640 --> 0:14:58.680 you're sailing literally right along the coast of Yemen within 0:14:58.800 --> 0:15:01.320 sight of the coast of Yemen and men places. It's 0:15:01.360 --> 0:15:03.280 about one hundred and some miles long, about one hundred 0:15:03.280 --> 0:15:04.960 fifty miles long, and it's kind of a. 0:15:04.960 --> 0:15:06.200 Shooting gallery right now. 0:15:06.400 --> 0:15:10.560 What we've seen happen escalating since December is the Huthi 0:15:10.640 --> 0:15:13.520 would take shots at vessels and it's very hard to hide. 0:15:13.560 --> 0:15:16.240 Even if you turn off your ais. This is the 0:15:16.280 --> 0:15:19.920 transponder ships have, you are clearly visible. And plus there 0:15:19.920 --> 0:15:23.160 are vessels in the area that we believe are spotting, 0:15:23.200 --> 0:15:27.040 either Iranian vessels or yemen vessels that are spotting. And 0:15:27.440 --> 0:15:30.680 lots of times these attacks take place and you're getting 0:15:30.800 --> 0:15:35.720 calls from navy vessels on open channels to evade or 0:15:35.720 --> 0:15:37.960 turn around. So, for example, on January ninth, which was 0:15:38.040 --> 0:15:42.400 probably the largest battle we've seen, the US pushed through 0:15:42.560 --> 0:15:45.880 four US flag vessels. They came down through the region 0:15:45.920 --> 0:15:48.880 they had been holding north of the area. They were 0:15:48.880 --> 0:15:51.440 told to go ahead and sail through. They didn't have 0:15:51.480 --> 0:15:54.280 a direct escort. They were sailing under the protection of 0:15:54.320 --> 0:15:57.240 the US Navy. But while they were sailing down when 0:15:57.280 --> 0:15:59.960 the strike started, they received word from the British nation 0:16:00.720 --> 0:16:04.600 that they needed to increase speed and escalate. And talking 0:16:04.640 --> 0:16:08.760 with the crews on these ships, a couple of things came. 0:16:07.800 --> 0:16:08.640 Through very clearly. 0:16:08.720 --> 0:16:12.040 Number one, it was three hours of really excitement. I 0:16:12.040 --> 0:16:13.800 won't say the words they were using, but there was 0:16:13.840 --> 0:16:16.520 a lot of stuff lying and they used some very 0:16:16.560 --> 0:16:18.320 good salty terms to explain it. 0:16:18.760 --> 0:16:21.360 But they also wanted to thank the Navy crews. 0:16:21.400 --> 0:16:23.520 They said they would have not gotten through that without 0:16:23.640 --> 0:16:25.960 the effort of the US Navy and the other navies 0:16:26.000 --> 0:16:26.520 that were there. 0:16:26.880 --> 0:16:27.840 But there were issues. 0:16:27.880 --> 0:16:30.479 For example, in the US ships there was no secure communication. 0:16:30.520 --> 0:16:33.000 There was actually an instance on one ship where the 0:16:33.120 --> 0:16:35.360 Navy tried to call them on a satellite phone on 0:16:35.400 --> 0:16:37.600 board the ship, but the ship had a series of 0:16:37.640 --> 0:16:39.480 satellite phones and they called the wrong number. 0:16:39.840 --> 0:16:42.600 So communication wasn't great. 0:16:42.760 --> 0:16:45.080 And so again this is not a mission that's very 0:16:45.160 --> 0:16:47.600 high up in terms of the US Navy and other navies. 0:16:47.880 --> 0:16:50.560 So practicing it doesn't really take a lot of time, 0:16:51.000 --> 0:16:52.680 and it's kind of showing right now. 0:16:53.640 --> 0:16:56.640 Oh so these things like not having the right phone 0:16:56.680 --> 0:16:58.880 number or not knowing like this is just a function 0:16:59.000 --> 0:17:01.200 of this is sort of this is not something that's 0:17:01.200 --> 0:17:04.919 been in practice, not something that's anticipated. Were this to persist, 0:17:05.440 --> 0:17:07.760 these things would presumably get smoothed over. 0:17:08.600 --> 0:17:10.800 Well, I don't want to say the Navy doesn't practice, 0:17:10.880 --> 0:17:14.479 because they actually have organizations within their their structure that 0:17:14.560 --> 0:17:17.720 does this. The problem is it's very low priority. You know, 0:17:18.600 --> 0:17:23.119 it doesn't get the attention and probably the resources it deserves. 0:17:23.480 --> 0:17:25.840 And there's also the perception that this was going to 0:17:25.880 --> 0:17:27.639 go away pretty quick, that you know, we're going to 0:17:27.720 --> 0:17:29.480 do a show of force, We're going to strike the 0:17:29.520 --> 0:17:31.840 Houthi and that should clear it up. And what we've 0:17:31.880 --> 0:17:34.760 seen is the Houthi are very kind of being tenacious here. 0:17:35.160 --> 0:17:38.520 They keep shooting one missile and while the Navy will 0:17:38.520 --> 0:17:40.600 make the point, well, they're not shooting twenty two missiles 0:17:40.600 --> 0:17:43.960 like they did on January ninth. If that one missile 0:17:44.160 --> 0:17:46.800 hits a ship, it's going to deter other vessels from 0:17:46.880 --> 0:17:47.440 going through. 0:17:48.080 --> 0:17:51.000 Do you hear anything from the actual the people working 0:17:51.040 --> 0:17:56.120 on the ship or the captains about reluctance to work 0:17:56.160 --> 0:17:58.479 on ships that are taking this route. Has there been 0:17:58.480 --> 0:18:01.480 any concern from just sort of the pure safety of like, Okay, 0:18:01.480 --> 0:18:05.680 maybe the company deems it worthwhile to continue to take 0:18:05.680 --> 0:18:08.920 this route, but the safety of the crew. 0:18:10.000 --> 0:18:12.440 Well, one of the things that the crews will say 0:18:12.680 --> 0:18:15.520 is they're fine going through. They know that there's risks 0:18:15.560 --> 0:18:18.520 involved in shipping in every day. What they want is 0:18:18.600 --> 0:18:21.040 to be compensated, you know, I mean again, ships crews 0:18:21.040 --> 0:18:22.560 are doing this and one of the things you saw 0:18:22.640 --> 0:18:25.480 early on is a lot of the foreign crews, for example, 0:18:25.520 --> 0:18:28.919 through their agreements, were able to get additional not just money, 0:18:29.240 --> 0:18:31.679 but you know, what they really wanted was, Hey, if 0:18:31.680 --> 0:18:33.600 something happens to me, I'm going to have insurance and 0:18:33.640 --> 0:18:36.080 I'm going to be covered by this, and you know, 0:18:36.160 --> 0:18:38.399 if I'm hurt, and worse, if I'm killed, you know, 0:18:38.480 --> 0:18:41.200 I want to make sure my family at home. Ironically, 0:18:41.200 --> 0:18:43.639 the place I heard the most issues with was on 0:18:43.800 --> 0:18:46.480 US ships, where US ships have to deal, for example, 0:18:46.520 --> 0:18:50.560 with multiple different unions, and different unions had different agreements 0:18:50.600 --> 0:18:53.120 in place, and there was actually an issue recently where 0:18:53.160 --> 0:18:55.520 two ships had to go through and they actually got 0:18:55.520 --> 0:18:57.960 turned around, two US flag ships. First time I've heard 0:18:58.000 --> 0:19:01.359 that in a long time, that US ships were denied passage, 0:19:01.760 --> 0:19:05.600 but some of those crew were not yet given the agreement. 