Naval Power and Trade Security: The Return of Convoy Economics?
by Sagar K. Chourasia*
How maritime insecurity is redrawing the relationship between state power, commercial shipping, and the infrastructure of globalisation?
Abstract
The resurgence of maritime insecurity — from sustained attacks on commercial vessels in the Persian Gulf and Red Sea to deepening strategic competition across the South China Sea — has forced a structural rethinking of the relationship between naval power and global trade. This brief argues that we are witnessing neither a simple return to 20th-century convoy systems nor a temporary tactical adjustment, but the emergence of a hybrid maritime security order in which naval capacity has become maritime economy infrastructure. Drawing on divergent threat environments in West Asia and the Indo-Pacific, it identifies two distinct security models, examines the systemic economic consequences of maritime disruption, and analyses India’s strategic position at the intersection of both theatres.
The post-Cold War era was built on a quiet bargain: that the oceans would remain open, that trade routes would be governed by international norms rather than naval force, and that commercial shipping could operate as though geopolitics were largely irrelevant to it. That bargain is now visibly unravelling. The resurgence of attacks on merchant vessels in the Red Sea and Persian Gulf, sustained tensions across critical choke-points including the Bab el-Mandeb Strait and the Strait of Hormuzi 1, and intensifying strategic competition in the South China Sea have collectively forced a reconsideration of a question most analysts believed belonged to history: must global trade once again be secured through organised naval power?
This brief argues that we are witnessing neither a clean return to the convoy systems of the two World Wars nor a mere tactical adjustment. What is emerging is a structurally new configuration — a hybrid maritime security order — in which naval capacity is reconceived not as a military adjunct to trade but as a foundational input to economic competitiveness. The implications extend well beyond shipping premiums and rerouted vessels; they reach into the architecture of industrial policy, strategic partnerships, and the evolving doctrine of states such as India that sit at the intersection of multiple contested maritime corridors.
From Background Condition to Economic Risk
For nearly three decades, maritime security was what economists call a non-priced public good — present, assumed, and invisible in the ledgers of global trade. The World Trade Organisation and its predecessor institutions operated on the foundational premise that sea lanes were constitutively open: disruptions were the exception, and the system’s governance mechanisms would correct them. Insurance premiums in most corridors remained low; just-in-time logistics chains extended ever further into global production networks; and shipping companies could legitimately plan without factoring in the cost of state-backed naval protection. This assumption no longer holds, and the shift is structural rather than episodic. Three overlapping pressures have converged to transform maritime domains into contested spaces: the growing capacity and willingness of non-state actors to strike commercial targets; the deliberate weaponisation of maritime chokepoints by regional powers as instruments of coercion; and intensifying great-power competition that has eroded the normative consensus underpinning freedom of navigation.2 The result is a situation in which the cost of maritime insecurity is being steadily internalised by firms, insurers, and — increasingly — governments.
“Trade security is no longer a background condition of globalisation. It has become a variable — one that states, not markets, are being called upon to manage.”
Is Convoy Economics relevant?
The historical convoy system — grouping merchant vessels under naval escort to mitigate submarine or piracy threats — was more than a tactical arrangement. It represented a principled acknowledgement that, under conditions of systemic risk, market mechanisms alone are insufficient to sustain trade flows. Security provision must be organised, coordinated, and state-backed when the private calculus of individual shipping firms cannot internalise the full social cost of disruption.3 This logic has returned, though in a substantially evolved form. Contemporary convoy economics does not manifest in rigid formations of merchantmen flanked by destroyers. It manifests through multinational naval task forces, escort patrols along specific high-risk corridors, real-time maritime surveillance architectures, and strategic pre-positioning of naval assets along chokepoints that double as energy and trade arteries. The underlying economic logic is the same: security provision has become a prerequisite for economic continuity. What has changed is the technology, the coalition structures, and the breadth of interests that must be coordinated.
“The economic content of convoy logic is often underappreciated. In pure market terms, maritime insecurity functions as an externality — a cost imposed on the broader trading system that no individual shipper or insurer has an incentive to fully correct. State intervention addresses this market failure, but at a fiscal and political cost that is rarely made explicit in trade policy debates. The return of convoy economics, therefore, implies a quiet but significant expansion of the state’s role in commercial activity.”
Two Theatres & Two Security Models
A critical analytical distinction must be drawn between the maritime security environments of West Asia and the Indo-Pacific, as they present fundamentally different risk profiles and call for structurally different responses.
| Active protection – West Asia
Threats are immediate, kinetic, and high-frequency. The Red Sea corridor in 2024-25 has experienced sustained direct attacks on commercial shipping. Naval presence is reactive and escort-oriented.4 Risk is priced into insurance premiums in real time and rerouting decisions are made voyage-by-voyage. |
Strategic deterrence – Indo-Pacific
Threats are latent and structural rather than immediately kinetic. The South China Sea and adjacent corridors are defined by strategic competition and signalling dynamics of great-power rivalry. Naval deployments serve deterrence — preventing the conditions under which commercial disruption would become direct — rather than real-time protection.v |
This dual model has significant implications for how states should resource and posture their naval capabilities. A force structure optimised for West Asia-style escort operations may be inadequate for the long-horizon deterrence game in the Indo-Pacific, and vice versa. States that must operate across both theatres — most notably India — face the most complex planning environment.
