The Arms Race Hidden in Global Shipping

The Arms Race Hidden in Global Shipping

The Arms Race Hidden in Global Shipping  A​‍​‌‍​‍‌ recent order of 207 vessels at a Chinese shipyard over a six-month period equaled or surpassed the commercial fleets of many countries. It seems Hengli Heavy, the shipbuilder, set a world record in single yard vessel turnover, if the source that made the claim is correct. The company did not make such information known during grand unveiling of the press event or via a signing of a diplomatic protocol document. Rather, it was a quarter's business performance report that disclosed this figure. Perhaps that is the way new realities in the international community are increasingly born – without big speeches and proclamations, but via economic documents and business-related changes.

At first sight, we can easily describe the case as a shipping sector adjustment after a phase of turmoil. It has become, in effect, a battlezone at least for Iran and the US, who are opposing each other in the Strait of Hormuz, and ship movements are becoming so unpredictable that even if it was 91 aweek that the number fell dramatically to 73 at the following week. Iran, in its confrontation with U.S., is targeting vessels passing through the straight, on the other hand, Washington is applying the blockade to Iranian ports. In August two more seamen are killed, even if their ships are not involved in these incidents. In the meantime, thousands of cargo ships are stuck at ports throughout China, Asia, and Europe, thus pushing up the freight cost. These trends, however, are commercial responses, and not the result of wars, according to the stakeholders. The example cited relates to a company of the State of Abu Dhabi, which, in a single move, purchased 11 oil and gas tankers in order to enhance its capacity instead of relying on the spot market, that it regards as increasingly unpredictable and hence unsafe. Besides a means of safeguarding from bad weather, it is the protection against wars.
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Something like this happened in history before it was given a different name. A few years before the World War 1, both Germany and Britain kept increasing their naval armaments while each of their respective government was telling that building up their fleets was a necessary commercial step, a way of safeguarding trade, and the insurance against economic prosperity. Officials in Germany saw that it was only reasonable to have the shipping routes protected while, for the British, it was the 2-power naval standard they were just talking about as an issue of stability. At first, the situation was not considered to be the result of an arms race. Instead, prudence, economic growth, or just the natural action of industry-based countries were some of the popular themes at that time. Only after they had built their ships and the War had started did the public opinion agree that it was an arms race ​‍​‌‍​‍‌indeed.

It​‍​‌‍​‍‌ should be pointed out to remind you that the sailors before even the soldiers were the ones who really experienced the effects of that denial. The fact was, in 1917, Germany's submarine strategy, the main focus of the campaign, was not directed solely to military targets like ships or navy warships; they mainly sank commercial ships carrying goods along with oil tankers because that would make the British supply lines run out which in turn would be less troublesome than going to sea and engaging the navy directly. At the same time, as Germany launched its campaign to torpedo commercial ships and tankers, the London insurance office, known as “Lloyd's of London,” adjusted its premiums in such a way as to reflect mainly changes of numbers rather than a major disaster that would need a whole different label. This is similar to what today's Strait of Hormuz situation: individual seafarers risk the most while the actual fleets and countries in fight are still at peace and can target them less easily.

Attention should be directed to that pattern now. Generally, it's not governments that say they are rearming but rather that they have been compelled to adapt to market conditions, risk, and “temporary” instability in supply chain. Undoubtedly, the tankers built and ordered today are commercial ships instead of warships and the parallel between past and present is not exact. However, still the mental aspect is almost same in cases when a rise in military strength is justified almost entirely by purely business arguments and every one of the actors insists he is simply responding to the situation created by another person. Then the aggressor, there was none – only merchants being protected and vital routes secured.

From orders placed by shipbuilding company, through investment in tankers by state-owned oil company exceeding $1 billion, it becomes evident that a different kind of mobilization is quietly going on. The means and ends of this are not public, it takes place behind the scenes so to speak, during a time when the general discussion over sanctions and diplomatic gestures, etc., makes up the majority of people's agenda. Very rarely in history do we find ourselves as observers of a situation that can be called as arms race but still remains in a state of denial. This time we can follow through supply chains and terms relating to supply chain resilience the whole process of mobilization, just like in those many occasions when these developments have already happened before. It can be that we know how to label one of those situations that are not admitted right away. In most cases, after the ships have left the ports, it is just that we are more inclined to use those ​‍​‌‍​‍‌words.