0:19:05.640 --> 0:19:09.199 Now the company has since worked out those agreements, but 0:19:09.320 --> 0:19:11.159 for the crew going through, they kind of like that 0:19:11.200 --> 0:19:12.720 in place before they get shot at. 0:19:13.520 --> 0:19:16.960 So we have seen shipping rates go up recently, but 0:19:17.040 --> 0:19:19.680 my impression is that a lot of the shipping rates 0:19:19.800 --> 0:19:22.480 or you know, the shipping rate is sort of pre agreed, 0:19:23.080 --> 0:19:26.240 contractually agreed some time ago, and yet we have seen 0:19:26.640 --> 0:19:30.360 this increase in costs. You described how the wartime insurance 0:19:30.440 --> 0:19:33.840 rate goes up. It seems fairly quickly. You have captains 0:19:34.040 --> 0:19:38.640 that are presumably wanting additional compensation for taking on this risk. 0:19:39.280 --> 0:19:44.600 How quickly and how much could shipping rates actually rise 0:19:44.680 --> 0:19:45.200 from here? 0:19:46.480 --> 0:19:48.960 So you know what we saw during the height of 0:19:49.000 --> 0:19:51.399 the supply chain crisis. You see all those charts, that 0:19:51.560 --> 0:19:53.680 was the spot right, that's the rate you pay if 0:19:53.680 --> 0:19:57.120 you don't have a long term commitment in place. Most 0:19:57.160 --> 0:19:59.879 shipping most containers, for example, are on long term t 0:20:00.119 --> 0:20:02.639 charters and so those you know, about seventy percent of 0:20:02.640 --> 0:20:05.000 the cargo it's moved is on long term. But ironically, 0:20:05.520 --> 0:20:08.520 the route between Europe and Asia was up for renegotiation 0:20:08.720 --> 0:20:11.280 as of January first, so right when this was taking place, 0:20:11.359 --> 0:20:13.879 we saw that happen. But even if you have a 0:20:14.000 --> 0:20:17.600 long term shipping route agreement, there are charges that can 0:20:17.640 --> 0:20:20.359 be imposed on top of that, search charges for extra 0:20:20.480 --> 0:20:23.720 fuel for port stays, and so a lot of company, 0:20:23.800 --> 0:20:25.720 you know, a lot of companies that were shipping goods 0:20:25.960 --> 0:20:28.120 all of a sudden started getting notices is like, well, 0:20:28.119 --> 0:20:30.080 my container's going to be one thousand dollars more than 0:20:30.119 --> 0:20:32.040 I thought it was going to be. Well, that's because 0:20:32.040 --> 0:20:34.119 the company sat there and said, well fuel, I had 0:20:34.160 --> 0:20:36.679 to stop in South Africa and by really expensive fuel. 0:20:37.080 --> 0:20:39.800 Plus we're not going to the port initially we were 0:20:39.800 --> 0:20:42.000 going to drop your container off in. So we got 0:20:42.000 --> 0:20:43.879 to drop it off in a subport and it's got 0:20:43.920 --> 0:20:46.280 to be moved over there. And so we saw the 0:20:46.320 --> 0:20:50.000 prices begin to escalate because the shipping companies tend to 0:20:50.040 --> 0:20:53.639 pass that cost on. And what you're seeing now is 0:20:54.119 --> 0:20:57.680 even the long term rates are seeing readjustments because of that. 0:20:58.080 --> 0:21:01.080 Plus the shipping companies have to re adjust their schedules, 0:21:01.119 --> 0:21:02.680 you know, if you had a container ship that was 0:21:02.720 --> 0:21:05.320 going through the Suez and stopping in the Med, that's 0:21:05.359 --> 0:21:08.920 not happening now. And now you're seeing ships stop at 0:21:08.960 --> 0:21:12.800 other terminals, dumping their containers and reshuffling them. So the 0:21:12.880 --> 0:21:15.320 ports at the entrance to the Med, Tangier and al 0:21:15.359 --> 0:21:18.439 Jacayers is getting a lot of business because you have 0:21:18.480 --> 0:21:22.280 to reshuffle containers. And so now the freight rates are 0:21:22.320 --> 0:21:24.120 changing that if you look at the freight rate charts 0:21:24.200 --> 0:21:26.199 right now, they kind of peaked and they've kind of 0:21:26.280 --> 0:21:30.919 dipped down and now they're starting to stabilize at this point. 0:21:31.000 --> 0:21:34.000 But we're also seeing impacts in other ways. So for example, 0:21:34.040 --> 0:21:37.879 the US freight rates get negotiated by May first, but 0:21:37.960 --> 0:21:42.480 we're seeing freight rates increase to the United States. Why 0:21:42.520 --> 0:21:45.800 because a couple of factors. If you're shipping containers from 0:21:45.840 --> 0:21:48.760 Asia to Europe, I mean to Asia to North America, 0:21:48.800 --> 0:21:51.399 for example, well you may be shipping it. 0:21:51.480 --> 0:21:53.160 You know, I don't want to go to LA and Long. 0:21:53.000 --> 0:21:55.040 Beach anymore because of the issues with LA and Long 0:21:55.040 --> 0:21:57.520 Beach that happened a couple of years ago. So I'm 0:21:57.520 --> 0:22:00.399 going to put my containers on these new Neo Panama ships. 0:22:00.440 --> 0:22:02.920 They go through the big lane of the Panama Canal 0:22:02.960 --> 0:22:05.600 that open in twenty sixteen. But like we don't have 0:22:05.720 --> 0:22:08.920 enough choke point issues Panama Canals. At low water levels, 0:22:09.280 --> 0:22:11.760 we've seen a two thirds reduction in the number of 0:22:11.800 --> 0:22:15.800 ships going through there. So now you've got this fully 0:22:15.840 --> 0:22:19.000 loaded Panamac Neo Panamac ship. It arrives on the Pacific 0:22:19.080 --> 0:22:21.760 side of the Panama Canal and they can't get through 0:22:21.840 --> 0:22:23.800 because it draws too much water. Now I got to 0:22:23.840 --> 0:22:27.959 take three thousand boxes off rail them across Panama and 0:22:28.000 --> 0:22:29.159 meet them on the other side. 0:22:29.200 --> 0:22:30.720 That's a cost I didn't plan on. 0:22:31.480 --> 0:22:34.280 That ship comes to the United States offloads, but instead 0:22:34.280 --> 0:22:36.879 of going back the way it came because it doesn't 0:22:36.880 --> 0:22:39.960 want to take a passage through the Panama Canal, It's 0:22:40.000 --> 0:22:42.760 now going to head back to Asia through the Mediterranean 0:22:42.800 --> 0:22:45.200 and the Suez Canal. But wait a minute, the