Suez Canal – Significance, Challenges and Way Ahead

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On 23rd March this year, a large container vessel ran aground and blocked Suez Canal, leading to the maritime shipping traffic coming to a halt at one of the world’s busiest waterways. It had remained struck for 6 days, with more than 400 ships being stranded in the waterway. While the vessel was dislodged using tugboats and dredgers, it caused significant adverse implications to the already suffering global economy amid the pandemic. This rare incident highlights the importance of strategic chokepoints in economic growth.

suez canal

What is Suez Canal?

  • The Suez Canal is a manmade waterway in Egypt connecting the Mediterranean Sea and the Red Rea through the Isthmus of Suez.
  • Operational since 1869, this canal provides a direct route between North Atlantic and the northern Indian Ocean via the Mediterranean Sea and the Red Sea without the need to navigate through South Atlantic and Southern Indian Ocean.
  • This 193 km long canal was constructed in 1859-1869 under the regional authority of the Ottoman Empire.
  • It belongs to Egypt and is maintained by the country’s state-owned Suez Canal Authority.

Suez Canal in the past:

  • The Suez Canal existed in one form or the other since its construction commenced during the rule of Senausret III, the Pharao of Egypt (1887-1848 BC).
  • With this, Egypt became the first country in the world to dig a manmade canal.
  • Subsequent monarchs kept improving and expanding this canal.
  • There was a rapid increase in construction activities around 300 years ago when maritime trade between Asia and Europe grew exponentially.
  • In 1858, the Universal Suez Ship Canal Company was made in charge of constructing and operating the canal for 99 years, after which the Egyptian government will take charge of its operations and maintenance.
  • The canal became operational in 1869 after several financial constraints and external challenges.
  • The French and the British held most of the shares in the canal company.
  • The British used this position to sustain their maritime and colonial interests by stationing armed forces along the Suez Canal Zone in accordance with a 1936 treaty.
  • In 1956, the Egyptian government nationalised the canal for financing a dam on the Nile River.
  • This resulted in the UK, France and Israel initiating conflict against Egypt.
  • The conflict between these countries and Egypt ended in 1957 after the United Nations intervention and deployment of the UN Peacekeeping Forces
  • The canal later became the focal point of the Arab-Israeli War of 1973, with Egypt blockading the canal until 1975.

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Why is it important?

  • Since it shortens the distance between Asia and Europe, it is playing a pivotal role in global trade.
  • Around 12% of the world trade, some 1 million barrels of oil and roughly 8% of LNG pass through this canal each day.
  • Around 15% of world shipping traffic use this canal.
  • Due to high dependence on Suez Canal, it acted as a buffer to the COVID-19 induced stress on the global shipping industry.
  • It is an important chokepoint with military and strategic significance. This was especially seen during the 1973 Arab-Israeli War.

Why was it blocked?

  • The Ever Given, a 400m long container vessel weighing 200,000 tonnes, blocked the entire width of the canal, leading to a traffic jam in the Suez Canal.
  • It ran aground and lodged sideways across the waterway due to a high-speed wind and poor visibility from a sandstorm that hit Egypt.
  • Further investigations are to be undertaken to assess the technical and human errors that contributed to this crisis.
  • This is not the first time to see such a blockage in this canal. In 2017, a Japanese vessel was lodged in the ground under the canal water due to mechanical issues.

What are the implications?

  • More than 100 vessels that were stuck along with the Ever Given include those oil tankers carrying one-tenth of a day’s total global oil consumption.
  • This created an additional burden to the global shipping industry, which was already suffering from COVID-19 fallout due to delays, goods shortage and inflation.
  • Several nations in eastern and western parts of the world are facing the economic implications of the blockage.
  • It is estimated to have cost around 12% of the global trade and held back trade worth $9 billion per day.
  • Since the blockage lasted for 6 days, the total trade loss is estimated to be around $54 billion. However, this figure exclusively focuses on cargo shipments delays and disruptions.
  • Its economic fallout is much higher since there are also the losses faced through additional shipping charges and commodity price
  • The canal’s revenue alone faced a loss of $14-15 million per day.
  • Since cargo ships were forced to take a longer route via the Cape of Good Hope, the shipping operation charges spiked.
  • The delay faced by those choosing this treacherous route is 7-15 additional days.
  • It had also increased the cost of renting some of the vessels to ship cargo between Asia and the Middle East.
  • It is estimated that the blockage reduced annual trade growth by 2-0.4 percentage points.
  • This crisis affected businesses across the globe – from domestic transport providers to retailers, supermarkets and manufacturers.
  • This blockage, however, did not create a long-term impact. It just inflated the prices of some commodities and goods for a short duration.

Which are the alternative routes?

