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How to Close a Shipping Lane
1k Plays15 days ago
In Season 1, we talked about “How to hijack a ship”, and earlier in this season, we talked about “How to deliver a ransom”. Today, we’re following on from these two episodes to discuss “How to close a shipping lane” with three fantastic guests.
Firstly, we have Daniel Giordanio. Daniel is the Senior Threat Intelligence Manager at shipping giant AP Moller Maersk, where he focuses on assessing and mitigating threats to the company’s global operations and workforce. Prior to Maersk, Daniel had a fifteen-year career in the United States Federal Bureau of Investigation, with his final position as the FBI’s Assistant Legal Attaché for Intelligence at the US Embassy in Copenhagen. His focus was on ensuring cross-collaborative intelligence sharing on a wide range of threats with Nordic intelligence and security partners. Daniel worked a multitude of threats with the FBI in the United States, and was instrumental in the identification and eventual capture of Rafael Caro Quintero, an FBI Top Ten Most Wanted Fugitive, and leader of the Sinaloa Cartel in Mexico. In Washington, DC, he worked on a high-profile task force to address espionage concerns across the US Intelligence Community, and did a joint-duty assignment at the US Central Intelligence Agency, developing collaborative cross-agency intelligence efforts to counter threats to US national security.
Joining Daniel, we also have Encyclopedia Geopolitica’s own Anthony Clay, as well as one of this show’s cohosts, Cormac McGarry.
Anthony Clay is a retired US Navy Surface Warfare Officer where he specialised in amphibious warfare and expeditionary operations. He is currently a Senior Strategic Planner in the Department of Defense where he has worked on diverse issues, with focuses on Logistics, Nuclear Weapons, and Space Warfare.
Cormac Mc Garry is the Director for Maritime Security at Control Risks, a global specialist risk management consultancy. He helps a range of clients, from ship owners and manufacturers to insurers and law firms, understand risk in the maritime word. He also teaches on the topic as an Adjunct Professor at Sciences Po Paris and has previously worked in East Africa, the Irish Defence Forces and the National Maritime College of Ireland.
If you enjoyed this episode, don’t forget to subscribe on your podcast platform of choice. Please also consider supporting our work via a Patreon subscription (getting you access to early releases and other perks), or by tipping us on Ko-fi. While the topics we discuss here are often shrouded in secrecy and security classifications, we really hope you’ll tell your friends about us!
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Transcript
Introduction to the Podcast
00:00:02
Speaker
Welcome to How to Get on a Watchlist, the new podcast series from Encyclopedia Geopolitica. um In each episode, we'll sit down with leading experts to discuss dangerous activities. From assassinations and airliner shootdowns through to kidnappings and coups, we'll examine each of these threats through the lenses of both the Dangerous Act to seeking to conduct these operations and the agencies around the world seeking to stop them. In the interest of operational security, certain tactical details will be omitted from these discussions.
00:00:34
Speaker
However, the cases and threats which we discuss here are very real.
Host and Previous Episodes Recap
00:01:01
Speaker
back correct nine one one what's the emergency I'm Louis A. Percant, the founder and co-editor of Encyclopedia Geopolitica. I'm a researcher in the field of intelligence and espionage with a PhD in intelligence studies from Loughborough University. I'm an adjunct professor in intelligence at Science Pro Paris, and in my day job, I provide geopolitical analysis and security-focused intelligence to private sector corporations.
00:01:25
Speaker
So in season one we talked about how to hijack a ship and then earlier this season we talked about how to deliver a ransom. And today we're following on from these two fantastic episodes which I really encourage you to go back and listen to and discussing how to close a shipping lane. Now we're recording this episode in November 2024 which is months into the Red Sea crisis. ah So to understand how this crisis unfolded and what it means for geopolitics and shipping we have some excellent guests on the show.
Guest Introductions
00:01:51
Speaker
Firstly, we have Daniel Giordano, Senior Threat Intelligence Manager at the shipping giant AP Mola MERSC, where he focuses on assessing and mitigating threats to the company's global operations and workforce. Prior to MERSC, Daniel had a 15-year career in the United States Federal Bureau of Investigation with his final position as the FBI's Assistant Legal Attaché for Intelligence at the US Embassy in Copenhagen. His focus was on ensuring cross-collaborative intelligence sharing on a wide range of threats with Nordic intelligence and security partners.
00:02:19
Speaker
Daniel worked a multitude of threats during his time in the FBI, including back in the United States, and he was instrumental in the identification and eventual capture of Rafael Carro Quintero, an FBI top 10 most wanted fugitive, the leader of the Sinaloa cartel in Mexico.
00:02:34
Speaker
In Washington DC, Daniel worked on a high profile task force to address espionage concerns across the US intelligence community and did a joint duty assignment at the United States Central Intelligence Agency, developing collaborative cross-agency intelligence efforts to counter threats to US national security.
00:02:51
Speaker
Joining Daniel, we also have Encyclopedia Geopolitica's own Anthony Clay, as well as one of this show's co-hosts, Cormac McGarry. Anthony Clay is a retired U.S. surface warfare officer, where he specialized in amphibious warfare and expeditionary operations. He's currently a senior strategic planner in the Department of Defense, where he's worked on diverse issues with focuses on logistics, nuclear weapons, and space warfare.
00:03:14
Speaker
Cormac McGarry is the Director for Maritime Security at Control Risks, a global specialist risk management consultancy. He helps a range of clients, from ship owners and manufacturers, to insurers and law firms, understand risk in the maritime world. He also teaches on the topic as an adjunct professor at Siencepo Paris and has previously worked in East Africa, the Irish Defence Forces and National Maritime College of Ireland. So gentlemen, thank you very much for joining us. Good to be back. Thanks for having me. I am very happy to be here.
00:03:44
Speaker
So we always start the show asking how you got into your line of work. I would say for those wanting to hear about Cormac and Anthony's career journeys, check out season one, episode seven, how to hijack a ship where we covered those. But Daniel, as your new guest on the show, how did you get into your line of work? You got a fantastic background there. So I'd love to hear how that happened.
00:04:02
Speaker
Yeah it's quite a story actually I mean I kind of fell into it to be honest with you I i went to school in Washington DC and when you do that when you kind of when you're going to school in the middle of of power you you tend to look at that as as maybe what you'll do with your life.
00:04:18
Speaker
When I went to school, we didn't have anything like an intelligence degree. It just didn't exist when I was looking at university. So I did international affairs and geography as ah kind of a double major, double double degree. And actually I wanted to go work for the Census Bureau because I just really wanted to map stuff. I was really into mapping and I really wanted to map stuff um and the Census Bureau didn't want to hire me.
00:04:39
Speaker
So um I was waiting tables and I was waiting tables and one night ah we had a very we had a bad night and my manager who was ah one of the best managers I think I've ever had, he finished the night with a yeah with a whiskey tasting at the bar so that we could understand what whiskeys we needed to sell to our customers.
Daniel Giordano's FBI Journey
00:05:00
Speaker
And that night I went home and i i I declared that I would not be working in restaurants anymore and I applied to the FBI.
00:05:07
Speaker
and I don't remember the application process necessarily that much. But that's a couple weeks later I got a phone call from them and um I just timed it really really well and they yeah that was I think March and then by July I was already on board. I've been cleared and processed and and they brought me on board. I started in Washington.
00:05:28
Speaker
at headquarters working kind of terrorism cases so i worked a lot of the uh... kind of early like two thousand and eight to two thousand and eleven terrorist attacks are attempted terrorist attacks in the u.s. times where bombing uh... najib alizazi things like that and uh... i just you know i said yes to everything and when things came across my desk i would just say yes to it because I felt like at that point, particularly you know you in your early 20s, why not? so That's how I ended up doing all these kind of different things. That's how I ended up doing a stint at the CIA and that's then eventually how I ended up getting a transfer out to the West Coast and am working completely different stuff, organized crime. But then that gave me the bone a few days to apply to a job overseas. and That's actually where I ended up in March of 2020, I came out to Copenhagen.
00:06:15
Speaker
and um really It's a job that I think maybe point one percent of Intel professionals in the FBI get to do so it was really awesome I got to work with all sorts of different security and intelligence and policing services here in Copenhagen but across Scandinavia as well and that kind of set me up to to find a job in the private sector and mask was right there and and that's yeah again just say yes to everything guys and something good will come along.