HOOTHI 0:22:45.240 --> 0:22:47.600 are there. Now I got to head around Africa, and 0:22:47.640 --> 0:22:50.919 so what you're seeing is a lot of surcharges and 0:22:51.000 --> 0:22:54.720 extra charges and most importantly, delays in the movement of 0:22:54.760 --> 0:22:56.240 goods that were not planned on. 0:22:56.720 --> 0:22:58.840 I want to talk a little bit more about the 0:22:58.880 --> 0:23:02.640 military response, but I you know, I imagine We could 0:23:02.680 --> 0:23:06.000 do like a twenty episode series about the history and 0:23:06.119 --> 0:23:09.280 founding of the US Navy, but we are just doing 0:23:09.320 --> 0:23:11.880 you know, we have a thirty five minute podcast. Can 0:23:11.920 --> 0:23:14.520 you just zoom out? You know, I've heard that the 0:23:14.600 --> 0:23:18.040 US Navy is sort of originally created in part to 0:23:18.160 --> 0:23:21.159 you know, to secure shipping against pirates, et cetera. Can 0:23:21.200 --> 0:23:23.440 you talk a little bit about, you know, the history 0:23:23.800 --> 0:23:27.480 and just the expectations globally for what the Navy is 0:23:27.520 --> 0:23:31.040 expected to do anywhere when there is either a military 0:23:31.080 --> 0:23:33.359 threat or a piracy threat to world trade. 0:23:34.320 --> 0:23:37.000 Yeah, I mean two hundred and thirty years ago, this year, 0:23:37.040 --> 0:23:41.480 seventeen ninety four, the Navy will basically create itself with 0:23:41.560 --> 0:23:44.440 the Naval Act of that year, where they build six frigates, 0:23:44.800 --> 0:23:47.560 one of which is still in commission today US Constitution 0:23:47.840 --> 0:23:51.880 up in Boston. Those ships were built specifically because the 0:23:52.000 --> 0:23:55.920 state of Algiers had seized eleven American ships and we're 0:23:55.960 --> 0:24:00.399 holding them hostage for basically tribute for the agreement with 0:24:00.440 --> 0:24:03.240 the United States. So literally, the birth of the US 0:24:03.359 --> 0:24:09.119 Navy is founded on an anti piracy and defend commercial shipping. Now, ironically, 0:24:09.400 --> 0:24:11.679 those ships aren't built in time to fix it. What 0:24:11.760 --> 0:24:15.960 we go do is basically negotiate out a treaty without jeers, 0:24:16.000 --> 0:24:18.440 and they released the vessels and we have an agreement. 0:24:18.720 --> 0:24:21.520 But then fast forward a few years later, eighteen oh one, 0:24:22.040 --> 0:24:25.760 the Shaw of Tripoli announces war with the United States 0:24:25.760 --> 0:24:28.160 by having his men march down to the US consulate 0:24:28.160 --> 0:24:32.280 and Tripoli and chop down the flagpole. And for five 0:24:32.400 --> 0:24:36.240 years Thomas Jefferson has got a wage of war against 0:24:36.240 --> 0:24:40.080 the Barbary pirates. We try an overwhelming military force, it 0:24:40.080 --> 0:24:44.480 doesn't actually work. We try and overland military operations, which 0:24:44.560 --> 0:24:47.760 the Marines immortalized in There to the Shores of Tripoli 0:24:48.200 --> 0:24:51.000 in their hymn. But in truth, what we wind up 0:24:51.040 --> 0:24:52.719 doing is paying off the best shore are. We give 0:24:52.760 --> 0:24:55.160 him thirty thousand dollars and we get a deal. 0:24:55.359 --> 0:24:57.000 He releases some captured. 0:24:56.640 --> 0:25:00.679 Americans, including the crew of an American naval vessel, and 0:25:00.840 --> 0:25:04.080 we get peace. Fast forward one hundred years, German U 0:25:04.080 --> 0:25:08.320 boats start sinking American ships on the high seas, ten vessels, 0:25:08.320 --> 0:25:12.080 sixty four crew members killed. That's the reason Woodrow Wilson 0:25:12.119 --> 0:25:16.040 goes before Congress on April second, nineteen seventeen and wants 0:25:16.040 --> 0:25:19.240 a declaration of war, and so the US Navy has 0:25:19.520 --> 0:25:23.240 historically been a protector of trade, but usually it's a 0:25:23.240 --> 0:25:27.320 protector of US flag shipping. But that all changes after 0:25:27.359 --> 0:25:30.120 World War Two. After World War two, when the Germans 0:25:30.160 --> 0:25:33.720 and the Japanese are vanquished, the seas become this great 0:25:33.840 --> 0:25:38.919 open medium, this great blue ocean of commerce that takes place. 0:25:39.040 --> 0:25:41.280 And one of the things that we see happen beyond 0:25:41.400 --> 0:25:46.359 technological changes, supertankers and containerization, is we see the birth 0:25:46.359 --> 0:25:51.480 of open registries the Marshall Islands, Panama, Liberia, so that 0:25:52.240 --> 0:25:56.200 you can have lower shipping costs because those countries don't 0:25:56.240 --> 0:25:59.439 require a huge amount of overhead and taxes, and they 0:25:59.440 --> 0:26:01.520 don't require because they don't have to pay for navies 0:26:01.880 --> 0:26:05.680 because no one is threatening the ocean commerce. Now twenty 0:26:05.760 --> 0:26:09.160 twenty three, here come the Houthi and they are threatening 0:26:09.200 --> 0:26:12.600 ocean commerce. But you don't have the Panamanian, Liberian, Marshall 0:26:12.640 --> 0:26:15.720 Island navvies show up because they don't basically exist. It 0:26:15.840 --> 0:26:18.399 falls upon the US Navy, the Royal Navy, and these 0:26:18.440 --> 0:26:21.760 other navies to defend the commerce because we move commerce 0:26:21.800 --> 0:26:24.639 differently now. We don't move it on national ships, we 0:26:24.680 --> 0:26:26.320 move it on international ships. 0:26:26.640 --> 0:26:29.160 Do you think you could see more of a reordering, 0:26:29.320 --> 0:26:32.399 a shift, a wave from flags of convenience. 