News Analysis: Lebanon's economy heavily impacted by Red Sea attacks

0 Comment(s)Print E-mail Xinhua, January 17, 2024
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by Dana Halawi and Huang Hongsheng

BEIRUT, Jan. 17 (Xinhua) -- A new crisis is looming over Lebanon's already-battered economy, as the disruption to maritime transport in the Red Sea is expected to continue, local experts have said.

Withing climbing shipping costs and cargo backlog, Lebanese merchants have felt the impact of ongoing geopolitical threats to navigation in the key trade route.

Container ships had to reroute from the Suez Canal to the Cape of Good Hope on the southern tip of Africa, adding thousands of miles to journeys, said Elie Zakhour, former president of the International Chamber of Navigation.

In light of repeated attacks by Yemen's Houthi group against "Israel-linked vessels" in the Red Sea since mid-December 2023, global shipping giants have increasingly suspended their transition in the region and opted for alternative routes.

In Lebanon, the per-standard container shipping cost, on average, has increased from around 2,000 U.S. dollars before the ongoing Red Sea escalation to 4,000 dollars, according to Zakhour.

Insurance costs increase by as much as 700 percent due to soaring premiums related to "war risks," he noted.

Zakhour estimated that altogether, around 40 percent of Lebanon's total exports and 18 percent of its total imports will be impacted by rerouting, and these will finally be reflected in commodity prices in Lebanon and beyond.

The Red Sea is an important global trade route for many goods, including oil, grain, and technological products, it is connected to the Mediterranean and European markets via Egypt's Suez Canal.

Through this waterway, Lebanon mainly exports agricultural products like fruits and vegetables, mainly to regional countries like the UAE, Qatar, Iraq, and Jordan, and imports bulks of automobiles and digital products from Asian producers.

Anis Abou Diab, an economist and professor of economy at the Lebanese University, told Xinhua that the disruptions will bring cash-flow issues to Lebanese importers if their products arrive too late.

The crisis will force local industrialists and farmers to bear additional costs, affecting their global competitiveness, he noted.

Lebanese have already suffered from dire living conditions due to the country's financial meltdown since 2019, followed by the COVID-19 pandemic and two big explosions that rocked Beirut port the next year, which dealt another heavy blow to the country's economy.

Ibrahim Tarshishi, head of the farmers' association in Lebanon's Bekaa, said hundreds of tons of vegetables and fruits stockpiled inside the container at the Beirut port for exports for three weeks due to factors due to ships' inability to reach the Beirut port.

"We were forced to stop our exports for 30 days and we already lost some of our markets and our clients' confidence," said Tarshishi.

"We can't wait to ship our products because they are all perishable," he lamented. Enditem

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