00:06:48
Speaker
That's always very good advice. so let's Let's dive in and
Understanding Shipping Lanes
00:06:53
Speaker
look at the threat. and Today, we're talking about how to close a shipping lane. and you know This is something that's been going on for a while now, but let's let's start with definitions. It's something that I think we in the geopolitics space can often be a little bit loose with. What is a shipping lane? you know Do vessels have to stick to a specific lane? Is it like a road? Can they go where they want? Because that's not how I imagine this. I'm really interested to your thoughts on on how we define this to start with.
00:07:17
Speaker
I guess I'll jump on this. This is actually a really kind of a complicated question, right? So the sea is wide open, basically. You can go anywhere you want with the exceptions of things like territorial water and other other areas that might have restrictions. However, particularly when it comes to long long range transits, which are, you know, when we talk about the commercial world is how they live.
00:07:42
Speaker
every extra mile you go is more fuel. So that necessarily concentrates ships into particular routes. That's the shortest distance between two points. And those are generally concentrated at choke points. So when we talk about choke points, it's where everything comes together and everybody's familiar with Strayed Gibraltar and the Suez Canal and the Panama Canal. These are the main ones that we use for you know where you when you look at the tracks of all of the ships, they all converge together. and so When you're looking at where you get the biggest bang for your buck of how to affect shipping, it's at those locations.
Maritime Choke Points and Control
00:08:24
Speaker
and so that's it's a little bit of Of course, that's the case. right You look at junctions of of motorways, you look at where
00:08:32
Speaker
you know, go paths come together and, you know, various parts of the, you know, agrarian parts of the world, those all mesh together at that one spot. So it's why things like the battle of thermopoly worked. It's why, why this is a critical issue. And some technical terminologies around that in those choke, choke points you tend to have things called traffic separation schemes, for example, so that will dictate the direction in which vessels are to pass each other. There's going to be other things like the colour of the buoys and the water will indicate where vessels are supposed to pass. There's international regulations that define how ships are supposed to pass each other, for example, collision regulations. And so this will define how traffic works works in a place like the Singapore Straits. And interestingly, as we as we move move on to how do you control that even before you get to a blockade situation,
00:09:22
Speaker
One of the things, if you take the Singapore Strait, for example, Singapore will be a large part of controlling the safety of those separation separation schemes. And so that can be used by state actors, for example, to assert control in a kind of a let's call it a gray zone warfare area. An example of that would have been Russia in the Kerch Strait, which connects the Black Sea and the Sea of Azov before their whole scale invasion of Ukraine. And when they de facto controlled Crimea, they were able to kind of claim that vessels in order to safely pass under the Crimean bridge needed to have pilotage, which is basically a person gets on the ship to help guide the ship through a a hazardous water. So that means you have to take a pilot. Where does that pilot come from? It comes from Russia. And that that gives Russia an ability to control you know how quickly ships can get through there. So from around 2017 at that time, you could see Russia was very intentionally slowing down traffic.
00:10:23
Speaker
to Ukraine, Sea of Azov ports. Similarly, you can see in the Strait of Hormuz before Iran ever gets to more kinetic methods of interfering with ships, they can they will make excuses and say this ship was was behaving dangerously and therefore we performed an interdiction and they have a responsibility under international law to perform such an interdiction, even though we all know they're they're performing some political messaging.
00:10:49
Speaker
Actually, I think that was it was really great because I think from a commercial standpoint, at least what we're looking at as ah as a shipping company, it's kind of a combination of what was just said between these two gentlemen. We obviously, we we run these ships and there's a cost to doing that, right? So there is there is definitely a cost to the energy it takes to run those ships. There is a cost that we then either have to absorb or pass on to customers.
Strategic Implications of Shipping Routes
00:11:13
Speaker
And we're also a slave to geography.
00:11:15
Speaker
The world is not as big of a place as people think it is things are produced in one place and consumed in another place and there's only very few ways for those things to move. and When you look at a map of the world and you draw it out there's there's okay we can you know we can sell this route we can sell that route there's not a lot of other alternatives.
00:11:33
Speaker
I was in a discussion a while ago in my previous life about um the Arctic right shipping through the Arctic. And we had to kind of break some some mindsets because they're like, well, we can just ship through the Arctic. I'm like, well, the art is a very dangerous remote place.
00:11:50
Speaker
And most shipping companies aren't going to want to send their ships through the that kind of a situation. There's a little bit of safety in numbers when we talk about shipping lanes, because you know there's going to be other ships on that path that could aid in the event of an emergency, that could help defend in the event of piracy when we're talking about piracy in a off of East or West Africa. So it's it's it's a very interesting question, though, because I think You can look at it from a very technical standpoint, which is true. There are so many rules when it comes to sailing through either contested or highly regulated waters. But when you look at the long-term kind of 30,000-foot picture, there's only so many places you can sail. And you're not going to sail in ah in a pattern that is doesn't make sense, because at the end of the day, these these ships, when we're talking about trade and we're talking about shipping, these ships all have a cost associated with them. It's not free. it's not air We're not sailing on the air anymore. It takes fuel.
00:12:41
Speaker
ah think just a and A nice little addition to that is to, you know, with a lot of this, it's framed in the commercial sense of things. If you flip over to the military side of things, these become a lot less relevant, where military ships don't necessarily want to be around a high concentration of commercial ships. It's it's like if you don't have to drive on a crowded freeway, you don't drive on a crowded freeway.
00:13:09
Speaker
And the mission of a military ship in that area is a lot different as well. So you you might be staying in one place for a long duration of time. You might be transiting in a method to obscure your movements or to make the enemy think that you're moving somewhere else. So while when we talk about the sea lanes here, it is really heavily focused on the commercial side of things, but there is a lot of grounds to exploit those and go different routes to to influence.
00:13:39
Speaker
I suppose that would bring me on to my next question, which is, what
Blockades vs. Sea Denial
00:13:42
Speaker
is a blockade? How does it work? And then what does the history of blockades look like? you know I think this is something we've seen pop up from the Peloponnesian Wars and onwards. So this doesn't seem like anything new, but we do seem a little bit surprised that it's happening again. So talk to me about that. How how does this mechanically happen and what does that look like?
00:13:59
Speaker
there's a big difference between a blockade and sea denial. Traditionally, a blockade is leveraging one country's ships to physically block the ports of another of another country. So completely reduce their ability to conduct trade into and out of those ports. With shipping, you have limited locations you can pull in. It's not just any beach in the world you can drive a ship up to and offload. So you have these critical nodes and as we've moved on towards larger and larger shipping, those become fewer and fewer. But if you look historically, it's it's how countries inhibit the ability for a nation to resupply itself or to conduct force movements. So yeah, it goes back many, many centuries of this being done.
00:14:45
Speaker
I think probably the most salient example of this is the American Civil War where the entire Southern United States was, like basically every port was blocked. That led to a variety of technical ah advancements like blockade running ships, the development of ironclad ships, the ah development of steam power to go faster and outrun. So it's it's not a foolproof situation. In fact, it's like extremely manpower and resource dependent because it's it's like standing guard at a you know over a large area of land. It takes a lot of bodies, it takes a lot of weapons to be able to cover that. So in a modern sense, a blockade is still very feasible to do in some areas, but when you're talking particularly in the context of great power conflict, it's absolutely not really what you want to do. Now, on the flip side of that, when we talk like sea control,
00:15:42
Speaker
which is a you know doctrinal term for for naval forces, but it's being able to exert that authority without necessarily ships there. And so you know the impetus of of this episode is a lot of the Houthis in yeah know the Southern Red Sea.
00:16:00
Speaker
They're not using ships by and large to or or boats to conduct their denial operations. It is mostly anti-ship cruise missiles and or anti-ship ballistic missiles. And there there is some degree of boats being used, fast attack craft, both manned and unmanned to be able to control it. but By and large, it's using non-ship weapons to control that area.
00:16:24
Speaker
That brings me on to my next question nicely, which is, yeah how how effective have the Houthis been in closing
Houthi Tactics and Shipping Disruption
00:16:29
Speaker
the Red Sea? and you know Cormac, I know you and I have spoken about this, so I'd be really interested to hear your views on this. and In particular, how many vessels have we actually seen damaged, hit, diverted, and so on? so You're looking at Red Sea traffic, which the important thing about the Red Sea is that it's the route into the Suez Canal, and the Suez Canal is literally built by Europeans, it was started by Napoleon, I believe.