0:26:34.040 --> 0:26:36.359 I think the thing you may see is not so 0:26:36.440 --> 0:26:38.440 much that I would argue, because I think, you know, 0:26:38.760 --> 0:26:42.400 those ships are getting the protection that they need. I'm 0:26:42.440 --> 0:26:44.400 what I'm concerned about with the Houthi, and what they're 0:26:44.440 --> 0:26:48.040 doing is breaking up the idea of this international blue 0:26:48.080 --> 0:26:50.719 water where you can move goods freely. And what we 0:26:50.760 --> 0:26:53.119 start to see is something that Bruce Jones talks about 0:26:53.160 --> 0:26:55.480 in his great book To Rule the Waves, where we 0:26:55.520 --> 0:26:59.280 start seeing the breakdown and creation of regional shipping because 0:26:59.320 --> 0:27:01.560 people don't want to ship long distances, they want to 0:27:01.600 --> 0:27:04.639 ship local distances. We're seeing that right now, for example 0:27:04.680 --> 0:27:07.360 in the l ANDNG trade where you have three big 0:27:07.400 --> 0:27:11.800 players Australia Guitar and the United States. But now you know, 0:27:11.840 --> 0:27:14.880 we're really seeing that shift take place where the US 0:27:14.960 --> 0:27:17.880 is providing most of their LNG now to Europe vice 0:27:17.920 --> 0:27:21.720 Asia Guitars is not shipping to Europe as much. They're 0:27:21.760 --> 0:27:25.880 moving to provide their LNG to Asia. So my concern 0:27:26.440 --> 0:27:29.439 is that if we can't handle a threat like the Huthi, 0:27:29.880 --> 0:27:32.879 and again we've seen multiple issues happen in the supply 0:27:33.000 --> 0:27:36.119 chain Remember, the big difference you have now today than 0:27:36.160 --> 0:27:39.480 ever before is not just the volume of trade. We've 0:27:39.520 --> 0:27:42.480 gone from moving half a billion tons of cargo on 0:27:42.520 --> 0:27:45.760 the world's oceans in nineteen fifty to twenty two billion 0:27:46.359 --> 0:27:49.840 tons today. It's the velocity. And when you have something 0:27:49.920 --> 0:27:52.679 moving as fast and as large as that, all it 0:27:52.720 --> 0:27:55.119 takes is a little you know, sand pebble on the 0:27:55.160 --> 0:27:56.760 runway and you create a buff. 0:28:13.160 --> 0:28:17.200 So when you're thinking about comparing this crisis versus say, 0:28:17.320 --> 0:28:19.639 the Samali piracy that people talked a lot about a 0:28:19.680 --> 0:28:23.639 decade ago, how much more is it is? The basically, 0:28:23.680 --> 0:28:27.880 as you say, the increased velocity of world trade since then, 0:28:27.960 --> 0:28:32.040 I assume it's continued to grow basically magnifies the degree 0:28:32.040 --> 0:28:32.600 of disruption. 0:28:33.680 --> 0:28:36.159 Oh, I mean even since two thousand you've seen a 0:28:36.240 --> 0:28:39.680 massive increase. But the Somali piracy was very limited. Remember 0:28:39.720 --> 0:28:42.160 what Somali piracy was. It was an issue a sure 0:28:42.360 --> 0:28:45.520 drove the Somalis to see and then what they were 0:28:45.520 --> 0:28:48.680 doing was seizing vessels and holding them for ransom. It 0:28:48.760 --> 0:28:52.040 was basically ransomware, you know what they were doing. They 0:28:52.040 --> 0:28:54.160 would seize a vessel, bring in the Somali waters and 0:28:54.280 --> 0:28:56.120 wait for a bag of money to fall from the 0:28:56.160 --> 0:28:58.520 sky and then they would release the vessel and you 0:28:58.600 --> 0:29:01.880 could interdict that by moving ships further at sea. We 0:29:01.920 --> 0:29:04.960 saw navy patrols come up. And you know, the only 0:29:05.000 --> 0:29:07.680 time you saw the US Navy, for example, take direct 0:29:07.720 --> 0:29:11.480 action was when an American flag ship was captured, when 0:29:11.480 --> 0:29:14.840 Marisk Alabama was captured and Captain Phillips was taken. Then 0:29:14.880 --> 0:29:17.280 the US interseas because you have to save Tom Hanks. 0:29:17.280 --> 0:29:19.920 He's a national treasure. You can't allow him to fall 0:29:19.920 --> 0:29:23.479 into the hands of the Somalis. But what's different now 0:29:23.600 --> 0:29:26.920 is the Huthi aren't doing this for monetary reasons. They're 0:29:26.920 --> 0:29:30.920 doing it for ideological reasons, and they're able to affect 0:29:30.920 --> 0:29:34.440 the trade on an international level. The Somali piracy was 0:29:34.480 --> 0:29:36.880 a blip on the radar. It didn't really affect world 0:29:36.920 --> 0:29:40.680 trade at all. You didn't even see rates go up 0:29:40.840 --> 0:29:43.400 very much because of that. This is much different. 0:29:43.960 --> 0:29:47.720 You mentioned that the Indian Navy has gotten involved, which 0:29:47.760 --> 0:29:51.480 sort of raises the question in a few multipolar world 0:29:51.560 --> 0:29:55.360 arising other superpower powers, and the other big one is China, 0:29:55.400 --> 0:29:58.640 and of course they're a major beneficiary of the trade 0:29:58.680 --> 0:30:02.800 through this route, what is your expectation in the future, 0:30:02.960 --> 0:30:07.680 will there be more sort of regional shipping police forces 0:30:07.680 --> 0:30:11.600 to facto, Would you expect to see an expectation that 0:30:11.720 --> 0:30:15.160 other larger countries that benefit directly from this type of 0:30:15.200 --> 0:30:19.560 trade have more resources in the area. 0:30:19.680 --> 0:30:22.880 So I was very surprised, for example, that the US 0:30:22.960 --> 0:30:25.680 and other nations didn't put together some sort of un 0:30:25.800 --> 0:30:28.600 element here to go in and do this. You know, 0:30:29.040 --> 0:30:31.080 basically there was an argument that the US waited for 0:30:31.160 --> 0:30:34.560 a UN action to before they struck. The fear you 0:30:34.640 --> 0:30:37.280 have here is that nations will lack unilaterally. So talk 0:30:37.320 --> 0:30:40.320 about the Indians for a second. Indians are greatly impacted 0:30:40.320 --> 0:30:43.480 by this. India has seen a growth of trade to Europe. 0:30:43.920 --> 0:30:46.080 And you know, India trade to Europe goes right through 0:30:46.080 --> 0:30:47.840 the SEWAs Canal, and now if you've got to go 0:30:47.880 --> 0:30:51.080 around Africa, that's like three four times the distance for 0:30:51.240 --> 0:30:55.440 Indian trade to go. It's a massive change for them. Plus, 0:30:55.560 --> 0:30:58.959 Indian crews represent a big majority of the world's cruise 0:30:59.000 --> 0:31:01.040 out there, and one of the things we've seen is 0:31:01.040 --> 0:31:03.360 the Indian Navy come to the rescue of their crews. 0:31:03.440 --> 0:31:05.800 The ship that was just hit, the Marlin Wanda, had 0:31:05.840 --> 0:31:08.320 a largely Indian crew on board, and it was an 0:31:08.320 --> 0:31:11.880 Indian Navy destroyer that actually came on board, fought the 0:31:11.920 --> 0:31:15.600 fire and helped save the vessel. And you can see 0:31:15.800 --> 0:31:18.200 an issue where we saw during the piracy issue where 0:31:18.240 --> 0:31:22.520 India when they encountered pirates, did not really use a 0:31:22.560 --> 0:31:25.560 lot of restraint in their forests. They were pretty clear 0:31:25.640 --> 0:31:29.960 of using overt force to convince the Somali pirates not 0:31:30.080 --> 0:31:32.800 to mess with ships with Indians on board, and the 0:31:32.800 --> 0:31:35.320 fear is you can see that again. You also have 0:31:35.320 --> 0:31:38.840 the issue with China. China has a overseas squadron based 0:31:38.880 --> 0:31:41.680 down at Djibouti. We haven't seen much from them. They're 0:31:41.800 --> 0:31:44.920 escorting their vessels in and out, very low key, but 0:31:45.040 --> 0:31:47.240 you know, if there's an issue with a Chinese ship, 0:31:47.280 --> 0:31:50.200 will China intervene. We've already seen a couple of Chinese 0:31:50.200 --> 0:31:53.520 ships come under attack with no action by China. But 0:31:53.560 --> 0:31:57.120 the fear is that you'll see regional navies, especially navies 0:31:57.160 --> 0:32:00.240 that have a big impact on shipping one and I 0:32:00.280 --> 0:32:02.720 think it's the big player to watch right now. They're 0:32:02.800 --> 0:32:06.200 really interesting. They've come out in force after the attack 0:32:06.280 --> 0:32:09.160 on a ship in the Arabian Sea pretty close to 0:32:09.280 --> 0:32:10.720 Indian territorial waters. 