The Suez Canal: Constant Crisis and a Continuing Conundrum
The Suez Canal has for over a century been the pathway through Africa, connecting the Mediterranean with the Red Sea, making it the shortest maritime route from Europe to Asia. The 24th of March saw the entire operation come to a halt, as a ship blocked the Canal and led to an enormous build-up of container and cargo ships. The ship in question, named the Ever Given, is owned by the Taiwanese shipping company Evergreen and registered in Panama. On its way to Rotterdam the ship fell victim to strong winds, knocking it off course and causing the boat to spin and ground. Dr Sal Mercogliano, a maritime historian based in North Carolina, stated that this was the “largest vessel to ever go aground”. The enormous cargo ship is 400m long and weighs massive 200,000 tonnes and is relatively new, being built in 2018. The crew has all been safely accounted for. Given that the Canal is one of the most important maritime routes in the world, early fears by experts judged that crude oil prices would rise by 4% on international markets but the situation was seemingly worse. Lloyds List, a shipping journal, has estimated that for every hour that the Ever Given was aground and blocking traffic, it resulted in around $400 million an hour lost. The result of this loss has led Egyptian authorities to seize the Ever Given pending payment of damages by Evergreen. An Egyptian judge ruled that Egypt and the Suez Canal Authority suffered both physical damages as well as “reputational damage” and should therefore be compensated in the region of $1 billion. As of writing, insurers for Evergreen are already contesting this claim stating “The [Suez Canal Authority] has not provided a detailed justification for this extraordinarily large claim, which includes a $300 million claim for a ‘salvage bonus’ and a $300 million claim for ‘loss of reputation”. With such a mess caused, it will be an interesting case for the future. However, a bigger question should relate to the Suez Canal itself, as clearly its importance, for international trade, is enormous. But first its history needs to be understood.
The Canal was finally opened, after 10 years of construction by the French and Egyptian governments, in 1869. The Canal was controlled by the Egyptians for around 6 years before they were forced to sell it to the British after financial problems occurring from debt and a financial crisis. The British had around a 44% share of the canal, with the rest sitting with French investors. Britain being Britain decided to invade Egypt in 1882, taking charge of the Canal and its finances and operations. In 1888, the Convention of Constantinople stated that the Canal is a neutral territory under the control of the British and should be available internationally in both war and peace. The 20th century came along and certainly challenged this agreement with conflict fought for control of the Canal in both the First and Second World Wars. After the Second World War, Britain’s Empire was dissolving and their hold over the Canal was dwindling, combining this with the increased use of oil and the Egyptian Revolution meant that the power of the Canal was changing hands. This culminated in the 1956 Suez Canal Crisis. France, Britain and Israel invaded Egypt late in 1956 with the aim of regaining control of the Canal and removing Gamal Abdel Nasser from power, as he had just nationalised the Canal. On the 29th October, Israel invaded Egypt and both Britain and France issued an ultimatum of cease fire, which was ignored, and, on the 5th November, the two nations sent in paratroopers to land at the Suez Canal. The invasion only lasted a week and two days but in that time 40 ships had been sunk in the Canal, blocking it for trade and making it useless even if the three nations achieved their military objectives. The US, the USSR and the UN placed significant pressure on Israel, France and Britain to withdraw and it worked. Later it was discovered that the three nations had conspired their actions beforehand and then the backlash really started. This resulted in President Eisenhower threatening Britain by selling US government pound sterling bonds and the public turned on Prime Minister Anthony Eden, resulting in an embarrassing resignation. Historians have pinpointed the Suez Canal Crisis as the end of Great Britain being a world power. It was also one of the first international incidents for the United Nations and resulted in the creation of the UN Peacekeepers and their first job was to monitor the Egypt-Israeli border. Since the crisis the importance of the Canal has only grown with globalisation, as now 80% of world trade is done via the oceans.
Nowadays, the Canal’s importance is widely known, resulting in it being called the ‘artery of world trade’. On average, 50 vessels pass through the Canal a day, accounting for around 12% of global trade and is particularly valuable for those trading in oil and gas. The closure of the Canal from the grounding of the Ever Given has demonstrated how vital this trade route is, as ships have had to take for example a 10, 500 nautical mile journey around the Cape of Good Hope rather than a 4,400 nautical mile trip through the Suez, from Italy to India. Due to the importance of the Canal, the Egyptian authorities underwent an expansion project and it was opened in 2015. More parts of the Canal have been deepened and a 35km parallel channel was provided. However, this clearly wasn’t enough.
Therefore, questions should be asked surrounding the control of the finances and operations of the Canal. It is still difficult to traverse, and considering the consequences of recent events, perhaps it would be better if it were controlled by an international body that could devote all of its time and bigger resources to ensuring the constant flow of trade through the Canal. With the size of ships like the Ever Given becoming more and more popular it appears that the state owned Suez Canal Authority could have done more despite their valiant efforts and it should be expected that the international community should aid the improvement of the Canal.
Whilst it is in Egyptian territory, the Canal is too important for one government alone to suffer the burden and potential criticism of how the Canal is managed. For the 19,000 vessels a year that travel through the route, it is important to establish an international body that can review and fix areas that are too difficult or risky to traverse. Massive cargo ships are only going to become more and more common with globalisation and problems like this will continue if management either improves significantly or another body takes over. Perhaps pressure from interested actors, such as insurance companies like Allianz (the largest shipping insurance company) and shipping companies themselves, will lobby for such a body, as no company will want the consequences that Evergreen are currently receiving. Plus, if Egypt wishes smooth transport and less hassle from the international community, it is maybe in their best interest to hand over control of the Canal so it can focus its resources on other parts of its country. It is likely that control over the Suez Canal will be a constant discussion for many years to come and will only lead to more and more debate about who should be in charge of maintaining and managing the Canal.
This article was written for the MD x EuroMUN Printed Edition.