Netanyahu's $15 Billion Reason for Threatening Iran

Israel will join the coalition against Iran if it tries to block the Bab al-Mandab strait in the Red Sea, Prime Minister Benjamin Netanyahu declared last week.

“If Iran tries to block Bab al-Mandab, it will find itself facing an international coalition determined to prevent it from doing so, and this coalition will also include the State of Israel and all its arms,” Netanyahu warned in his speech at the graduation ceremony of Israeli naval officers. Pro-Iranian rebels in Yemen launched an attack in late July on a Saudi Arabia tanker in the strait, which connects the Red Sea to the Gulf of Aden.

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What induced Netanyahu to rattle his saber? Maybe the answer lies partly in a remark made at the same ceremony by Defense Minister Avigdor Lieberman, who said that "recently, we have heard of threats to harm Israeli boats in the Red Sea." But there have to be other reasons for Netanyahu’s jitters.

Bab al-Mandab is a strategic waterway and major route for international commerce. The alternative to passing through it is to sail around the African continent. A great deal of the oil transported from the Gulf states to Europe passes through the strait.

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In 1967, Egypt's blockage of a different maritime bottleneck, the Straits of Tiran, was one of the reasons the Six-Day War broke out. At the time Israel feared a loss of its power of deterrence, not to mention other problems involving commerce with the East.

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If Israel joins an international coalition against Iran over the Bab al-Mandab strait, there will be multiple reasons for that – some the same as in 1967. Israel wants to protect its economic interests and contacts in the East, mainly those related to China. It has an interest in joining a coalition that protects Egypt and Saudi Arabia; such a move would likely strengthen Israel’s geopolitical status in the Middle East, and its relations with other Gulf nations that fear Iran.

Economically speaking, about $15 billion worth of goods pass through Bab al-Mandab each year, to and from Israel. Specifically, according to the Central Bureau of Statistics, maritime commerce from Asia and Oceania (Australia and New Zealand) totalled $12.3 billion in imports and $3 billion in exports, in 2017.

The total trade in goods last year amounted to $130 billion, of which $69 billion was imports and $61 billion exports.

For Israel, 18% of all imports and 5% of all exports passes through the Strait of Bab al-Mandab. It imports more goods by ship from China (15.5% of all imports) than it does from Germany (7.2%), the United States or Turkey. With respect to exports, Israel ships much more to the United States (19.4% of all exports), Holland and Turkey than to China (4.8%).

If anything Israel-China trade is expected to increase, surpassing exports from the United States in the coming years, experts say. Israel mostly buys machinery and electrical equipment, textiles, metals and chemicals from China. Exports to China include chemicals and oil distillates.

Israel also has commercial relations with South Korea, Japan and Australia, but closure of Bab al-Mandab would mainly hurt Israel’s increasing imports from China, and in general, the import of cars from the East. It bears mention that any tensions surrounding the strait will jack up the cost of maritime insurance, which will in turn spark a rise in product prices.

An extreme scenario sees Iran's closure of the strait leading to a war in the region. That doesn’t seem to be likely to happen at this point if only because Iran seems to be in need of foreign investment. It has no interest in a conflagration that spirals out of control and enlarges the Western coalition being forged against it.