00:16:52
Speaker
to um to facilitate traffic from East to West into Europe. And the Houthis have effectively been trying to interrupt that trade to hurt European powers, but primarily to force Israel to ease up its war in Gaza. Now, this is where it's interesting in terms of definition, is it a blockade? Is it denial?
00:17:18
Speaker
You know, they've expressly stated that they wanted to stop shipping into Israel. Then subsequently, they started expressly saying that they would target UK and US affiliated vessels. So it's not a total blockade against all traffic or so they would claim. About half of their attacks have indeed gone after vessels that are kind of obviously associated with those three <unk> declared target countries. The other half, sometimes we don't know why they why they hit them. Maybe they use faulty intelligence. Maybe they mis-targeted, misdirected the weapons. there's ah There's a lot to say about that. But how effective has it been right now? You're looking at traffic to the Red Sea is about 60% down on air quotes normal. And I say 60%, I mean large tonnage traffic.
00:18:03
Speaker
So think about the big container ships, the big big bulk carriers that will carry things like coal and food across the waters. I'm not talking here about smaller fishing vessels, for example. So 60% down, that 60% of large ton of traffic will now be diverting around the South African Cape of Good Hope in order to get to Europe and back. How have they done that? In terms of numbers, one vessel has been hijacked. She remains the galaxy leader. That was the first vessel where the Houthis kind of unveils their intent and their capability.
00:18:33
Speaker
to do what they're currently doing. They did a Hollywood style hijack of the galaxy leader, which was the car carrier. She remained in detention in the Houthi controlled port of Hadi Aida, become a little bit of a tourist attraction for local Yemenis in Hadi Aida, which can sound funny, but you know, there's mariners still on board that festival who have not been able to get home and see their family. So I mean, it is it is a tragedy. So that's one hijack.
00:18:59
Speaker
We've had four seafarers killed during the subsequent attacks after the hijack. Two vessels have been sunk. Bear in mind, these vessels, these are major losses. You're talking vessels that can be well over $100 million dollars in value here. And of course, four seafarers dead. there's There's no price on their lives. There's been about 45-ish what you could call direct strikes on ships from aerial weaponry, which will include things like anti-ship ballistic missiles, also kind of improvised drones.
00:19:29
Speaker
Interestingly, modern merchant ships are extraordinarily resilient against that type of weaponry, so they they haven't always achieved the kind of damage you might think. But the Houthis have also deployed more lethal weaponry, for example, unmanned surface vessels, which you could also call drone boats, to use a less terminological term.
00:19:50
Speaker
These are basically boats full of explosives that they drive at their target vessel controlled by VHF, which means they need line of sight, which means they need to make themselves vulnerable on the water. So rather than firing a missile from land, relative safety, they have to actually put the team on the water to control that USB or drone boat as it goes into the ship. When these unmanned surface vessels hit their targets, they they can be very devastating and they're more likely to result in death and sinking compared to the aerial weaponry that's been used. The Houthis have kind of consistently evolved their tactics as well. They've rolled out new weaponry, more sophisticated tactics. In the last few weeks, they unveiled or these claims that they have what they're calling a submarine, I would call it an underwater drone. ah that That's difficult because we've come to some of the measures that commercial ships are taking, but
00:20:48
Speaker
There's very little that a crew or even a private armed security team can do against a weapon coming underwater. It's also more difficult for naval vessels to deal with. So, you know, to wrap up, they've constantly evolved their talk their tactics in such a way that the naval forces, which we'll talk about later, they have struggled to contain the threat. It should be said that the vast majority of Houthi weapons have been intercepted. There are naval task forces out there, there are still pretty much on a weekly basis and basis, intercepting missiles coming at ships. But the attacks so far have been effective enough to reduce traffic to 60%, which you know interestingly hasn't really impacted us. um Most of us are sitting here in Europe. We're not seeing the prices on our shelves change as a result of it. you know Shipping has really been able to absorb a lot of the logistical changes here. That means us customers kind of continue to benefit
00:21:47
Speaker
from shipping, just getting stuff to us. Yeah, I mean, and I can definitely add to that. you know we We keep an internal um database of attacks and hits and it pulls from all sorts of different sources. And it's right where you said Cormac, it's about 48 to 50 ish confirmed vessels that have been hit with you know a couple that have sunk and some deaths as well. And I think what's interesting is you know that point you said, which is that most of the most of the the shots towards these ships have been intercepted.
00:22:17
Speaker
Problem is it's it's also a it's not that that's not good right it is good it means that that is an effective defense. However the stomach for that is very low when it comes to corporate decision makers. Business executives because they don't want to see the ships being targeted at all we had this problem when ah it first started so so we had. It was november nineteenth was when the galaxy leader was.
00:22:45
Speaker
Hijacked and we maisk we kind of started to pull back ships from the Red Sea and then and then beginning December we made a decision to say, okay, you know, we're going to send a couple more through. We've got some more military assets in the region. And then on, I think it was the 30th or 31st December, we had the Maersk Hangshu, which was targeted, it was shot at. And it was not hit. And this is a very important data point that the ship was not hit.
00:23:09
Speaker
It was targeted. There was a ah missile fired at it, and it was intercepted by either US or UK. I can't remember at this particular moment, but it was intercepted by military intercepts. However, the shrapnel hit the ship. It started a fire in one of the containers and it was incredibly damaging for the morale of the crew. We had to stop the ship at the Suez. We had to get people off. We had to get them help. We had to pull the container off the ship. That's huge delays for this ship. And from a business perspective, the business basically said, okay, we know we said,
00:23:40
Speaker
We could stomach this because we made this decision saying, you know, we accept that they're going to shoot at us. We accept that we might even get hit, but we've got the security measures involved. We've got a safe house. We've got hardened bridge. We've got weapons on board. We've got armed guards, whatever.
00:23:55
Speaker
And then it happens exactly the way you say it's going to happen and then suddenly it gets pulled back because what decision makers and what what the corporate leadership wants to see is and is something very different from that. They don't want to see that at all.
Military Operations in the Red Sea
00:24:08
Speaker
And it's it's been very, very effective because that fear is is much more real for these these decision makers than I think it was when it first started.
00:24:17
Speaker
from the other side of it, from the military operation side of it, through Operation Prosperity Guardian and some of the other efforts to to do that active defense in the region. What a lot of the commercial shipping side sees is how the US s Navy, the UK Navy are doing these defenses, shooting down missiles, shooting down drones, going after these, these USVs, these unmanned surface vessels. That's one of the sides that we're seeing. The other side is actually conducting the strikes ashore to try and prevent these from being launched as well. And this is where with with the ships that are that are stationed over there, and it's a it's relatively small number. We don't have, we're not really considering the
00:25:04
Speaker
you know, the fifth fleet area of responsibility is kind of a high priority lately because it's relatively calm. So with Russia and Ukraine being important, there's a lot of effort in the Western or the Eastern Mediterranean, and there's a lot of effort in the Western Pacific.
00:25:21
Speaker
But these ships that are down there are conducting routine strikes to try and go after the source. So attacking them ashore, the the launch the missile launchers going after command and control modes, there's third party targeting, they're over the horizon targeting capability. And this comes like they're using a lot of open source information to target. They're using commercially available information surveillance and reconnaissance capabilities. They're using as as As OSIN analysts, they are they are doing that every single day to better their targeting capability. so So we're going through a lot of different areas to be able to go after this capability. Part of that is also the weapons supply chain, which is also primarily at sea. So that's coming from Iran by and large through different small ports because they're coming on small ships and then a lot of overland routing to to the Houthis.
00:26:20
Speaker
it's a It's one of those when you look at the how to get after this problem, it is a many, many, many, many phase problem. So it's it's not just the the the method of protecting those ships while going through, it's the entire chain of of weapons to sensor, to shooter, to target.
00:26:39
Speaker
ah brings me on to my next question. you know if are There are other groups that risk being inspired by the Houthis. The popular perception is that the Houthis have been pretty successful in this. and And by extension, are there other maritime choke points that that worry you around the world? I'll kick it.
00:26:57
Speaker
So we've actually asked this question internally among among ourselves. And there's like four or five choke points that we are really concerned about from our commercial perspective, right? As as a trade perspective, we've got obviously the Suez and Red Sea, we've got the Strait of Hormuz, we've got the Panama Canal, the Malacca Strait, and then the Taiwan Strait. Those are kind of our four or five, to varying degrees, the the most important from a trade perspective, from from at least a commercial perspective.
