Yemen: The Economic Cost of Terrorism

On October 6, 2002, terrorists attacked the French oil tanker Limburg, as it prepared to receive crude oil from Nexen's Ash-shihr export terminal off the coast of Yemen. This attack dealt a serious blow to Yemen's shipping industry.

In the period following the blast, Yemen's ports have seen a sharp increase in insurance costs, forcing vessels to bypass Yemen and re-route to their competitor’s ports at Djibouti and Oman. Hodeidah Shipping and Transport Company reports that insurance underwriters have imposed a 300% increase in insurance premiums on all vessels coming into Yemeni ports. As a result, ship owners are applying for War Risk Surcharge(WRS) at a cost of $250 per each 20' cargo container and $500 per each 40' container bound for Yemen. This translates to an average cost of an additional $150,000 for each vessel entering Yemeni ports.

Port records indicate approximately 7,000 containers enter Yemen each month and about 3400 containers are handled by Aden Container Terminal. Since October 6, both Aden Container Port and the Hodeidah Shipping and Transport Company have reported a 50% decrease in port activity. As a result of the high insurance premiums, the price paid for WRS, and the decrease in shipping activity, Yemen expects to lose approximately $3.8 million U.S. dollars per month, a drastic blow to Yemen's economy.

Although security at the ports has been stepped-up in the form of patrol boats and helicopters, the costs to the Government of Yemen for the increased security has not been fully realized.