Red will be penalized for infringing rule 17.1 and rule 18.2(c). Red becomes overlapped after Blue is required by rule 13 to keep clear, therefore rule 17.1 forbids her to sail above her proper course. At the moment when Blue reaches the two-length zone, rule 18.2(c) applies, and Red must give Blue room to pass the mark on the required side, if she becomes overlapped outside.