00:27:24
Speaker
I think it's really good question though because when we talk about the other ones. Mostly we're dealing with state actors state actors who have have to act at some point they're gonna have to act a little bit more rational than a non state actor.
00:27:37
Speaker
because they do have state interests involved. And I think that actually was one of the harder things for for us to kind of convince people of in this particular crisis was because they weren't dealing with rational actors, right? The business leaders were saying, okay, well, you know we we did this for China and Taiwan and and they're gonna act rationally at some point because it affects their interests. And the problem is that when you're dealing with irrational actors, you can't apply ah rational thinking to them as much as you want to.
Vulnerable Maritime Choke Points
00:28:06
Speaker
Not to get too wide on this, but you know in terms of groups, I'm not entirely sure, but in terms of just other other potential choke points that we have a little control over what happens to it is really, I mean, we've had a lot of issues with the Panama Canal, a lot of issues with the Panama Canal, and that is purely based on on climate. right If there's not enough water in the canal, the ships can't go through, and that is a huge cost.
00:28:29
Speaker
because then you have to either try and offload those containers and send them overland, or you have to send those ships somewhere else and they have to re they things have to be rerouted. there's There's some solutions, there's some railways, there's some trucking lines, but they don't have the same capacity as you know these huge container ships. But yeah, it's it's it's a very big question that we are constantly asking and we're trying to monitor for it. I don't know, Louis, I think it's a that's a hard one.
00:28:57
Speaker
You know, interesting aside, Mexico is investing billions of dollars into building a new supply route that would get primarily containers from the Pacific over to the Atlantic. They're not building like a canal, they're building a railroad interjectory between the ships and they're they're basically placing that best on the Panama Canal, kind of being almost permanently subject to these droughts that are reducing their traffic capacity.
00:29:23
Speaker
So, I mean, just from that perspective alone, geopolitically, can you imagine Panama without the canal and what that would do to regional regional power plays, right? Mexico becomes the primary supply chain route between the board both of the great oceans. But just back to the broader question, Lewis. Yeah, reiterating the areas that Daniel mentioned, we don't really see anywhere right now that we think you know could explode into the kind of crisis that we've seen the Red Sea.
00:29:52
Speaker
explode into. But we're always watching the straighter for movies is kind of always top of everyone's minds. But it generally takes a probably worst case scenario for Iran in order to actually try to shut down that straight. Last time they did it, you know, they were under an existential threat from i Iraq. However, something that the Houthis have done has kind of given us a heads up that if Iran wants to air quotes shut down the straight, they don't have to blockade it, they can select traffic. So if they have a particular state that they're adversarial with and they want to interrupt shipping to that state, they can choose those ships. They kind of did that with Israel during the, we call it the the shadow tanker war that's been going on for about five years. So it's kind of unveiled the new threat factor threat vector that a straight doesn't necessarily have to be totally blockaded for a state to to interfere with another state's trade.
00:30:46
Speaker
Other areas, you know we look at Al-Sana and Mozambique that could at some point impact traffic in the Mozambique channel, wouldn't really have global impacts, but you know have some ramifications and in shipping. Al-Sana don't really have a maritime capacity to do that that we've seen so far. What worries my team more is on the geopolitical side rather than a group like the Houthis popping up in other choke points. so we think thinking about the geopolitics of Europe, and if you if you just escalate the adversarial relationships between the West and Russia, what happens in the Baltic?
Historical Non-State Actor Impacts
00:31:24
Speaker
Even the Black Sea, which is in Europe's backyard, i mean there effectively was a blockade of a blockade of Ukrainian ports. The fact still is, but Ukraine has just managed to get around us.
00:31:38
Speaker
So I agree that in this case, we're looking primarily at state actors if for the expansion of this sort of threat, right? So there's been some history of non-state actors. If you look at and kind of going back to season one talking about piracy on the Horn of Africa, like that had a real effect on slowing down a lot of trade as a non-state actor. There was a degree of that in the Strait of Malacca for a number of years, probably through the 80s and 90s, and then a consortium of of countries went through and basically eradicated that. Now, the volume of trade that went through Malacca, it was a
00:32:21
Speaker
infinitesimal percentage of ah shipping that was affected, but it was still enough to to cause some hesitation and to cause pre-planned responses to be developed and and capability to be leveraged counter to that. But realistically, what the five Straits that Daniel mentioned, Suez, Hormuz, Panama, Malacca, and the Taiwan Straits, those are all going to be state actors. So Suez can be, you know we've seen it,
00:32:50
Speaker
basically rendered ineffective several times through, through history, the, you know, the crisis in the Suez and was that the sixties or the seventies that's, that's more of your country lists, you know, and then with the the ever given, you know, during 2020 where it just can completely shut it down. And that's, that was an accident that could be done on purpose with Panama in particular, there is technology that is required to make that happen.
00:33:18
Speaker
Now in the old canal, it's a lot of it' it's a lot of you know manually changing pumps around to affect the locks and using train cars to move ships in and out of the locks. In the newer canal, it's there's a lot that's automated. There's a lot of technology that's there. And that gets into methods of attack of how you render this useless without actually having to use military forces, without actually having to do any sort of overt attack. These are things that can be done through cyber. They can be done through affecting you know power generation and power lines and communications and all the different other things outside of just you know moving equipment.
Worst-Case Scenarios for Shipping Lanes
00:34:04
Speaker
These are areas that could be really, really effective.
00:34:07
Speaker
So let's stay on this kind of worst case scenario trend here. what What is the worst case scenario for a closed shipping lane? You know, there's anecdotes out there that if ah a ship doesn't reach a port within a certain number of days, you know, grocery stores would be empty. What does the danger point look like there? I think a worst case scenario, you have to think of about worst case geopolitics. I mean, you know, we we have historical precedent and really worst case scenario here. And I don't want to sound like a million chasing, but If you get a capable state actor fully going after shipping lanes and choke points, yeah you get a World War II situation. you know Just take the United Kingdom, goes into rationing during the Second war second World War because of attempts to interrupt shipping. you know Rationing in the Second World War literally changed the British diet for 40 years. Took a while for rationing to come off.
00:35:00
Speaker
So but that's what a worst case scenario is. And you remember in second world war, a lot of people tend to forget thousands of seafarers died. And yet this, they kept sailing to to make sure that that food could get to the, to allied countries. So that's a really worst case. And I would implore people who we we do hear a lot more talk today about a looming world war three, ah like hopefully it's not, hopefully that's far off. But when people talk about that, that is the kind of worst case you're going to see in the shipping world.
00:35:29
Speaker
Kind of more realistic reiterating some things that Anthony said, we've seen the Suez Canal close. That's a worst case for a single shipping lane or choke point closing. They close it in the, well, Egypt chose to close it in the seventies because it was covered in war debris and um it wasn't safe to say that. And that was a large part, if not the primary cause of the oil crisis of the seventies, which really defined global geopolitics and even domestic politics in the 70s. It would be a very different situation today because oil through the Suez Canal is very different to what it was in the 70s. But you can just imagine any other shipping lane, at worst case again, if Panama gets subject to the kind of droughts that it's been experiencing and Suez for some reason gets completely closed, then you have multiple choke points closed and but then you get into worst case scenario where consumers really do feel the impact.
00:36:26
Speaker
So I've got two kind of worst case scenarios here. in The first one is going to be more of a large scale geopolitics, second one more of a small scale. So the first one is coordinated actions between multiple organizations, states, terrorist organizations pick here.
00:36:42
Speaker
pick your actor, but to close down multiple at one time. So if you were to lose Malacca and either the Suez or Bab al-Mandeb in the Red Sea, then you lose east to we west trade from Asia to Europe. You know, if you shut down Suez and Panama, basically you've basically hindered global trade, you know, with far reaching effects.
00:37:12
Speaker
So that's the, that's kind of, I think in the, the macro sense, the worst, worst cases, if like when these become specifically targeted to interrupt global, the kind of more tactically focused worst case scenario. And this is something that the Houthis have specifically tried to do is you sink a ship in one of these traffic separation schemes. And now you have filed the channel and with these large commercial ships, they have,
00:37:42
Speaker
you know, deep drafts where they were very restricted on where they can maneuver. And so you have to send in dredges or recovery ships or some sort of salvage ship to be able to clear these channels. And now you're in a case where they're still inside the weapon engagement zone for that, for that bad actor. And so now you're trying, these ships are generally not well defended. You're trying to clear this debris, trying to open the channel back up, trying to return shipping while under fire. And that just becomes a situation where a lot of these salvage ships and are owned by the commercial industry and they won't send those ships to clear those channels while they're under threat of being shot.