0:32:11.720 --> 0:32:14.360 I just want to press on the US military point 0:32:14.640 --> 0:32:17.000 a little bit more because you did a fantastic job 0:32:17.040 --> 0:32:21.120 of laying out the historic importance of protecting trade to 0:32:21.520 --> 0:32:23.760 the US Navy. That was sort of the whole raison 0:32:24.000 --> 0:32:28.560 debtch in many respects. However, we have seen this sort 0:32:28.560 --> 0:32:31.480 of reluctance or at least a debate right now to 0:32:31.640 --> 0:32:34.880 engage further with what's going on in this US. Is 0:32:34.920 --> 0:32:38.600 that unwillingness on the part of the US to get 0:32:38.640 --> 0:32:43.560 involved in yet another thorny military conflict or is it 0:32:43.960 --> 0:32:47.440 I guess, inability in the sense that there are limits 0:32:47.560 --> 0:32:53.040 to what nation military forces can actually do against what 0:32:53.200 --> 0:32:55.080 is essentially guerrilla warfare. 0:32:55.720 --> 0:33:00.920 Yeah, this represents a historically, you know, common threat that 0:33:00.960 --> 0:33:03.600 the Navy has faced in the past, but not one recently, 0:33:03.920 --> 0:33:05.440 and so the Navy is not, I would argue, has 0:33:05.480 --> 0:33:07.680 not done a great job of articulating what they're doing 0:33:07.680 --> 0:33:10.120 in their mission. They haven't put a lot of press 0:33:10.240 --> 0:33:12.920 on this in many ways, so I don't think they're 0:33:12.920 --> 0:33:15.880 doing a great job in conveying exactly how important for 0:33:15.960 --> 0:33:19.400 most Americans they see this as a European Asian conflict. 0:33:19.800 --> 0:33:21.600 This is where the trade is it really, you know, 0:33:21.920 --> 0:33:25.600 they're not contextualizing how this impacts the United States. And 0:33:25.640 --> 0:33:27.880 my argument keep you know, I will keep saying, is 0:33:27.960 --> 0:33:30.080 it's going to It just takes time to work its 0:33:30.080 --> 0:33:32.840 way through the supply chain system. By the time you 0:33:32.880 --> 0:33:35.760 feel it, it's too late to react. And that's one 0:33:35.800 --> 0:33:38.120 of the issues here. I do think that the US 0:33:38.600 --> 0:33:41.600 Navy and the military in some ways are being hamstrung 0:33:41.680 --> 0:33:44.480 by the resources given to them. I think they were 0:33:44.520 --> 0:33:49.040 delayed in doing anything when the Carnie had this very visible, 0:33:49.240 --> 0:33:52.920 you know, intervention and save three ships back in early December. 0:33:52.920 --> 0:33:55.240 I think about December ninth, that should have been a 0:33:55.280 --> 0:33:57.000 key moment there. That should have been a moment of 0:33:57.040 --> 0:33:59.840 where a decision was made about whether or not to 0:34:00.000 --> 0:34:02.560 do a large scale protection. It took several you know, 0:34:02.760 --> 0:34:05.640 several weeks after that to really announce it and then 0:34:05.680 --> 0:34:08.360 to get it into full force. But this is a 0:34:08.480 --> 0:34:11.719 historic mission for US and other navies. And the other 0:34:11.760 --> 0:34:15.240 element is really the slow reaction the US has gotten 0:34:15.280 --> 0:34:18.200 from other allies. You've seen the British Navy, you've seen 0:34:18.239 --> 0:34:20.400 the French and the Italians, but not a lot of 0:34:20.440 --> 0:34:22.480 other navies coming in. I mean, the Indians are kind 0:34:22.520 --> 0:34:26.120 of doing this separately. You haven't seen Asian navies, the Japanese, 0:34:26.200 --> 0:34:29.880 the Koreans come in. This really should be a unified 0:34:29.960 --> 0:34:32.960 effort because this is an attack not on just American shipping, 0:34:33.239 --> 0:34:36.520 but on world shipping. And to me, this is the 0:34:36.560 --> 0:34:40.160 context of why this needs to be better articulated. And 0:34:40.200 --> 0:34:43.800 again the concept seems to be handed off to the military. 0:34:43.880 --> 0:34:47.040 Let the military solve this problem when the root cause 0:34:47.080 --> 0:34:49.600 of this problem goes back to what is happening in 0:34:49.719 --> 0:34:54.120 Israel and Gaza. And until you fix that situation, until 0:34:54.120 --> 0:34:56.640 you know, until there's Mideast peace, then you have a 0:34:56.680 --> 0:34:59.560 problem with the Huthi. And how do you exert pressure 0:34:59.600 --> 0:35:02.640 against the There was a story a few weeks ago 0:35:02.680 --> 0:35:05.240 about the shipping companies trying to buy off the Houthis. 0:35:05.480 --> 0:35:08.239 I don't think you buy off the hoothies because they're 0:35:08.280 --> 0:35:11.400 not in this for money. However, there is leverage that 0:35:11.440 --> 0:35:15.480 can be exerted, either through Iran or some other forces 0:35:15.520 --> 0:35:18.239 at play here that maybe you can convince them to 0:35:18.320 --> 0:35:21.759 push back on the Huthi, or talk to the Israelis 0:35:21.760 --> 0:35:24.000 and have them back off, and see if you can 0:35:24.040 --> 0:35:27.080 get the Huthi to kind of diminish it. But it's 0:35:27.120 --> 0:35:30.080 really hard to make that argument because you're seeing lives 0:35:30.120 --> 0:35:33.319 lost in Palestine, whereas in the Red Sea all we're 0:35:33.360 --> 0:35:36.440 seeing as of now is the loss of money. 