Equilibrium: Issue #2

To the Global Energy Security Community, we are excited to bring you the second issue of Equilibrium, the Global Energy Security Institute's newsletter we first introduced in November. As with the first issue, we look to keep a dialogue of energy security going among our community of interest and to present "Energy in Context."

In this issue, we highlight some of the challenges facing global energy. We have continued expanding our bench of expert authors and have three new offerings highlighting various challenges and threats the global community faces.

First, retired Royal Navy Commander Tom Sharpe brings into sharp focus the fragile nature of global shipping by examining the effects of Houthi aggression in the Red Sea. While this is certainly topical and anchored in current conflicts, it indicates the potential for global shipping to be disrupted by various threat actors across varied chokepoints.

We continue with articles from Dr Ellen Wald and Brian Cavanaugh, drawing on their expertise to demonstrate the challenges to offshore wind power and rare mineral extraction.

We hope you enjoy this issue. In the coming months, we will bring you a special Equilibrium edition specifically intended to prepare for the conference topics at GEST 2024 in Tokyo.

– Mike Nelson
Editor

Standoff in the Red Sea

by Tom Sharpe OBE

Since 26 October, when the Iranian-backed Houthis first lit up the Red Sea sky with a barrage of missiles and drones out of northwest Yemen, freedom of navigation there has been under threat.

In normal times, 15% of world trade passes through the chokepoint at the bottom of the Red Sea, the Bab el Mandeb or the “Gate of Tears.” This and other global chokepoints such as Suez, Panama, and Malacca are like connected arteries through which the world's lifeblood should be able to pass unhindered. Strangle one, and all are affected. Maintaining the flow of goods through them is a fundamental part of international trade and world order. 

And yet we find ourselves in a situation where a non-state actor armed with a range of weapons, most of which are quite rudimentary, can challenge that order with considerable success.

Initially, they professed to be targeting just “ships connected to Israel.” This then broadened to “ships going to and from Israel.” By late November, most countries had recognized that these attacks were no longer precisely targeted (if they had been at all). Perhaps more importantly, shipping companies such as Maersk, MSC, and BP agreed and started to route the long way around the Cape of Good Hope rather than run the missile gauntlet.

The Houthis had some success, including hitting a chemical tanker which caught fire as well as firing at a Hong Kong-flagged ship, a ‘dark’ ship carrying Russian sanction-busting oil, and directly at coalition warships (although the US Navy denied this was the case for some time). This might all have started in response to events in Gaza, but pinning on that was looking increasingly tenuous.

In an attempt to reassure the shipping companies, a US-led coalition was formed called Operation PROSPERITY GUARDIAN (OPG). This leveraged an organization already in place in the Red Sea called Combined Task Force 153, whose leadership was also the Commander of the U.S. 5th Fleet headquartered in Bahrain.

It was the right thing to do, but standing up the response was slow for two reasons.

First, some countries found themselves unable to delineate between support for the US in restoring freedom of navigation in the Red Sea and support for the US and, therefore, by extension, support for their posture towards Israel.

Second, it was clear to many that OPG’s entirely defensive posture was not just unlikely to work but that it also placed the warships there at considerable risk. Their intercept rate was impressive but not 100% - it never is outside of Hollywood - and the longer they stayed in place playing permanent goalkeeper, the more the chance of being struck increased. It also doesn’t take much to realize that shooting down $20k drones with $2m missiles can’t be sustained for long. 

During this phase, merchant vessels were struck. It’s testament to the strength of them and, on occasion, the bravery of the crews that none of these strikes escalated into a major pollution incident or sinking. Again, every day that passed, the likelihood of this increased.

The net result was that you now had ships from a few countries- the US, the UK, Spain, Italy, France, and Japan- all operating in the area but not under a common set of instructions, rules of engagement, or even air picture. By the time the Indian and Chinese warships turned up, the picture was cluttered.

Initial liaison between the shipping companies and OPG headquarters was slow and clunky, indicative of both the complexity of the shipping infrastructure and how quickly lessons regarding civilian/military interfaces tend to be forgotten. 

While this did little to reassure shipping companies, it was doing even less to deter the Houthis, who kept escalating and adding ever more diversity into their attacks, including hi-jacking and surface drones, all the while treading the fine line between creating maximum disruption but being careful to remain sub-threshold and not trigger a backlash. 

One only has to look at the complexities of the region, not to mention the desire not to get involved in war on yet another front there, to see why there was such a delay before counterstrikes were authorized.

However, with the status quo not working, something had to change, and on 12 Jan, the US and the UK, with statements of support from Australia, Canada, the Netherlands, and Bahrain, struck back.