00:38:28
Speaker
I think i have to I have to go and agree with that because we've seen glimmers of this over the last year or so. Is that kind of this combination of of multiple different things going on at the same time can almost overwhelm the system.
00:38:40
Speaker
I remember like when I was talking about this ah before, it amazes me every time how the supply chain, the global supply chain is at the same time you know incredible and calm complex and actually quite resilient, but can it it is fragile enough to be to be blocked. right It is fragile enough to have disruption.
00:39:00
Speaker
um Very quickly and we saw this yes with the who these last november last december when most of the major shipping companies stopped shipping to the red sea. but We also saw this from accidents with the ship hitting the bridge in baltimore that's an immediate closure port in baltimore that's a massive i mean that bridge is huge.
00:39:20
Speaker
And you're dealing with bodies in the water, you're dealing with a ship that's that's now stuck under that bridge with God knows what on it. um So there's a lot of things that have to happen. I mean, the amount of work it takes to just figure out, okay, can we move some of these containers off the ship or are is there hazardous material? Are there leaks? Do we have to get, ah you know, buoys in the water? Do we have to get the EPA? There's a massive amount
Critical Infrastructure and Vulnerabilities
00:39:43
Speaker
of work. So if you start piling those up,
00:39:46
Speaker
The system that controls all that, i.e., the commercial shipping companies or even the military, there's there is a limit to how much those two entities can handle. right one of the things that that that I'll never forget this. yeah We had a meeting in January with the the fifth fleet. We had ah this video call with the fifth fleet. And I think Louis, you'll appreciate this. It was ah all the Danish kind of decision makers sitting in a room and they're like, well, I have will talk to Brad. And I'm like, you well, you won't call him Brad. You're going to call him, you know, Admiral, whatever. You're not going to call him Brad, right? Like, let's, let's start there. And they, they basically were just asking like, well, why aren't you giving us more ships? And he's looking at them like, how many ships do you think we have?
00:40:26
Speaker
How many ships do you think there are to protect this, to do this for you? there's We can't escort your container ships through the Red Sea. There's not enough warships in the world for that. There are too many things to protect, and we're involved in other places, right? there's It's not just the Red Sea that's the only problem. It's not just ah the South China Sea that's the only problem. In the US, s ah you know the bridge the bridge collapse, that That really sticks to a discussion that we've been having for what twenty thirty years about infrastructure right. Critical infrastructure and how fragile is that critical infrastructure and we talk about port infrastructure as a critical infrastructure we talk about you know the the cyber infrastructure we talk about the.
00:41:04
Speaker
yeah gas and electric and and water, but do we look at, okay, what happens if that bridge collapses? That is a scenario that people aren't going to necessarily plan for because it's so out of left field and then it happens and so you have people scrambling to figure out how do we fix this and how do we fix it fast enough where we can get things moving again because that's the real goal here.
00:41:29
Speaker
That's my concern. I mean, that's that's really, you know, when we talk about worst case, that's that's the worst case to me, is when we start seeing all these kind of things piling up and it's not necessarily one major event that that takes everybody's attention. It's not this kind of major thing. it's It's a bunch of little things that pile up and just stress the system to the point where the system can't handle it anymore.
00:41:53
Speaker
So I want to kind of touch on a little bit, like less so worst case scenario and more like realistic, like how this has happened in the recent in recent times and how it can continue to happen. And by and large, you can use the Russia Ukraine conflict as a great example. So one of the early things that was done by the Russians was to put out notice to Mariners for a coordinated naval exercise that basically spanned the entire shoreline.
00:42:21
Speaker
of Ukraine in the Black Sea. So they were able to, via completely legal methods, basically say, we are going to be launching missiles, practicing a variety of things, and therefore you need to be excluded from this area.
00:42:38
Speaker
These are actually, a lot of these are still in place today, still under the same guise of the exercise that they were conducting in December of 2021. So these these have not really gone away. Now that's not the only method that you have to legally do to isolate ports, isolate countries. One of the other ones is you can declare a mine danger area that you have laid mines and there is no requirement of you actually laying mines to create a mine danger area, but you put that into notice to mariners and now it becomes a place where if there is a threat, then now that is not going to be a place where ships willingly travel. So that is, you know, if if from the the kind of lawfare side of this, that's one way. And then of course there's the other side of it where there are numerous straits that are controlled by a single country. Most of the the
00:43:34
Speaker
the straights that have come up in conversation today are or not, you know, you have the Strait of Hormuz where you have Oman and. Iran there. You have Malacca, which has a wide variety of countries that are all all up and down each side of it. But you do have the, you know, Panama Canal, you have Suez. And then in, I think one of the more interesting cases is the Turkish Straits. So with the Turkish Straits, there's the Montreux Convention that I think was signed in 1937 that basically gave Turkey the ability to control their strait in the context of war. And so they have,
00:44:12
Speaker
particularly banned with legal backing the ability for belligerents to transit through the Turkish straits. So in the run up to the invasion of Ukraine, they shut down traffic for all warships going into and out of the Black Sea of belligerents. So that's Ukraine, that is Russia, and it is also, they have basically kind of lumped in the US and the UK in there as well.
00:44:42
Speaker
So while we are not active belligerents, they have not basically authorized travel of warships through there.
Complexities of Blockades and Legal Controls
00:44:49
Speaker
So that has done me the benefit to the to Ukraine of keeping all the Russianships that were in the Black Sea there and therefore making it easier for them to target. and that They can't run out of the Black Sea now, but it also means that Nobody can resupply. Nobody can, can really transit through to deescalate the situation either. So the exception there is Russian flagged military owned, but still commercial vessels that are you know shipping fuel, shipping grain, shipping, all the things that they're basically stealing from Ukraine. Those are still allowed to transit through, even though they're owned by the Russian Navy.
00:45:34
Speaker
And interestingly on that, Russia never officially declared a blockade of Ukraine's Gulf of Odessa ports, because declaration of ah a blockade it's is an act of war, which interestingly, interestingly Russia wasn't willing to declare in terms of a blockade. But oddly then, when they negotiated the Black Sea Grain Initiative, that by itself is ah is an admission that, hey, we're blockading you, so you have to negotiate to get this specific agricultural products out, but we're not blockading you. So it's interesting interesting dancing around internationally. You speak to basically do what you're trying to do, which is put in a blockade. And of course, Ukraine has managed to pretty much defeat the blockade of of the Gulf of Odessa. We're talking to Daniel Giordano, Cormac McGarry, and Anthony Clay about how to close the shipping lane. After the break, we'll talk about how governments and companies can respond to these threats.
00:46:41
Speaker
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00:47:05
Speaker
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International Military Responses
00:47:23
Speaker
So, Cormac, how can governments respond to this sort of threat? You know, we've seen Operation Prosperity Guardian from the US. We've seen the EU as a speediest mission. Are there other missions taking place here? And then for question, how how effective have these responses been? So it's good to clarify this and let's stick with the Red Sea crisis on this because it it gets quite complicated. And the reason it's complicated is because of kind of international politics and diplomacy, right? Because you would think Okay, we kind of have a military problem here. We need to stop these Houthis from attacking the commercial ships. So you think let's deploy a military mission to stop them. But the politics of that is much more complicated because the first real deployment, first of all, let's just clarify that there were actually already a lot of naval forces deployed in the region for a long time as a result of somatic piracy. Now we won't get into the details of that.
00:48:14
Speaker
But the US responded by getting together Operation Prosperity Guardian. When that was launched, Prosperity Guardian was designed to protect the commercial ships from the Houthi attacks. What's important there is is that it doesn't mean that they're going into Yemen and and proactively and preemptively attacking Houthis. So essentially they're operating, ah let's call it like a dome-like defense of commercial ships.
00:48:41
Speaker
A lot of countries didn't join that because there's countries, particularly in Europe, that did not want to be seen as publicly supporting a US military policy that's related to Israel and Palestine. right so That's why Prosperity Guardian didn't garner a huge amount of international members.
00:49:01
Speaker
Something that comes after that is Operation Poseidon Archer, and then that's the US and UK-led operation, which does actually target Houthi weapons sites in Yemen. Very different operations, also because of that that kind of political underpinning, not every country, even though some of those in Prosperity Guardian were not willing to get behind Poseidon Archer.
