Climate change, war disrupting global trade in 3 key sea lanes of Black Sea, Red Sea & Panama Canal: UNCTAD

Climate change, war disrupting global trade in 3 key sea lanes of Black Sea, Red Sea & Panama Canal: UNCTAD

Subject: IR

Section: Places in news

Context: UN body warns that prolonged interruptions, particularly in container shipping, poses a direct threat to global supply chains

Details:

The United Nations Conference on Trade and Development (UNCTAD) expressed concern on January 26, 2024, over increasing disruptions in global trade caused due to the impact of climate change and war on shipping in three key sea lanes: The Black Sea, the Red Sea and the Panama Canal.

Choke points

Black Sea

• The disruption in global trade first began on February 24, 2022, when Russian troops invaded Ukraine on the express orders of President Vladimir Putin.
• Russia also launched a blockade of Ukrainian Black Sea ports such as Odessa and Mykolayiv through which much of the global supply of wheat, sunflower oil and maize was exported through ‘choke points’ like the Straits of the Bosphorus and Dardanelles to the Mediterranean and globally.
• Russia and Ukraine signed a landmark deal — The Black Sea Grain Initiative brokered by the United Nations and Turkey— in Istanbul on July 22, 2022, to allow the resumption of Ukrainian grain exports from ports on the Black Sea. In July 2023, Russia refused to renew the initiative after it expired.

Panama Canal

• The Panama Canal, running across the isthmus of Panama that connects North and South America, saves time for ships travelling between the Atlantic and Pacific Oceans by five months. Ships would otherwise have to travel to Cape Horn or the Strait of Magellan at the southern tip of South America.

Red Sea

• Global trade has also been affected in the Red Sea, which connects the Mediterranean (through the Suez Canal at its northern end) with the Indian Ocean (through the Strait of Bab El Mandeb in the south).
• The Houthis of Yemen have been attacking shipping in the waterway in the wake of the Israel-Gaza Conflict which began on October 7, 2023.

Impact:

• Avoiding the Suez and Panama Canal necessitates more days of shipping, resulting in increased expenses. The price per day of shipping and insurance premiums have surged, compounding the overall cost of transit.
• Additionally, ships are compelled to travel faster to compensate for detours, burning more fuel per mile and emitting more CO2, further exacerbating environmental concerns,