Iran’s Economic Attack: Blocking Israel’s Trade Artery in the Red Sea

• On Nov. 19, 2023, Iranian Supreme Leader Ali Khamenei called on the Muslim countries to “block Israel’s [vital] arteries.”
• Iran is using the Houthis to prevent goods from reaching Israel through the Red Sea. Israel’s Eilat Port has seen an 85% reduction in activity.
• The aim is to increase the pressure on Israel at a time when Iran is in no position to take part directly in the war against Israel and the U.S. because of its own economic crisis.
• Iran’s economy is based on oil and its foreign currency revenues depend on its oil exports. It is necessary for the West to augment the pressure on Iran by ramping up economic pressure, among other things by preventing its illegal oil exports.
• Israel should consider adopting a policy of an eye-for-an-eye or “a trade artery for a trade artery.”
• Israel should cooperate with international bodies to locate, track, and report on the Iranian tankers’ violation of international laws on shipping, and consider more creative actions to hamper their movement.

Three Aspects of the Iranian Economic Battle against Israel

Since November 19, 2023, the Iranians have orchestrated from behind the maritime economic battle using the Houthis to “block arteries” in the struggle against Israel. The indirect economic battle has three aspects. The first and innovative one entails preventing goods from reaching Israel through the Red Sea by directing the Houthis’ piracy. Israel’s Eilat Port has seen an 85% reduction in activity amid Red Sea Houthi attacks.¹

The other two aspects, which are familiar but at higher intensity, involve the economic burden imposed on Israel by forcing it to shield its home front and to protect itself on social media against the Boycott, Divest, and Sanction (BDS) movement attacking American and European companies that express support for Israel

Israel bears the heavy economic costs of defending the home front. In the past and during the current war in Gaza, Iran’s regime-affiliated media have often compared the relatively low costs of Iran’s and the resistance axis’s rockets and drones, on the one hand, and the costs to Israel of the hi-tech missilry and radars in its air defense systems, on the other. Notwithstanding the much-appreciated U.S. aid Israel receives, Israel must combat its foes’ assortment of relatively cheap Iranian-supplied rockets and drones with hi-tech, sophisticated defense systems.

This Iranian approach, emphasizing the October 7 war, is outlined in statements by the Islamic Revolutionary Guard Corps (IRGC) and its top officials. They claim that Israel’s air defense is collapsing under the onslaught of inexpensive and efficient rockets, thanks to the strategies laid out by Iran’s late Qassem Soleimani of the Quds Force.²

According to Iran’s assertions, Hamas’s rockets cost no more than $800 per unit,³ whereas Israel’s Iron Dome system is very advanced and expensive. Each Tamir interception missile fired by the Iron Dome costs $100,000.⁴ Once the Iranian proxies, like the Houthis, move into longer-range ballistic missiles, Israel must counter the threats with costlier Arrow systems.⁵

Iran’s Cyber Attacks on Companies that Support Israel

Amid the Iranian cyber army’s extensive activity in social media, particularly TikTok and Telegram, many posts denounce commercial companies that have expressed support for Israel or whose actions are interpreted as doing so. An IRGC-affiliated media activists’ post says this effort has “scored points with the power of the people,” as well as punishing Starbucks, McDonald’s, Zara, and Coca-Cola.^{6 ,7}

American companies whose responses or actions have been viewed as supportive of Israel have suffered economic losses. Puma announced that it will stop sponsoring Israeli sports teams and will not renew its contract.

The Houthis Block Israel’s Trade Arteries in the Red Sea

On November 19, 2023, in a speech at an exhibit of the IRGC’s aerospace branch, Iranian Supreme Leader Ali Khamenei called on the Muslim countries to “block Israel’s [vital] arteries.” These countries, he said, must prevent oil, energy, and merchandise from reaching Israel and cut off diplomatic relations with it, promising: We, too, will fulfill our duty on this issue.⁸

A few hours after his speech, the Houthis seized the ship Galaxy Leader, which is partly owned by Israeli businessman Rami Ungar.⁹

A Houthi spokesman declared that the Houthis would attack any ship that sails under an Israeli flag or is managed or owned by an Israeli company. He also demanded that the world’s countries remove their citizens from these ships, eschew their services, and keep a distance from them.¹⁰

Since November 19, dozens of Houthi attacks have been launched against ships in the Red Sea.¹¹

Reports in the IRGC channels on November 20, 2023, indicated that before the Houthis commandeered it, the Galaxy Leader passed close to the IRGC spy ship Behshad, permanently anchored in the Red Sea.¹²