00:49:29
Speaker
and And both of those operations are ongoing. When you hear about air strikes in Yemen targeting Houthi infrastructure and weapons, that's going to be Poseidon Archer. Now, lastly, we had a later mission came out from the European Union. So this is the European Union's response to not being able to join Prosperity Guardian, which is the EU naval task force operation as speedies.
00:49:51
Speaker
So a Speedy is directly escorting ships and it's not as simple as you just give a naval ship to a commercial ship. There has to be specifications on the kind of weapons systems that are there in order to protect the commercial ship. It would be interesting to hear from Anthony what those specifications are. But in short, there's just not enough enough assets on the water to deal with the problem. So if you look at Operation A Speedy, they have a handful of ships um and they're protecting, there's still, you know, 40% of traffic remains in the Red Sea.
00:50:21
Speaker
and of what's there, you're still looking at hundreds of ships that would want an escort. There's only a handful of ships that can even give those escorts. So it's like it's just mathematically not possible for every ship to have that escort. So one of the things that would be needed in this case, if we were, I use we as just the generic broad military here, the navies of the world, to do broad spectrum defense would be mutual defense agreements, and these are between allies or partners, and and would basically explain the level of coordination that would happen, the mechanisms of communication, the command and control of the resources, and the level of protection that each of these countries would request for
00:51:11
Speaker
Prosperity Guardian and some of the other similar things that we've done through the years in different locations that typically from the US side is US ships protecting US flagships. So in the case of a commercial ship, even if it's a US owned company, but it's flying a flag of convenience for say Panama or you know, Liberia, that doesn't necessarily constitute that it would be defended by a naval asset.
Reflagging Ships for Protection
00:51:43
Speaker
There are ways to get around that. There are ways where we can conduct that ah security, but typically it's not going to be that point defense that Cormac was mentioning. Just an interesting aside here, during the Iran-Iraq War,
00:51:57
Speaker
one of the ways the US Navy was able to step in and protect Kuwaiti shipping was by reflagging Kuwaiti ships under the US flag. That meant that the US Navy could effectively go in and defend the shipping of another country without a declaration of war.
00:52:13
Speaker
And this this can be done in a variety of ways. So if it is a critical resource for the US to conduct operations, that's an easy thing to do. So in the case of exporting oil out of Kuwait, it is directly benefiting the global oil supply, which is a critical resource for wartime operations or even peacetime operations or the functioning of the world. So that's one where it is a relatively easy transition to make. So in the case of ships going through particularly the Red Sea where we would do that is if it is a commercial ship that is transiting to say Kuwait for offloading of US military supplies, while it has the military supplies on board, they will
00:53:00
Speaker
temporarily reflagged to being a U.S. ship and we will defend them through that. Yeah, I think there's no question about whether the US or the UK will defend and nationally flagged ships. I think we also saw this ah um in the Red Sea with the French, right? So the French Navy ah was effectively doing point point guard for French ships going through the Red Sea. And that kind of put a strain on this European operation, because you had Operation Speedies, which was spearheaded by the EU. It was a big kind of European Union
00:53:33
Speaker
European operation to. I don't want to say supplement because it really wasn't but it was ah it was to augment the operation prosperity guardian.
00:53:46
Speaker
But the difference is that you still have national navies doing it. You don't have an EU Navy. So they had to give preference. like Most of these countries have laws on the books that makes them give preference to flag ah ships that are flagged for their country. So if a German flagship is going through, the German frigate has to has to defend that ship versus a Danish-fied ship, and vice versa, right? And I think that is actually really interesting.
00:54:11
Speaker
It's a thing that happened and i think it's ah it's a really interesting kind of addition to the dynamic of of the complication that we're talking about here because you have the u.s. the u.s. is a massive military right and if it's u.s. u.s. flag great go up go forth but. If it's not and it's a multilateral kind of collaborative effort and you've got ships that are flagged from all these different countries at some point somebody's gonna have to make that decision and a lot of times that decision is made by a politician back home.
00:54:40
Speaker
and And no politician is going to say, yes, we should defend another country's ship before our own. It won't happen. To add to the complexity is the senior officer that filled the role of the commander of Prosperity Guardian also wears many, many hats. One of them being the commander of a multinational naval force that operates in the Gulf of Aden right there and being able to de-conflict the roles of the different ships and who they're assigned to it a different at a given time and the coordination of those actions between all those multinational ships who aren't necessarily a part of Prosperity Guardian or not necessarily part of, or they might be a part of Prosperity Guardian, but not a part of the multinational force.
00:55:25
Speaker
um that operates and in the Gulf of Aden. Being able to manage all of that becomes a command and control issue that proved to be extremely, extremely complicated. If I may ask Anthony a question here, because presumably it's complicated being on a warship. You identify some kind of threat, but You're still stuck within your your mission scope presumably the same way that say UN peacekeepers when they're deployed on ground, they're stuck within the mission scope. They can't just simply make
00:55:56
Speaker
a decision there and there, there and then it's dictated by a mission. Am I right in saying that? So every commander has the right to self-defense. And so if it is a threat to your ship, even if it's outside the scope of what you're doing at that point in time, then obviously you can take action to defend yourself. In operating in these areas, there's probably going to be as part of the operational order that they're operating under.
00:56:23
Speaker
there's going to be caveats that are listed of this is when you can take action. This is when you can't take action. So if you're transiting through that area, even if you're not one of the you know one of the shooters, one of the ships that's doing the escort, one of the ones that's tasked for air defense, there's going to be areas where you can support that force. where You can support the prosperity guardian. You can support whatever force your sailing through, even if you're not directly in tactical control by that by that organization. So it's it's not universally true. It's not necessarily a, you know, hey, while you're in this area, you belong to this person and therefore if they tell you to shoot, you shoot. It's it's a balance of managing the deconfliction of operations in that space. So there are situations where yes, you can be completely not assigned to doing something and
00:57:15
Speaker
do that very thing just while you're transiting through, if that makes sense, if that answers your question. So let's look at the commercial sector then. I'm i'm interested to also look at you know is that is there any recourse from ship owners, from shipping lines, and ways they can influence their ability to transit through contested areas?
00:57:35
Speaker
Yeah, I guess so'll I'll take that one.
Self-Defense in Commercial Shipping
00:57:38
Speaker
Yes and no, right? So I think it's really important that we remember that commercial shipping companies, as big as they might be and as complex as they might be, still aren't governments. And we still don't have defensive capabilities beyond you know armed guards on a ship, right? And most of those measures, at least from from our perspective, came about because um of piracy issues. so So you're dealing with a different threat actor at that point.
00:58:03
Speaker
Our ships are quite capable of of countering piracy and that is a almost direct you can trace that line almost directly back to the piracy the gulf right but when we're talking about anti ship ballistic missiles.
00:58:18
Speaker
defending that from onboard a ship is a very different struggle. And so we are, I'm gonna say powerless, but the capability there just doesn't exist, right? And nor really should it exist, because at that point, what do you then have, commercial companies buying heavy weaponry to install on the decks of their commercial ships? That's that's a nightmare um from a health and safety point of view, from a from a perception point of view.
00:58:45
Speaker
it's It's a nightmare. I mean, one of the things that I think I learned quite quickly coming into this job is that you never take even the simplest things for granted. So when we talk about yeah things like health and safety, for example, right? Don't take for granted that people know what they're doing when it comes to stacking things on a shelf. You have to tell people exactly how you want things stacked on a shelf. That's a simple thing, but you have to do it. And the idea that we would then have to have some sort of heavy weaponry or, or you know, explosive weaponry even um board ah on board a ship, a commercial ship, it's a terrifying thought from a health and safety point of view.
Lobbying for Maritime Security
00:59:19
Speaker
What we can do is
00:59:21
Speaker
we can lobby and we can advocate for ourselves, right? We can, um as a company, we can go to our politicians, and either in our national companies or at a bigger stage like in the EU or the US. s ah But there's also international forums, fora, fora. There's international fora for this, right? And we're shipping writ large can take a voice. And that voice has a lot more power when it's coming from All sorts of different companies and and interests than just one company, right? If CMA is saying something or if Maersk is saying something or Hopag-Loid or Evergreen or or or whatever, well, it's just one company's problem. But if we're all saying it and we're all advocating to the government's plural of the US, UK, EU, UN, n whatever, it's a much stronger message. I do think sometimes that it gets lost in the noise a little bit because
01:00:14
Speaker
One of the you know one of the great paradoxes is is once once a crisis is kind of over it's never like this is this was a big crisis for us right so it's a crisis and we adjusted um and we we we figured it out and we got used to it and we moved things around and we plan for it. Well now it doesn't have as much of an impact on the company so people kind of forget that it's still a very big problem.
