The latest attack on a vessel just 120 miles off the coast of India, prompted Indian Prime Minister Narendra Modi to dial up the Saudi crown prince Mohammed bin Salman bin Abdulaziz Al Saud on Tuesday to discuss cooperation in ensuring “peace, security and stability in the region.”

The immediate effect of the series of attacks is expected to be on shipping costs as a large number of shipping companies have already announced they will take the longer route via South Africa’s Cape of Good Hope. Insurance costs for cargo sent westwards from India are also going up and together this is expected to be a double whammy for India’s foreign trade, estimated to be worth $1.7 trillion this financial year.

Besides India taking a proactive role in safeguarding ships destined for or going out of its ports, its Navy will willy-nilly have to join the US-led task force, which plans to give security cover to ships in the affected region – the Suez Canal, Red Sea, Gulf of Aden and the Arabian Sea between Yemen and the sub-continent.

“India will of course have to look at a concerted deployment of naval ships in view of the threat. We cannot allow our oil flow or our commerce to be disrupted,” said Vice Admiral Shekhar Sinha, former flag officer commanding of the Western Fleet, in a conversation with The Secretariat.

Sinha pointed out that India would need to “organise security cooperation of the kind we did during the Somali piracy crisis in the previous decades.” During the height of the piracy crisis, India, along with most of the 5 permanent members of the UN Security Council and several other countries, deployed ships to counter attacks on shipping off the Horn of Africa.

The current crisis has been reportedly triggered by Iran-backed Houthi rebels in Yemen. They launched drone and missile attacks on shipping linked to Israel, posing a threat to containerised shipping, 30 per cent of which passes through the Red Sea-Suez Canal-Gulf of Aden route.

About a fifth of India’s commerce also uses these narrow but heavily congested sea lanes as the country’s major export markets lie in Europe and the east coast of America.

Though Iran has denied any complicity in the latest attack on MV Chem Pluto, which prompted naval deployments, Indian diplomats feel there is a need to use diplomatic levers to get the Iranians to influence Houthi non-state actors.

“I am convinced that Iran can play a role in bringing about a solution… In the meanwhile, we will need to deploy more naval ships,” said Pinak R Chakravarty, former Secretary, Ministry of External Affairs.

Indian diplomats hope to convince Iranian interlocutors to take up their case for safe passage of ships through the region, pointing out that attacks and counter attacks will hurt the economies of all nations in the region.

In the financial year gone by, India sourced about 55.3 per cent of its crude import from West Asia. This trend is likely to continue despite India banking more on Russian crude, due to a variety of reasons, and this only heightens India’s desire to reduce the tension in the high seas.

“Ukraine war, Hamas attacks and now Houthi drones expose the modern threat to commercial shipping. In the short run the implications will be on shipping and insurance costs,” said Commodore Ranjit Rai, former Director of Naval Intelligence.

Many shipping lines have announced they will take the longer route via the Cape of Good Hope and nearly 100 ships are currently being re-routed through those waters, away from the Red Sea.

“We have had experience in the past of the importance of this (Red Sea) business corridor and it will not only impact the supply of oil but also global business. Asian countries will be highly impacted if the situation is not normalised. In simplest economic terms, the disturbance in supply chain will lead to volatility in oil prices and cascading effect on all other industries,” said Krishan Insan, an energy expert who was earlier a fellow at ETH Zurich University and Chevening Fellow at London’s Queen Mary University.

On the other hand, Denmark’s Maersk is among shippers who have said a Transit Disruption Surcharge (TDS) will be imposed on 27 trade routes and an Emergency Contingency Surcharge (ECS) will also be brought in from the New Year.

For a 20 feet cargo container from India to Western Europe, this could mean an additional US$ 1,000.

Similarly, insurance costs have gone up several fold and analysts said have risen to 0.5 per cent of a ship’s hull value from an earlier 0.2 per cent for shipping transiting through the Red Sea area.

Crude oil prices have risen with each attack on shipping in the area and moderated as the scare eases. The inflationary impact of costlier crude and imports has as yet not been worked out but is expected to be considerable.

“The impact on our export and import costs as a direct consequence of these attacks on shipping on a vital choke-point for international commerce will have to be factored in into Indian policy making as we step into 2024 and avenues explored for a resolution,” said Kingshuk Chatterjee, a professor at the Calcutta University who specialises in Middle Eastern affairs.