0:35:37.239 --> 0:35:39.920 Well, I mean, I'm glad you mentioned that, because it 0:35:40.040 --> 0:35:43.920 struck me when you were giving your excellent two minute 0:35:44.080 --> 0:35:46.600 entire history of the US Navy that even when you 0:35:46.680 --> 0:35:50.279 mentioned some of the key moments, it was actually some 0:35:50.320 --> 0:35:54.160 sort of political resolution and not the show of might 0:35:54.280 --> 0:35:57.400 itself that solved it, including you know, the original pirates 0:35:57.440 --> 0:35:59.799 and the Shop Tripoli. It sounds like it's something other 0:35:59.840 --> 0:36:03.120 than the force which announced it. So ultimately it sounds 0:36:03.239 --> 0:36:05.680 like this is going to be a problem as long 0:36:05.719 --> 0:36:09.520 as the underlying tensions in the area, the ideological issues 0:36:09.560 --> 0:36:10.799 the ongoing war are there. 0:36:11.920 --> 0:36:14.440 Yeah, you know, the Navy just recently had their Surface 0:36:14.520 --> 0:36:16.799 Naval Association meeting, where I mean, there was a lot 0:36:16.800 --> 0:36:20.160 of congratulations on the role of the Navy destroyers, which 0:36:20.239 --> 0:36:22.640 have been doing a phenomenal job. Again, I talk to mariners, 0:36:22.640 --> 0:36:25.520 They love the Navy for what they're doing. The problem is, 0:36:25.760 --> 0:36:29.040 again you're not convincing the Huthi about this or the ships. 0:36:29.080 --> 0:36:32.359 It's the insurance companies and the insurance companies are going 0:36:32.440 --> 0:36:33.960 to use the line from dumb and dumber, you know, 0:36:34.200 --> 0:36:36.600 as long as there's a chance of them getting a hit. 0:36:36.840 --> 0:36:39.040 You know, that means that we're going to have higher 0:36:39.080 --> 0:36:42.080 war risk insurance and therefore it's going to make it 0:36:42.160 --> 0:36:45.000 cost prohibitive to go through what we're seeing, for example, 0:36:45.080 --> 0:36:47.440 up in the Red Sea right now with the rebirth 0:36:47.480 --> 0:36:50.759 of this new trade going into Ukraine after the death 0:36:50.800 --> 0:36:54.000 of the Black Sea Grain initiative, we're seeing ships going 0:36:54.080 --> 0:36:56.799 up and back to the Ukraine. And that's seeing an 0:36:56.920 --> 0:36:59.719 escalation or a de escalation in the war risk from 0:36:59.760 --> 0:37:02.520 three percent down to one point twenty five. But that's 0:37:02.560 --> 0:37:06.360 still high. But you're dealing with bulkships and smaller ones 0:37:06.360 --> 0:37:08.920 which the cost isn't as much. Plus you have the 0:37:09.040 --> 0:37:12.359 Ukrainians working with insurance companies to underwrite that. We don't 0:37:12.360 --> 0:37:15.239 see that right now, and that's another element that could 0:37:15.280 --> 0:37:19.080 be done. But again, to underwrite war risk insurance for ships, 0:37:19.120 --> 0:37:21.200 they have to be of your registry. The US isn't 0:37:21.239 --> 0:37:25.600 going to underwrite ships under the Marshall Islands under Liberia probably, 0:37:25.680 --> 0:37:29.120 although most of those ships can trace ownership back to 0:37:29.680 --> 0:37:33.960 Western companies in the US, Europe, or even East Asia. 0:37:34.040 --> 0:37:37.040 How long until the slow down? And I guess the 0:37:37.040 --> 0:37:40.320 additional complexity that you've been talking about, how long until 0:37:40.400 --> 0:37:45.080 that makes its way to US supply chains because so far, 0:37:45.280 --> 0:37:46.840 you know, most people are talking about this as a 0:37:46.880 --> 0:37:50.279 Europe or Asia specific problem, but as you point out, 0:37:50.680 --> 0:37:52.759 it just takes some time to reverberate. 0:37:53.480 --> 0:37:55.600 Well, I mean, you're seeing that right now in Europe. 0:37:55.800 --> 0:37:59.759 You've had a very kind of high visibility. Some manufacturers 0:37:59.760 --> 0:38:02.400 tests and a few others had to shut down production 0:38:02.520 --> 0:38:06.319 because they're waiting to get parts to them. And you're 0:38:06.320 --> 0:38:08.399 seeing the impact of that also in the fact that, 0:38:08.440 --> 0:38:11.319 well we'll just throw them on airplanes and send them over. Well, 0:38:12.400 --> 0:38:14.759 thirty three percent of the world's aviation fuel goes through 0:38:14.760 --> 0:38:17.239 the Suez Canal, and now it's being diverted, and so 0:38:17.480 --> 0:38:21.319 now even aviation has issues associated with it. It tends 0:38:21.320 --> 0:38:22.920 to be weeks and where we're going to see it 0:38:22.960 --> 0:38:25.560 is right after the beginning of February. Because what has 0:38:25.640 --> 0:38:29.239 happened here is a lot of empty containers, which is 0:38:29.280 --> 0:38:32.160 the most unsexy topic you can talk about as empty containers. 0:38:32.440 --> 0:38:36.759 Empty containers have not been repositioned backed to Asia in 0:38:36.840 --> 0:38:39.960 time to be reloaded and put on ships to leave 0:38:40.040 --> 0:38:43.600 Asia before the Chinese New Year, before the second week 0:38:43.600 --> 0:38:47.040 in February, which means that goods that should have been 0:38:47.800 --> 0:38:52.040 sailing across this week and next week aren't going to 0:38:52.120 --> 0:38:54.200 be there, which means now you're going to see them 0:38:54.239 --> 0:38:57.240 about a month later. So we're going to see some delays, 0:38:57.480 --> 0:38:59.600 and again we're not going to see shortages. We're not 0:38:59.640 --> 0:39:01.920 gonna have a great toilet paper run that we had 0:39:02.400 --> 0:39:04.680 during twenty twenty. But what you will see is a 0:39:04.719 --> 0:39:07.440 little bit of a spike in inflation in terms of 0:39:07.640 --> 0:39:11.319 transportation costs, a lot of disruptions. One of the things 0:39:11.360 --> 0:39:13.520 that we did learn from twenty twenty, and a lot 0:39:13.560 --> 0:39:18.560 of freight forwarders and smart people who went with companies 0:39:18.880 --> 0:39:23.080 that do this professionally did was diversify how their goods 0:39:23.120 --> 0:39:24.960 come in. So there was a lot of companies who 0:39:25.000 --> 0:39:27.600 saw what was happening with the HOUTHI and sat there 0:39:27.640 --> 0:39:30.279 and said, hang on, let me get my goods on 0:39:30.320 --> 0:39:32.239 a container ship, and I'll go into La and Long 0:39:32.280 --> 0:39:34.000 Beach right now, because even though I hate it, I'll 0:39:34.040 --> 0:39:36.439 go in there because I know they're going to arrive 0:39:36.480 --> 0:39:37.919 and I can get them in there and I'll pay 0:39:37.920 --> 0:39:41.040 the rail because rail is looking for cargo right now. 0:39:41.239 --> 0:39:43.520 So a lot of people began to make movements, but 0:39:43.640 --> 0:39:46.760 some didn't. And the ones who didn't see this coming 0:39:46.760 --> 0:39:48.360 ahead of time, they're the ones. 0:39:48.160 --> 0:39:48.920 Who are going to see that. 0:39:49.000 --> 0:39:51.600 We're already seeing backlogs of ships, for example, start to 0:39:51.960 --> 0:39:54.399 pile up off of Savannah and some of the East 0:39:54.480 --> 0:39:55.080 Coast ports. 