01:00:38
Speaker
And so is the advocating still as strong as it needs to be and that's something I think we struggle with on a day to day basis because we are also. You know a finite amount of people trying to do a job and we get distracted by other stuff and that's going to happen in every company I mean mask has a hundred thousand employees but they're all doing various different things there's only very few people in that company that are doing the advocating to governments.
01:01:02
Speaker
Small very dedicated very admirable cadre because they have to go sit in meetings with with politicians and all sorts of ranks and levels and know all the protocols and the what to do and what not to do. But that's that's the best thing we have, right? From my perspective as an intelligence person, as an intelligence professional, I think we have a lot more than that.
Strategic Data in Shipping
01:01:22
Speaker
I think that we as a shipping company and as a shipping industry, we have the data, right? We have insight into data, into the supply chain, into where things are happening, into how they're happening and who they're happening with. When we had a call ah with the Fifth Fleet,
01:01:38
Speaker
one of the key pieces of information was that we had done an internal analysis on impacts to the supply chain that if this shuts down we're looking at a six to seven percent impact on the supply chain. And that was the key data point for that briefing for the fifth league because that is the impact that's the so what right we always talk about that what's the so that is it yeah people don't want that.
01:02:02
Speaker
we can provide that kind of context that I think maybe we're not the people saying we need to do this for national security reasons or we need to do this for you know security security reasons even, but we need to do this to to protect trade. We need to do this to protect your economies, to protect the things you want, right? Because at the end of the day, that's what we're talking about, is we are shipping things on ships that people want to buy.
01:02:28
Speaker
That's, that's what we're talking about. So protect your way of life. And that's the message that we try and and drive home, but that can only get you so far, I think sometimes. So I have a ah question for you, Daniel. I'm coming at this with my personal framing of working in the government and through the restrictions that that provides you working in the corporate world have much fewer restrictions from that. And now maybe this is a little bit deviating from the the Red Sea part of it. And maybe with the other choke points is as a company, do you have both the ability and the practice of directly negotiating with the countries that may be providing you know the the state actors that would be providing the threat there. So with Iran and the Hormuz and with, I don't know, pick your country, right?
01:03:23
Speaker
and and Because you don't have to go through State Department, you don't have to go through ambassadors. like you Can you guys go through and do that direct negotiation? It's a yes and no, so certain countries we cannot because they are sanctioned, right? So sanctioned entities, we can't we can't deal with them sanctioned entities at all. That's that's poor business practice for ah for a business like Marisk. It's also illegal. So that presents, you know, it's illegal in the EU, it's illegal in the US, that really would hurt the business model, right?
01:03:55
Speaker
we We take stands, so I think this is also something that's actually particularly interesting when we talk about you know where the world is in terms of threat and and how commercial entities are responding to it. We took a stand in 2022 before I even started, but the company did, right? They they took a stand on on Russia and Ukraine. and we We visibly pulled our operations out of Russia. um We shut down our office there. We we we visibly supported, openly supported Ukraine and and our employees and our people there.
01:04:25
Speaker
And I think people expected that in this crisis as well. They expected that, okay, now you have to take a side. And we've been seeing this for many, many years, right? We've seen it in the US a lot. We've seen that, okay, we're now pushing this kind of, the business needs to take a side in this in this societal or political debate.
01:04:44
Speaker
For us, I think it's a bit more complicated because when we're talking about the Middle East, there's there's supplier markets and there's consumer markets there. it's It's very hard to disentangle yourself from that kind of a complicated landscape. So we can negotiate with countries that maybe have less, that the US, the EU have less access to um in order to build those deals, right? Like we certainly negotiate tons in China. we are we are We have a massive presence in China, but also in across Africa, right? Across Africa and Latin America. We run things up the littoral states into you know Mali and a whole bunch of other places, right?
01:05:25
Speaker
But that's places that maybe you can't go as a US government or military officer, at least openly or safely. so it's there there is a thing But we can't negotiate with Iran because they're under sanctions. We can't negotiate with North Korea because they're under sanctions. And and right now, we really can't negotiate with Russia because they're under sanctions too, and we took a stand on that.
01:05:48
Speaker
So it it it becomes ah almost a bit more complex because I think when I was in the government, there were really harden hard rules about what you can and can't do, right? Because I think in the private sector, they're not so much hard and fast. it's It's how does this present itself to the company? How's this going to play with the company? There are some hard rules. We will not do this, but we have to decide that it's a company.
01:06:12
Speaker
so For mayors, we will not negotiate with countries. We will not do business in countries that have active sanctions, right? Or that are listed on state sponsors of terrorism, et etc, et etc. But other companies might.
01:06:25
Speaker
you know And that's up to them. That's a risk that they're willing to take. That's a risk appetite, I think.
Maersk's Moral Stances
01:06:34
Speaker
And Maersk is an old, it's a very old company, right? I thought very old. It's over 100 years old and it's Danish. It's a very practical company. It has a very low risk appetite. They don't like to break the law. They don't like to break the rules. And when they do, they feel really bad about it. And they apologize really a lot.
01:06:50
Speaker
And they'll they'll gladly pay the fine because we should have done better. you know like They've done this throughout their history, but then they also take stands. Maersk helped in the 70s. Maersk basically so sent a bunch of its ships to pick up people that were escaping Vietnam.
01:07:08
Speaker
These people were escaping Vietnam and we picked them up and helped bring them to ah to kind of dry land where they could be picked up by the US or UK or whoever. We've done this before.
01:07:21
Speaker
This particular crisis presents a really strong problem for us because we can't negotiate with the Houthis. There's no negotiating with the Houthis. And even a glimmer of, like, should we do that? No, you shouldn't, because they are a designated terrorist organization. They're maybe not a full terrorist organization. They're not an FTO, but they are they aren on a list, right? And they're not a state. They are not a state entity.
01:07:43
Speaker
So we're not going to get involved in that. So our only recourse is to really talk to the US, talk to the EU, talk to the UK and see what they can do. I think it it frustrates a lot of people because I think it it has such an impact on the business that maybe previous crises didn't. This one really is kind of part and parcel, you know, blocking a block a shipping line is really what it's what it's all about when it comes to talking about an ocean shipping company. It's problematic.
Houthi Threat and Extortion
01:08:13
Speaker
So some news that's kind of breaking in the last 48 hours is a UN panel of experts report that has been reviewed by some media, good media organizations. And they're saying that they've found that the Houthis are taking in approximately $180 million dollars per month in safe transit fees from ship owners that are willing to pay that fee to ensure safe transit. Now, it's important that I reiterate it reiterate exactly what Daniel just said. You're going to have kind of big brand, well-known shipping companies that are just absolutely not going to engage in things like that. They're companies that have people like Daniel, you know but the majority of ship owners out there might own a fleet of five ships. They may be maybe 50,
01:09:01
Speaker
they They run in very thin margins as well. So for them, diversion decisions can be extremely costly. But something that we also have to admit, i' I'm part of the maritime community, it is it is a very Murphy industry. There's a lot that goes on in shipping. And again, it's not going to be companies like Daniels, but there's a lot that goes goes on in shipping, where there's all kinds of violations of labor regulations, environmental regulations, human rights abuses, this stuff does happen.
01:09:31
Speaker
you only have to look at the Beirut port explosion where the ammonium nitrate was landed in Beirut because of an abuse by a ship owner, right? That's how it ended ended up in Beirut. So there's companies like this that are going to be willing to pay the Houthis and negotiates and with negotiate with them. there's There's been rumors that this has been going on going on for years and it seems the last 48 hours, there's some good proof. I'm not sure if 180 million a month is accurate.
01:09:59
Speaker
if you break that down, that means that a ship owner is paying $200,000 potentially to the Houthis to get a ship through the Red Sea. In addition, they're going to have to pay sue as canalsies. So you run the mathematics there of that versus a diversioner in the Cape of Good Hope, the maths get a bit difficult. But look, there's certainly going to be ship owners out there that are willing to to work in the dark. Absolutely. There's about 20% of the global tanker fleet now is working in the dark. We call them the the the shadow fleet or the ghost fleet, which are basically using methods to get around Western sanctions on Russian and Iranian product, right? Separate topic, but point being, it's a murky world. And um on that side, there's the the commercial solution for some companies is just to pay pay the terrorists.