Economic Consequences: A Systemic View
The direct costs of maritime insecurity — elevated insurance premiums, rerouting around the Cape of Good Hope, and extended transit times — are well documented. Less appreciated is the systemic nature of these disruptions. The modern global economy is not merely dependent on shipping; it is deeply integrated with it, amplifying localised shocks into widespread supply-chain dysfunction. When Houthi attacks began in earnest in late 2023, container tonnage crossing the Suez Canal collapsed by 82 per cent within weeks; freight rates on Far East-Europe routes surged by 220 per cent between December 2023 and January 2024 alone. War risk insurance premiums — below 0.1 per cent of vessel value before the crisis — climbed to between 0.7 and 1 per cent almost overnight. For vessels that chose to reroute, the Cape of Good Hope alternative added approximately 3,500 nautical miles and 10 to 14 days to each voyage.6
When the Red Sea corridor or the Persian Gulf is disrupted, the consequences go beyond higher freight rates. Manufacturers operating on just-in-time production models face component shortages; export-dependent economies see their goods reach markets late and with diminished competitiveness; energy-importing nations experience price spikes that feed into broader inflationary dynamics. In this sense, maritime insecurity functions as a sustained inflationary mechanism — one that operates at the level of the global trading system rather than any individual firm or sector. There is a further consequence that receives insufficient attention: the socialisation of security costs. When governments deploy naval assets to protect commercial shipping, the expense is borne by taxpayers, not by the shipping companies or commodity traders who benefit from open sea lanes. This implicit subsidy distorts the economics of trade in ways rarely accounted for in trade policy analysis, and it raises distributional questions about who bears the burden of maritime security provision.
Naval Power as Economic Infrastructure
Perhaps the most consequential analytical shift underway is the reconceptualisation of naval power — not merely as a component of defence policy, but as economic infrastructure in the most precise sense of that term. Infrastructure is conventionally understood as the physical and institutional systems without which economic activity cannot be efficiently organised: ports, roads, energy grids, communications networks. The present conjuncture demands that sea lane security, naval patrol capacity, and maritime surveillance architecture be included within that category. The implication is profound. If naval capacity is infrastructure, then investment in it is not a defence expenditure to be weighed against social or development priorities; it is a precondition for economic competitiveness. States that fail to invest adequately in maritime security capability — whether their own or through alliances — face not merely strategic vulnerability but a structural competitive disadvantage in their participation in global trade.
India’s Strategic Positioning
Few states face the challenge described here with greater immediacy than India. Geographically, India sits at the convergence of both security theatres under analysis — proximate to the West Asian chokepoints through which its energy imports flow, and a central actor in the Indo-Pacific strategic order through which its trade with East Asia and the Pacific is conducted. India is not a spectator to these dynamics; it is an embedded participant whose economic interests are directly at stake in both.
India’s evolving maritime doctrine reflects this reality. The concept of acting as a net security provider in the Indian Ocean Region — a framing that has gained traction in strategic policy circles — is, at its core, an acknowledgement that India’s national interest and the collective interest in open sea lanes are largely aligned. Ensuring stable trade flows is not merely an act of regional benevolence; it is a function of India’s own strategic autonomy and economic development trajectory. This alignment creates both the rationale and the domestic political space for sustained naval investment. The challenge for Indian strategic planners is to develop a force structure and doctrine flexible enough to operate across both models — active protection in high-risk zones and long-horizon deterrence in contested strategic corridors — without over-extending naval assets or entangling the country in alliance commitments that compromise its characteristic preference for strategic flexibility.
Will Security form a new foundation for Global Trade?
The convergence of trends examined in this brief points toward a durable structural transformation rather than a temporary crisis response. Globalisation was constructed on the assumption that trade routes would remain open, apolitical, and broadly secure without organised state intervention. That assumption has collapsed — not dramatically, but incrementally and, in retrospect, decisively. What is emerging in its place is not a replication of 20th-century convoy economics, but a 21st-century hybrid order: one in which convoy logic, networked surveillance, coalition-based deterrence, and technology-enabled maritime domain awareness are combined into a security architecture that is more flexible and more distributed than anything that preceded it. The defining feature of this order is that naval capacity has become an economic necessity — as foundational to participation in global trade as the ports, logistics networks, and trade agreements through which commerce is conducted.
For policymakers, this transformation demands a rethinking of how trade security is financed, governed, and allocated among states. For strategic analysts, it demands an analytical vocabulary adequate to the hybrid character of the emerging order. And for India, sitting at the confluence of two of the world’s most consequential maritime theatres, it demands nothing less than a maritime strategy commensurate with the scope of its economic and strategic ambitions.
* Sagar K. Chourasia is the Founder of NITISARA. The views expressed here are personal.
References
1 U.S. Energy Information Administration, World Oil Transit Chokepoints, EIA, July 2024, available at eia.gov
2 Erosion of freedom of navigation norms under conditions of great-power competition, see: International Institute for Strategic Studies, Strategic Survey 2024: The Annual Assessment of Geopolitics, IISS, London, 2024.
3 Andrew Lambert, Seapower States: Maritime Culture, Continental Empires and the Conflict That Made the Modern World, Yale University Press, 2018.
4 BIMCO and the International Chamber of Shipping, Shipping and World Trade: Red Sea Crisis Impact Assessment, BIMCO, Copenhagen, March 2024.
5 RAND Corporation, China’s Maritime Gray Zone Operations, edited by Andrew S. Erickson and Ryan D. Martinson, Naval Institute Press, 2019.
6 United Nations Conference on Trade and Development, Impact to Global Trade of Disruption of Shipping Routes in the Red Sea, UNCTAD, Geneva, February 2024
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