0:39:55.880 --> 0:39:58.840 You mentioned that empty containers are not the sexiest topic, 0:39:58.840 --> 0:40:01.480 but I disagree. I think the very first episode Tracy 0:40:01.480 --> 0:40:04.800 and I ever did on supply chain disruptions at the 0:40:04.920 --> 0:40:07.640 end of twenty twenty was sort of related to this 0:40:07.680 --> 0:40:10.160 phenomenon of the ships coming from China to the US 0:40:10.280 --> 0:40:12.640 dropping off their stuff, not having anything to ship back, 0:40:12.640 --> 0:40:14.880 so they immediately turned around and then there were no 0:40:14.960 --> 0:40:17.760 more empty containers, and that was sort of the seeds. 0:40:17.840 --> 0:40:19.480 So it's a big deal, all right. I just have 0:40:19.560 --> 0:40:22.560 one last question, which is that you know, I'm a dad, 0:40:22.680 --> 0:40:26.280 and I'm well into my mid forties, and so by nature, 0:40:26.440 --> 0:40:29.960 I have this sudden impulse to read more military history books. 0:40:30.520 --> 0:40:32.640 What is a good book about the history of the 0:40:32.760 --> 0:40:34.040 Navy that I should read. 0:40:35.160 --> 0:40:38.000 Well, I would recommend Ian told six Frigates which it 0:40:38.040 --> 0:40:40.520 literally talks about the birth of those six frigates. I 0:40:40.520 --> 0:40:43.160 think Ian told does a great job. It is it 0:40:43.200 --> 0:40:46.840 is kind of must reading because it covers that early period, 0:40:47.239 --> 0:40:49.399 the birth of the US Navy. But it's also about 0:40:49.440 --> 0:40:51.440 trade because you learn about okay, I learned about that 0:40:51.480 --> 0:40:53.960 issue with Algiers, but then you learn about the French 0:40:54.000 --> 0:40:56.880 attacking our commerce in the Caribbean during what calls the 0:40:56.960 --> 0:40:59.680 Quasi Wore then the War of eighteen twelve, which is 0:40:59.680 --> 0:41:03.120 all about out commerce and the impressment of Americans because 0:41:03.239 --> 0:41:06.200 you know, the US wants to trade with everybody, because 0:41:06.520 --> 0:41:08.640 that's who we are, so we we we're trading with 0:41:08.680 --> 0:41:11.719 the British and the French during the French Revolution in 0:41:11.760 --> 0:41:16.440 the Napoleonic War. Thomas Jefferson tries to, you know, avoid 0:41:16.480 --> 0:41:19.840 this by passing something that the worst act ever passed 0:41:20.080 --> 0:41:22.239 in the history of the US, the Non Intercourse Act, 0:41:22.280 --> 0:41:24.560 which doesn't deal with what you think it does, but 0:41:24.600 --> 0:41:27.320 it deals with shipping and not trading with both Britain 0:41:27.320 --> 0:41:27.800 and France. 0:41:27.840 --> 0:41:29.439 So I love Ian Tol's book. 0:41:29.480 --> 0:41:31.719 I think he is one of the best. And then 0:41:31.719 --> 0:41:35.360 the last one I threw in there is one on 0:41:35.640 --> 0:41:39.160 us shipping that I think is really it's a wonky one. 0:41:39.200 --> 0:41:42.200 It's not a great read, but I think it's really 0:41:42.360 --> 0:41:44.640 an important one called The bandon Ocean, which talks about 0:41:44.719 --> 0:41:45.840 US maritime policy. 0:41:46.719 --> 0:41:49.560 I am conscious that we only have a few minutes left, 0:41:49.800 --> 0:41:51.920 so I just have one more question, what do you 0:41:51.920 --> 0:41:52.879 think of the Jones Act. 0:41:56.480 --> 0:41:59.280 No, somehow, somehow this is all going to be playing, 0:42:00.480 --> 0:42:02.960 going to be blamed on the Jones Act. And I 0:42:03.040 --> 0:42:04.560 just knew I wasn't gonna get out of a show 0:42:04.600 --> 0:42:06.960 with you guys as a masochist. 0:42:07.680 --> 0:42:10.840 No, that was a joke. We have been meaning to 0:42:10.880 --> 0:42:15.040 have you on for a Jones Act specific episode for 0:42:15.280 --> 0:42:17.319 literally years now. We got to get that done in 0:42:17.360 --> 0:42:18.280 twenty twenty four. 0:42:18.239 --> 0:42:22.080 Joe, we will definitely do a proper Jones Act episode 0:42:22.120 --> 0:42:22.560 one day. 0:42:22.680 --> 0:42:23.759 Well, I appreciate it. 0:42:23.760 --> 0:42:25.560 And actually you may hear about the Jones Act with 0:42:25.600 --> 0:42:28.480 this because there's diesel ships. Oh, you're bringing diesel out 0:42:28.480 --> 0:42:30.760 of Asia heading to Europe, are going to take longer 0:42:30.760 --> 0:42:32.720 to get there. There's gonna be a real big desire 0:42:32.800 --> 0:42:35.440 to pull diesel out of New England and send it 0:42:35.480 --> 0:42:37.560 the Cross. And if you start stealing diesel from New 0:42:37.560 --> 0:42:39.600 England to send to Europe. You're gonna have to get 0:42:39.600 --> 0:42:41.799 that diesel to New England some other way, and that's 0:42:41.840 --> 0:42:45.080 either by pipeline which is jammed, or those infamous Jones 0:42:45.080 --> 0:42:45.680 Act tankers. 0:42:45.840 --> 0:42:48.160 All right, Sale, thank you so much for coming on. 0:42:48.320 --> 0:42:50.480 That was great. We really will have to do a 0:42:50.480 --> 0:42:54.400 proper Jones Act episode. But this was an excellent context 0:42:54.400 --> 0:42:56.759 in details about the current crisis. So thank you so 0:42:56.840 --> 0:42:58.120 much for coming back on online. 0:42:58.320 --> 0:42:58.879 Can't be clear. 0:42:59.080 --> 0:43:01.480 John Conrad say, whatever you do, don't bring up the 0:43:01.560 --> 0:43:04.040 Jones he said, He said, don't bring it. 0:43:04.120 --> 0:43:05.279 Just try to get through it without that. 0:43:05.520 --> 0:43:08.000 Well, you stayed true to your promise. I brought it 0:43:08.239 --> 0:43:11.600 to you, you eveen, And I. 0:43:11.520 --> 0:43:13.160 Told John, I said, I said, there's no way it's 0:43:13.160 --> 0:43:15.080 coming off. There's no way they can bring it up. 0:43:15.120 --> 0:43:18.000 There's there's none. And then Tracy bring it up right 0:43:18.040 --> 0:43:20.640 at the air. That's funny. I can't tell you how 0:43:20.680 --> 0:43:23.200 it does. Laughing to the mic for a second. 0:43:36.200 --> 0:43:37.640 I love talking to So we got to make that 0:43:37.719 --> 0:43:39.200 Jones ch episode. That happens. 0:43:39.640 --> 0:43:41.920 I know. I feel bad that we keep touting it 0:43:42.000 --> 0:43:43.040 and it never happens. 0:43:43.040 --> 0:43:45.720 So funny because like we've never done it. The Jones 0:43:45.920 --> 0:43:48.640 comes up all that times, I almost feel like we're associated. 