01:10:50
Speaker
But other options then but but back to kind of what I do as as a consultant is is helping companies negotiate the risk in places like the Red Sea, not by negotiating with the Houthis, but and first of all, understanding the risk. So a lot of that is like, do you have the relevant information? And again, a company like MERSC has someone like Daniel and who's there for that purpose. Not not all ship owners will have that.
01:11:15
Speaker
and That's often where i I come in as a consultant, is really actually understanding the threat. What is it specifically to your vessel? It starts with that. Then what measures can you take? Is a diversion really the only thing you can do? Some of those measures, Daniel mentioned, that come from anti-piracy measures. Armed teams are being used quite a lot in the Red Sea to counter the Houthi threat and just to reiterate what Daniel said. While they have proven successful on a couple of occasions against some of those unmanned surface vessels,
01:11:46
Speaker
yeah to There's a degree of luck involved in intercepting those, and also that armed team cannot do anything against a ballistic missile. There's also yeah credible reporting here in the open source that the Houthis are getting their hands on Yakant missiles from Russia. These are very, very different beasts to the kinds of missiles they've been firing at ships so far. Yakant missiles could do a lot more damage, they're much more difficult to defend against from a naval perspective, and they have much more range.
01:12:16
Speaker
So it's about understanding those risks and and also understanding the limitations. There's only so much as a commercial entity you can do to protect yourself against a threat like that. And I think it comes back to your previous question, Lewis. It's like the role of government is is supreme here. Commercial shipping just cannot be left completely on its own against these kind of kinds of threats.
Navigating Contested Regions
01:12:37
Speaker
And I think you know when we talk about commercial industry, the commercial shipping industry, the commercial shipping industry is run by people who are not necessarily a security or intelligence or former military, right? They're businessmen, women, business people. They're business people. And they've got and MBAs, and they're very good at you know negotiating over a table and and ah broadcasting their earnings and losses over the years or or whatever.
01:13:05
Speaker
And it can be a very difficult job when you are trying to explain to them what the uncertainty is in a conflict like this. um It can be very difficult when you try trying to explain to them they're dealing with irrational actors who they can't be negotiated with. they I mean, you might want to pay, but we're not going to pay them, so that's not an option for us. So moving on, right? Your options constrict themselves very quickly when you're dealing with a large companies with with leadership that's business, that's that's ah Yeah. we had a yeah ah We had to make a decision about our 2025 network. This was back in August. and They basically said, okay, we want you to do the assessment, do the analysis, and come to us with a recommendation of whether or not we should sail through the Red Sea and in in in January 2025. They said, well okay, well,
01:13:59
Speaker
That's a long time to forecast out when you think about it, with all the different factors and and and and variables that we're talking about here in this conflict. In this crisis, that's a really long way to to forecast out. But okay, and so we had a whole scheme, a whole thing that I will talk about at the OSAC conference in a couple weeks. And um we had a whole kind of framework built out, and we said basically if things don't improve, then it won't be safe as of 1st of January.
01:14:26
Speaker
And I swear to God, I swear on something. The first question, i was I thought I was so prepared for these questions. And the first question wasn't, okay, well, what about, you know, if something changes with the Houthis or if something, what if Amman gets involved as a kind of a third country negotiator? The first question was, why are we saying 1st January? I thought we said 31st December.
01:14:51
Speaker
that's what we're talking about here. right like that's and that's and I realized it was just, okay, this has to even be more simple. like it out I have to break the stand even more because they're the people that have to make that decision, not me, and and not the the security folks, right not the intelligence folks, the the business leaders make that decision because at the end of the day, it is a business decision. Some companies, some big companies,
01:15:18
Speaker
the The executives made the decision, even in the face of the security recommendation, to go through the Red Sea. They said, you know, screw it, we're going to do it. um Again, it goes back to that that that risk appetite. yeah Every company is different because every company is made up of people of different you have cultures and origins and backgrounds that they're going to have a different attitude towards that risk.
01:15:41
Speaker
Ours is very low and and that has served us very well through the years and um and that's just the way it is. right so that's the That's the context we have to work in. It can be very frustrating to the government though sometimes because you know is the military has said, well, we're here and and we're shooting things down and kind of our our basic response is, yeah, but we need more. right so It can be frustrating on both sides.
01:16:07
Speaker
And then you deal with this information which is a whole different part right when they say they attack something and and they haven't really attacked something and and that's the message that people here because it goes out on twitter of the news or they see it in word is the ep.
01:16:19
Speaker
And it it it gets in their head. um and And again, they're not the professionals that are that are that are normal normally looking at this kind of information and, and you know, wading through uncertainty and sourcing and and validating things. They just they want to know what to know. And that can be almost more difficult. And and hey, look, ah to reiterate something I said in season one, which is that the industry itself, the maritime industry, let's let's let's go to shipping is extraordinarily risk-tolerant ah compared to other industries. I mentioned before that these are basically moving ships rolling around on the oceans. Now imagine your office turning into that. So there's a level of tolerance there that just has to be there. And when it comes to security, the industry at large will... like Look, 40% of traffic is still there in the Red Sea because those ship owners, for good or for bad, have decided the best thing for their business is to send their people and ships into places where missiles are flying around.
01:17:18
Speaker
There's really no one in the other industry that just does that. like Imagine if you had, I mentioned two ships have sunk and four mariners are dead. Imagine if two commercial airliners and four pilots had been shot down over a certain area. No one would fly there. That would be the end of aviation through that area for years. But maritime just keeps on sailing.
01:17:40
Speaker
so That cues up really nicely for for the last question we always like to ask people. you know This is ah an area with a lot of risks.
Geopolitical Shifts and Maritime Security
01:17:47
Speaker
What keeps you up at night? What is the worst case scenario here? and let's Let's start with Daniel. Worst case scenario is, I think from from my professional you know place, my professional seat is if we lose a mariner. right If we lose a seafarer, that's terrible for us.
01:18:06
Speaker
Mariska is actually it's there's a lot of things I could find fault with in any any place I i work, but Mariska is a pretty good company and I think the company tries to take care of its people really well. That's one of the things that we really push is this constant care of each other and I think losing somebody would be would be really really bad.
01:18:24
Speaker
From a geopolitical perspective, what keeps me up is, is you know honestly, so we're recording this on election day in the US. The uncertainty around geopolitical shifts and how that impacts the security for things like this for the supply chain, and how just insanely complicated it is, that honestly keeps me up at night because frankly, I can't stop thinking about it. Because you know it doesn't take a lot to change policy.
01:18:51
Speaker
It doesn't take a lot to really have impacts on you know conflict in Ukraine or the conflict in the Middle East. And you know our livelihoods can be tied to that at some at some point. Yeah, that's kind of what keeps me up, I guess. And what keeps me up? Exactly that, the geopolitical shifts. And one specific and I think somewhat realistic scenario is Iran being pulled into an intent to shut down some form of shipping through the straighter from while the Houthis continue what they're doing.
01:19:20
Speaker
and the Houthis gaining an increased capability to target ships further out into the Arabian Sea and Indian Ocean. Because with that, they would effectively be able to bring the 60% of traffic that is diverted right back into their target range. I take a slightly different perspective on this. I appreciate the direct threats to to shipping. I think that is a very, very critical problem to solve and Leveraging military forces or whatever to to support that is is good, but it's a it's a very conventional problem It is a you know, it's force on force. It is how do we how do we stop ordinance from flying? to kind of tie back to Episode one or series season one when we did talked about this it's for me, it's all the other areas of threats and
01:20:17
Speaker
I mentioned it a little earlier with regards to Panama Canal and the cyber and the the cyber threat and the ability to control these things independent of ordnance, to be able to shut down the ability to transit goods, services, warships, everything without firing a shot is the one that actually, actually scares me because the conventional fight exists. We've done it very well for a long time. The unconventional threat is one that we are not great at as the West. A lot of our adversaries are better at it than we are. And they have the benefit of time. They can fire when they want to fire.
01:21:08
Speaker
We have to be on defense right now. This has been a ah phenomenal discussion. So, gentlemen, thank you very much for joining us. Thank you very much. This has been great. Thank you. Thanks, Lewis. Always a good time. You've been listening to Daniel Giordano, Anthony Clay and Cormac McGarry discussing how to close a shipping lane. Our producer for this show was Edwin Tran. To our listeners and Patreon supporters, thank you very much for listening and supporting how to get on a watch list.
01:21:37
Speaker
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