Cape Route

  • The European-Asian sea route or the Cape Route is a shipping route from the European coast of the Atlantic Ocean to Asia’s coast of the Indian Ocean passing by the Cape of Good Hope and Cape of Agulhas at the southern edge of Africa.
  • The first recorded completion of this route was made by Vasco da Gama in 1498.
  • Its relevance fell with the coming of the Suez Canal and its upgradation in 2015.
  • This route is longer, uses more fuel and rife with piracy concerns.
  • Piracy has been a significant concern in recent years off the Somali coastline and in the Gulf of Guinea.

North Sea Route

  • This shipping route runs along the Russian Arctic coast from the Kara Sea, along Siberia to the Bering Strait.
  • The entire route lies in Arctic waters and within Russia’s Exclusive Economic Zone.
  • Some of the regions in this route are free from ice only for two months a year.
  • During this crisis, Russia promoted this route as an alternative to Suez Canal.
  • Developed by Russia, this route reduced the journey to Asian ports by 15 days when compared with the Suez Canal route.
  • Yet, it failed to attract traffic due to high costs and environmental concerns.

How did India respond?

  • Indian exports/imports worth $200 billion to/from North America, South America and Europe depend on this route each year.
  • These include petroleum goods, organic chemicals, iron and steel, automobile, machinery, textiles and carpets, handicrafts, furniture etc.
  • The Central Government unveiled a four-point plan to mitigate the consequences of this blockage.
  • The includes:
  1. Advising ships to re-route via Cape of Good Hope
  2. Prioritisation of perishable cargo
  3. Stabilising freight rates
  4. Effective shipping traffic management at Indian ports

Which are the other places vulnerable to such incidents?

  • Several critical chokepoints are vulnerable to similar incidents in the future.
  • These are strategically important routes as they make navigation faster, easier and cheaper.
  • Apart from the Suez Canal, other major maritime chokepoints include:
  1. The Strait of Malacca that separates the Pacific and Indian Oceans
  2. The Bosporus Strait that separates the Aegean and Black Seas
  3. The Strait of Bab-El-Mandeb at the tip of the Arabian Peninsula
  4. The Strait of Hormuz at the outskirts of the Arabian Gulf
  5. The Panama Canal connecting the Atlantic Ocean and the Pacific Ocean
  • These chokepoints are often busy with high volumes of merchant traffic as well as naval warship movements.
  • Interruption of any one of them would mean a significant impact on global trade as seen in Suez Canal.

What can be the way forward?

  • When chokepoints are blocked, trade does not necessarily come to a standstill since alternative routes are available.
  • Yet, abrupt blockages as seen in Suez Canal has significant implications on several sectors and the overall economy at least for a short duration.
  • While such blockages are unintentional, they create a situation where valuable assets become sitting ducks to terrorist and piracy threats.
  • There is also the possibility of accidents occurring in these regions and creating tangible economic implications.
  • Though such threats are rare, they should not be completely ruled out since chokepoints still remain significant in the global economic growth.
  • With the growing traffic in these chokepoints, there is a high possibility of accidents becoming more frequent.
  • Maritime traffic control and other countermeasures must be chalked out for better resilience of the chokepoints.
  • For this to happen, threats related to specific chokepoints must be identified.
  • The technical infrastructure of the Suez Canal must be improved immediately in order to prevent the repetition of blockages.
  • The Suez Canal Authority is currently mulling expansion of the southern section of the waterway where the Ever Given was stranded.
  • Such an extension would allow the continuation of traffic even in the presence of large grounded vessels.
  • There currently lacks readily available equipment capable of removing containers of large commercial vessels like that of Ever Given.
  • Therefore, the following measures can be taken immediately to prevent future blockages:
  1. Make available bigger tugboats, dredgers and offloaders
  2. Implementing stricter guidelines on how ships transit the chokepoints. Permissions should be given for transit only during daylight hours or high visibility.
  3. Increasing crew sizes for ultra-large ships to enable better navigation
  4. Improving technology in vessels for piloting through narrow channels
  5. Creating international authorities to manage chokepoints (Suez and Panama canals have specific authorities to manage them)
  6. Conduct frequent drills and exercise to respond to disasters like seen in Suez Canal.
  7. An international regime with regulatory powers can be set up to inspect all chokepoints frequently. The International Maritime Organisation may be tasked with such a function.

Conclusion:

With the ever-increasing size and number of vessels, seamless passage through narrow chokepoints is becoming more and more difficult and blockage-prone. Therefore, putting in place necessary safeguards and regulations is a need of the hour.

Practice question for mains:

Critically examine the implications of Suez Canal blockage. Enumerate the countermeasures that can be put in place for seamless transit through strategically important maritime chokepoints. (250 words)

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