Suez of the past and the future

Remember the Cape of Good Hope? That used to be Africa’s southern tip, which ships would circumnavigate during their Asia-Europe expeditions.

From a crisis in the 1950s to a stuck container ship in 2021, the Suez Canal symbolises all that could go wrong with the Middle East and why its challenges outgrow opportunities.

Remember the Cape of Good Hope? That used to be Africa’s southern tip, which ships would circumnavigate during their Asia-Europe expeditions. This circuitous route went out of favour following the opening of the Suez Canal, the shortest maritime route connecting the Mediterranean Sea to the Red Sea. It quickly became one of the world’s most heavily used shipping lanes.

But more than becoming a message of hope for the embattled Middle East — as one would imagine with an asset of that value and such high stakes — the Suez Canal also became a bone of contention, disputed territorial water, and a conflict zone. Call it the convergence of geo-economic interests, or the region’s inescapable location, the world had to deal with the asset, and its liabilities, often with disastrous consequences.

A combination of these factors triggered the 1956 Suez Crisis. With the wounds of World War II still fresh, superpowers basking in their military glories, and the developing world looking for alignments to safeguard their interests, the crisis became another rallying cry for the assertion of economic might, diplomatic influence, and military power. Things took a more incendiary turn in June 1967, with the canal becoming a battleground and dragging other countries of the region into turmoil.

Double whammy

Destabilising factors notwithstanding, the volume of global trade across the Suez Canal widened all the time. Besides essential goods, it provided a critical link for crude oil shipping. For the hydrocarbon-rich countries, the flowing supplies meant oil windfall, while the essential commodity consuming countries across the globe built their industrialisation plans on the trade route.

Today, the Suez Canal is the passageway for roughly one-tenth of the world’s trade. In 2020 alone, 18,829 ships passed through the canal, with a total net tonnage of 1.17 billion. Despite a history of crises, blockades, and disruptions, Egypt has benefitted immensely from the Canal, generating an annual revenue of $5.6 billion in 2020 alone.

It has also invested heavily in expanding the canal to allow passage of giant ships, reduce waiting time via two-way circulation, and is looking to double the traffic by 2023. The canal may even outdo projections provided other factors that routinely disrupt the region remain in control.

Ever Given

Since it opened for navigation in 1869, the canal has closed five times for different reasons. Perhaps the most bizarre disruption happened earlier this year when the massive Panamanian-flagged container ship, Ever Given, got stuck in the Suez Canal. The 200 feet wide and 1,300 feet long ship took up the width of the channel, triggering a worldwide shipping crisis. According to one estimate, the snarl cost $400 million per hour in delayed goods.

The incident shook the shipping industry and raised doubts about a just-in-time manufacturing strategy, reducing costs but increasing the risks associated with such disasters. Even the US’s lack of masks and other safety equipment supplies during the first Covid wave was attributed to gluts in the shipping network due to the lockdown.

Analysts and observers see this as a wake-up call. Mahmood Sharif, managing director of Dubai-based geo-economic think tank — the Center for the Study of Global Economic Future (CSGEF) — looks at the Suez Canal as more than just a maritime gateway. “There are perpetual risks associated with the canal, and it needs infrastructure upgrade to meet the needs of the global supply chain,” he says.

According to Sharif, the supply of goods is critical to the global economy, and if the risks aren’t mitigated, advanced economies may have to look for alternative routes and initiatives. “Moreover, Suez is a geo-economic choke point in a strategic economic route that connects the Pacific, the Indian Ocean, and Arabian Gulf to the Mediterranean. There are chances of it becoming a new kind of geo-economic concern for states who fear that their strategic economic leverage will be undermined. Also, Suez Canal can be used by non-state actors as an economic instrument to achieve strategic objectives,” says Sharif.

Despite their stated positions of keeping the channel open to global trade, major powers have often flirted with the idea of making alternative routes, albeit with limited success. However, seen from the delicately balanced geopolitical and geo-economic standpoints in the Middle East, the Suez Canal could be a barometer for the region’s economic fortunes.

To ensure they reap dividends, all stakeholders will have to continue to invest in the Suez Canal’s security and longevity to boost economic progress. In the worst-case scenario, though, the canal could literally cripple global trade and cause far-reaching ramifications.

Ehtesham Shahid is an editor/journalist based in Dubai.