US Central Command said, “This multinational action targeted radar systems, air defense systems, and storage and launch sites for one-way attack unmanned aerial systems, cruise missiles, and ballistic missiles.” 

And this is where we are now - in the post-counterstrike phase. US F-18 fighter jets from the USS Eisenhower, mixed with tomahawks from various US assets and occasional Royal Air Force sorties flown from Cyprus, have adopted a ‘one out one in’ strike policy, occasionally ‘going big’ but mostly conducting precision strikes on weapons about to fire or having just been fired.

There is only one thing to note: it isn’t working yet.

As of today, 55% of container shipping is going around the Cape of Good Hope rather than running the missile gauntlet. Oil tankers are down just 30%, but that is increasing. Liquid Natural Gas carriers, some of the safest ships out there (until hit by a drone), have all decided to go around.

Depending on where the journey starts and ends, this can add 15 days to a passage with associated increases in fuel (and refueling) costs. The flip side is that insurance is cheaper, and the Suez Canal fee is avoided, but this is a fine balance unless you are in Egypt.

So what will work?

Ultimately, for freedom of navigation to be restored, shipping companies and their insurance companies must be convinced that the trip is worth the risk. To what percentage they need to be assured is a key unknown here – it’s unlikely to be 100% for a long time, so what is the acceptable risk?

Either way, to get there, the Houthis have to stop firing. This can only happen in three ways.

First, they decide to stop of their own accord. Second, they are persuaded to stop by diplomatic means, most likely, although not exclusively, through Iran. Third, they are compelled to stop.

One and three seem unlikely. They have too many reasons in country and are enjoying their restored position as a global source of conversation too much to stop of their own accord. Their insistence that they would stop if there were a ceasefire in Gaza is believed by few. Besides, their slogan, “Allahu Akbar, Death to America, Death to Israel, A Curse Upon the Jews, Victory to Islam” doesn’t drip with contrition.

Bombing them into submission is as unlikely as it would be difficult. The dispersed and mobile nature of their weaponry, sheer numbers, and ability to hide in amongst the local topography and population make targeting difficult – ask the Saudis. The weight of fire to ‘decapitate’ their capabilities would be immense and would almost certainly lead to a regional escalation.

So, the best route to success is the one that is being pursued now. Diplomatic channels from around the world supplemented with a light sprinkling of counterstrikes to ‘degrade’ not ‘decapitate’ and to let them know that they can no longer operate with impunity. A strike policy of ‘one out, one in’ has the added advantage of being frameable as self-defense, a vital part of appearing legitimate to various voting populations.

The key question now is, for how long?

Western Navies are all stretched. Even the mighty U.S. Navy is feeling the squeeze with the (unfair?) global expectation placed on them to resolve all these issues taking its toll. The USS Ford was extended on her maiden voyage twice. The USS Eisenhower is carrying the burden of the strikes from the southern Red Sea. The Arleigh Burke destroyers have all been there for months now. The Royal Navy has three warships there, which it will not be able to sustain for long.

So, as this goes to print, we are in a standoff. The issue is that the West’s end state – restoring freedom of navigation - is harder to achieve than it is for the Houthis to disrupt. They won’t stop themselves and can’t be made to without escalating. While we wait for them to be persuaded, strikes and counterstrikes will continue, and Western forces will be preparing for the long haul.

In the meantime, ships and their goods and energy will be delayed, and prices in your house will rise accordingly.

Securing the Future: Navigating the Global Rare Earth Minerals Landscape

By Brian J. Cavanaugh

Rare Earth Minerals are the hidden backbone of our modern technological era, powering everything from electric vehicles to renewable energy technologies and consumer electronics. As the demand for these critical elements continues to rise, understanding the dynamics of the global market becomes paramount.

The current state of play for rare earth minerals is cause for concern, characterized by China's dominance in mining and refining, coupled with the critical role these minerals play in emerging technologies and defense applications—it presents serious security implications that demand immediate action to secure a resilient future.

Limitations of Offshore Wind

by Ellen R. Wald, Ph.D

Energy transition is rooted in the idea that renewable energy will replace fossil fuels as a source of baseload power. The benefits of renewables are often touted to the public in ways that obfuscate the drawbacks or presume technological strides that haven’t come to fruition and might never. The truth is that renewable energy, even when paired with battery storage, cannot meet the energy demand currently met by fossil fuels.

Renewables have a place in our energy ecosystem, but we must be realistic about the power they can and cannot deliver and deploy them where they best fit the energy mix and make financial sense. A prime example of this is the case of offshore wind power.

We hope you enjoyed this issue of Equilibrium by the Global Energy Security Institute. We look forward to being back in your inboxes soon with cutting-edge analysis of the challenges facing the global energy industry ahead of the GEST Conference in Tokyo.