Columns, Opinion

Worldview: The world’s quest to avoid the Suez Canal

When the Suez Canal was opened in 1869, it immediately had a profound effect on international trade as it completely reshaped maritime paths between Europe and Asia. Specifically for the British Empire, the completion of the Suez Canal (which it would later exert full control over in 1882) was of immense importance because it cut travel times between London and Bombay nearly in half. For Britain, control over the Suez Canal represented the monopoly with which the Empire held over the global shipping lanes. With control over Gibraltar in the west and Suez in the east, the British had essentially transformed the Mediterranean into their very own nautical highway connecting the Western and Eastern Worlds.

Today the Suez is controlled exclusively by its native country: Egypt. While the Arab Spring may have rocked Egypt to its core, the canal has remained a steadfast for the Egyptian government, providing a reliable stream of foreign currency which Egypt desperately needs. The decision to spend $8.2 billion in 2014 on a major expansion of the canal, therefore, should come as no surprise. The expansion, completed in 2015, greatly expanded the canal’s capabilities, allowing for two-way traffic along parts of the route and allow larger vessels to traverse the canal. At the extravagant ceremony celebrating the expansion, banners in Cairo lauded the canal as Egypt’s “gift to the world.”

Yet despite the zeal and enthusiasm in Cairo, the canal’s value in the eyes of the rest of the world has begun to wane. The reality is that distance is not the sole factor in a cargo ship’s calculations when choosing which route to take. While the Suez Canal route is clearly attractive as it cuts transit times substantially, saving vessels the need to spend more on fuel, the taxes imposed on vessels that enter the canal designed to fill the Egyptian coffers are a significant drawback. As fuel prices plunged in 2016, cargo ships increasingly began to avoid the Suez Canal and, instead, sail around the Cape of Good Hope. While this alternate path is longer and therefore more environmentally costly, the low fuel prices make it less expensive.

While the total number of ships passing through the Suez Canal did actually increase by 2 percent in 2015 following the expansion, the number of bulk carriers and container ships decreased by 5.7 and 3.1 percent respectively, and earnings decreased by 3.2 percent in 2016. In response, Cairo announced in 2017 that it was cutting transit fees by as much as 50 percent for large container vessels. This measure, along with the rise of oil prices, saw a recovery of traffic levels in 2017, but was still nowhere near the levels the government projected when it announced the expansion project in 2014.

Moreover, as the viability of circumnavigating the Cape of Good Hope declines, other countries are seeking alternatives rather than just resuming traffic through the Suez Canal. In the neighboring Israel, construction of a railroad between Eilat, the Israeli port along the Red Sea, and Ashdod along the Mediterranean is intended to provide a shorter journey than the canal. Upon its completion, the new Israeli railroad will certainly attract cargo ships away from the canal.

Russia, meanwhile, has begun to take advantage of improved technology and thawing of the Arctic ice to pioneer its own new maritime route: the Northern Sea Route. Making its vast northern coastline useful has been an obsession of Russia’s for centuries, and as climate change makes inroads into the previously impassable Arctic ice, the Northern Sea passage is now being seen as a viable route which bypasses all of the hurdles associated with the Suez Canal. Furthermore, the Northern Sea route cuts travel times between Europe and Asia, and is therefore more cost effective and less environmentally detrimental (as ironic as that may be).

Most recently there have been discussions between India, Iran and Russia about opening a new route called the International North–South Transport Corridor (INSTC) connecting the three nations so as to avoid the Suez Canal. The INSTC would allow Indian cargo to be shipped to Iran through Bandar Abbas, where it would be transported north by road to Astrakhan in Russia and then on to the rest of Europe. The route is projected to cut the cost of delivering goods by about 30 percent and reduce transport time between Mumbai and Moscow to about 20 days.

Egypt’s stranglehold over Eurasian commerce is clearly loosening as the Suez Canal begins to decline in importance. New infrastructure projects tying Asia to Europe are establishing a new wave of Eurasian commerce and interconnectedness. While alternate routes are great for international commerce and for the environment, they are dreaded by Cairo, which does not wish to see the Suez lose its profitability. However, the world continues to innovate and move on from the maritime legacies of the 19th century. Suez’s time in the sun seems to be coming to an end.

Comments are closed.