0:43:48.760 --> 0:43:51.359 It's like that. And Onion futures, we've never done an 0:43:51.360 --> 0:43:53.120 episode on that, even though we talk about them all 0:43:53.160 --> 0:43:53.399 the time. 0:43:53.520 --> 0:43:55.960 I think the problem is the stakes are now so 0:43:56.280 --> 0:43:59.160 high because we have you know, they have come up 0:43:59.200 --> 0:44:02.560 repeatedly for yours now and right. If we ever do 0:44:02.640 --> 0:44:05.319 an episode, we want to do it in a big way, 0:44:05.520 --> 0:44:08.040 or we want to do an event around it, and 0:44:08.120 --> 0:44:10.600 we just haven't been able to make that happen yet. 0:44:10.600 --> 0:44:13.640 But there are so many interesting things to pull out 0:44:13.640 --> 0:44:17.600 of that conversation with sal I thought his pinning of 0:44:17.640 --> 0:44:20.960 the time frame in which you might see some impact 0:44:21.160 --> 0:44:24.279 on us shipping. I thought that was really interesting to 0:44:24.440 --> 0:44:27.200 actually get a firm time period and the idea that well, 0:44:27.600 --> 0:44:31.440 things might be messed up because containers have been going 0:44:31.520 --> 0:44:34.319 empty again and Chinese New Year is coming up, so 0:44:34.560 --> 0:44:37.360 we'll definitely be watching that. And then I guess his 0:44:37.480 --> 0:44:42.280 explanation of just how the insurance actually works wartime insurance, 0:44:42.320 --> 0:44:46.360 and how quickly it seems some of those decisions are made. 0:44:46.680 --> 0:44:49.280 Yeah, I thought that was really interesting in this idea 0:44:49.320 --> 0:44:52.360 that like on each on each route, you buy the 0:44:52.400 --> 0:44:54.719 insurance and sometimes it's up to one percent, and eventually 0:44:54.960 --> 0:44:57.160 you know, it can jump to the point where just 0:44:57.200 --> 0:45:00.759 the math says, now between this it's too much and 0:45:00.800 --> 0:45:03.239 the added fuel costs of taking a much longer route 0:45:03.280 --> 0:45:05.520 are worth it. And how quickly that adjusts, and how 0:45:05.560 --> 0:45:08.160 there's this club of insurers and they're always setting I 0:45:08.160 --> 0:45:10.560 thought that was really interesting. I also did think it 0:45:10.600 --> 0:45:13.800 was really interesting that in his history of the Navy, 0:45:13.960 --> 0:45:16.359 like all of those sort of keep many of those 0:45:16.520 --> 0:45:19.160 key moments he described, like in the end, it was 0:45:19.160 --> 0:45:21.960 the political solution that ultimately took. 0:45:21.880 --> 0:45:24.840 Care of the problem, right, and not a military. 0:45:24.719 --> 0:45:30.080 Yeah, that ultimately you need to address the underlying diplomatic crisis. 0:45:29.680 --> 0:45:31.759 So peace in the Middle East. 0:45:31.760 --> 0:45:34.520 Right, we're not gonna well this also, I mean this 0:45:34.640 --> 0:45:38.920 broader phenomenon where the Huti's like this small military that 0:45:39.040 --> 0:45:44.040 Saudi for years attacked and wasn't able to eliminate their force. 0:45:44.480 --> 0:45:47.000 And this idea that he brought up that since World 0:45:47.080 --> 0:45:51.839 War Two there has been this generally stable expectation of 0:45:52.280 --> 0:45:55.920 global trade, but this idea that it could refragment, particularly 0:45:56.000 --> 0:45:59.399 small militaries are able to stand up to large militaries, 0:45:59.840 --> 0:46:02.520 is like a really interesting long term right. 0:46:02.640 --> 0:46:06.160 The regionalization of shipping. That was really interesting because again 0:46:06.239 --> 0:46:09.960 you think about shipping, obviously it's the sort of global industry, 0:46:10.040 --> 0:46:14.800 but it's global in very specific ways, including those flags 0:46:14.800 --> 0:46:18.759 of convenience where where you can sail under a Liberian 0:46:18.840 --> 0:46:22.640 flag or something like that because you enjoy the benefits 0:46:22.680 --> 0:46:27.160 of other governments that are going to protect strategically or 0:46:27.160 --> 0:46:29.000 commercially important waterways. 0:46:29.160 --> 0:46:31.040 Yeah, that was great. And you know, I think people 0:46:31.080 --> 0:46:35.960 talk about deglobalization or you know, bifurcation or whatever it is. 0:46:36.360 --> 0:46:39.439 But look, if you don't have this expectation any more 0:46:39.560 --> 0:46:42.200 of and maybe you know it's not dead or anything, 0:46:42.239 --> 0:46:45.239 but if this idea that it's getting easier and easier 0:46:45.760 --> 0:46:49.760 for small military forces to disrupt tray due to advances 0:46:49.760 --> 0:46:53.120 and weaponry and drones, et cetera like that, then that 0:46:53.320 --> 0:46:56.240 does seem like implicitly a force for deglobalization. 0:46:56.440 --> 0:46:57.640 Yeah, shall we leave it there. 0:46:57.680 --> 0:46:58.399 Let's leave it there. 0:46:58.560 --> 0:47:01.480 This has been another episode of the Odd Loots podcast. 0:47:01.560 --> 0:47:04.680 I'm Tracy Alloway. You can follow me at Tracy Alloway. 0:47:04.480 --> 0:47:06.320 And I'm Joe Wysn'tthal. You can follow me at The 0:47:06.360 --> 0:47:11.040 Stalwart follow sel Mrcagliano. His handle is Mercagliano s and 0:47:11.120 --> 0:47:14.200 check out his show What's going On with Shipping that's 0:47:14.239 --> 0:47:17.959 on YouTube. Follow our producers Carmen Rodriguez at Carman Arman 0:47:18.360 --> 0:47:22.480 Dashel Bennett at Dashbot and kel Brooks at Kelbrooks. Thank 0:47:22.520 --> 0:47:25.720 you to our producer Moses Ondam. For more Oddlogs content, 0:47:25.800 --> 0:47:28.920 go to Bloomberg dot com slash odd Lots. We have transcripts, 0:47:28.960 --> 0:47:31.719 blog and a newsletter and you can chat twenty four 0:47:31.719 --> 0:47:34.919 to seven with fellow listeners in the discord discord dot 0:47:34.960 --> 0:47:39.200 gg slash odd lots. We have a defense channel in there, 0:47:39.560 --> 0:47:42.360 we have a transportation channel, so there should be plenty 0:47:42.360 --> 0:47:44.000 of conversation about this episode. 0:47:44.120 --> 0:47:46.520 And if you enjoy odd Thoughts, if you want us 0:47:46.600 --> 0:47:50.080 to finally do that Jones Act episode or event, then 0:47:50.120 --> 0:47:53.800 please leave us a positive review on your favorite podcast platform. 0:47:54.160 --> 0:47:57.080 And remember, if you're a Bloomberg subscriber, you can listen 0:47:57.120 --> 0:48:00.279 to all our episodes ad free. Just connect to your 0:48:00.280 --> 0:48:03.720 Bloomberg account to Apple podcasts. Thanks for listening.