On November 30, Ali Abadi, an Iranian expert on Israel, explained that complex intelligence efforts are needed to identify the Israeli vessels.¹³

According to a Wall Street Journal report on December 22, 2023, based on Western intelligence sources, an Iranian spy ship guides the Houthis’ attacks since they have no such intelligence technology. The Journal quotes the White House as saying that Iran is deeply involved in the attacks on the vessels.¹⁴

In light of the Houthi aggression in the Red Sea, on December 18, the U.S. defense secretary announced that the Americans would form a maritime coalition.¹⁵

In response, the naval branch of the IRGC declared the establishment of a maritime Basij militia,¹⁶ asserting that the IRGC fears only God and not the tools of the American enemy, such as aircraft carriers.¹⁷

On December 19, 2023, the Houthi spokesman threatened in an interview with the Iranian Al-Alam channel that an operation against Yemen would turn into a regional and global war. He implied that there is no need for a maritime coalition against the Houthis because they seek to target only Israel-related vessels, while other vessels can safely pass through the Bab el-Mandeb Strait.¹⁸

On December 23, the Pentagon reported^{19, 20} that a drone that attacked the “Israel-related” ship near India was launched from Iran. Israel made the same assessment, while the spokesman of the Iranian Foreign Ministry vehemently denied²¹ Iran’s involvement.

Despite the suspected Iranian involvement in a direct attack on an Israel-related vessel, the Iranians will do everything to avoid a direct clash with the U.S.-led coalition. Neither the Iranians nor the Americans are eager to start a direct conflict between the two countries.

An Eye for an Eye

Iran’s economy is based on oil and its by-products, and its foreign currency revenues depend on its oil exports. Indeed, during the Trump administration, when stiff sanctions were imposed on Iran’s oil sales, its economy almost collapsed.

Iran’s economic malaise today is so severe that even regime supporters voice criticisms in public. Meeting with the president of Iran on December 10, Ayatollah Mazahari, a leading religious scholar and head of the seminar for religious studies in Isfahan,²² said that the state economy had not been as weak in the last 40 years or even in the previous 100 years, as during the tenure of the current government.²³

In its proposed budget law for the coming year, 2024-2025, the Iranian government determined the revenues from oil sales based on selling 1.35 million barrels of oil per day.²⁴

This is much lower than the current sales, estimated at two million barrels per day.²⁵ The Islamic Republic’s proposed solution to compensate for this shortfall and meet the growing expenses is raising taxes by 50 percent,²⁶ something without precedent in Iranian history.

Oil sales are the highest priority for the Iranian regime, determining its national allocations and, indeed, the funding of its proxy network. For years, Iran has concealed shipping lanes, in which its oil tankers sail with their transponder devices (which send the ship’s location to the international bodies that monitor shipping lanes) turned off and thereby circumvent the sanctions, enabling Iran to sell oil to customers all over the world below the market price.

The Tanker Trackers website, a leader in tracking and analyzing shipping issues, has publicized many instances of Iranian oil tankers with turned-off location devices worldwide. Recently, on November 22, 2023, it reported seven Iranian oil tankers that, under the eyes of the American fleet, managed to reach the port of Baniyas in Syria;²⁷ and, on December 2, 2023, on an Iranian gas-carrying tanker that, after two weeks of drifting in the Red Sea, reached Iran. The website assessed that this move was made out of fear of continuing toward the Suez Canal.²⁸

Tanker Trackers also reported several times ship-to-ship oil transfers in mid-ocean or international waters between Iran and Venezuela. On July 11, 2023, it reported on the seizure of one of the Iranian oil tankers in Indonesian waters. On November 6, Iran again transferred 12 million barrels of oil by Iranian tankers in East Asia.²⁹

For Iran, the efforts to circumvent sanctions and sell its oil constitute a vital economic artery. Iran indeed strongly demands the revision of the International Maritime Organization’s (IMO) resolution on dark shipping, with the words “illegal” and “dark shipping” deleted.³⁰

It would be wise for Israel to adopt a policy of an eye-for-an-eye or “a trade artery for an artery.” On the international level, Israel should try to persuade the United States, especially in connection with Iran’s threats against the United States^{31 32},to ramp up the enforcement of the sanctions on Iran. It is clear that economic pressure on Iran also has an economic effect on its terror proxies.

On the practical level, Israel should cooperate with international bodies to locate, track, and report on the Iranian tankers’ violation of international laws on shipping. It should also consider more creative actions to hamper their movement.

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