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An old stripe of water

8 February, 2011

Much is being talked this days about Egypt and some about the Suez Canal. We have all heard about this old stripe of water, which connects the Indian Ocean to the Mediterranean, via the Red Sea.

It is feared that, push come to shove, the Canal could be closed by turmoil in Egypt (or by an emerging hostile regime) just like in 1956, when closure of the Canal provoked a war that marked the end of European intervention abroad and the rise of the US as the world’s new superpower.

But just how important the Canal is for the world? Shall we expect great harm to the world’s economy from any aggravation of the situation in Egypt?

Well, lets start by thinking exactly how old it is. Here you can see that it was first dug in the nineteenth century. BC, think about it. Through the millennia, different locations have been tried, until the present one was dug in the nineteenth century, this time A.C. In the 3.600 odd years in between, several emperors including Cleopatra and Napoleon devoted a lot of effort to this project and not a few wars have been fought for it. There must be a reason to all this.

Let’s take a look at the map. I have marked the main shipping routes with lines which vary in color with traffic intensity (light yellow means less ships traveling; bright red, maximum number of ships) and in thickness with tonnage (the thicker, the more tonnage and, presumably, the bigger the ships, and vice versa)

As a general rule, which can be a little inaccurate, the larger the tonnage, the more likely bulk – commodities – is being transported (this is changing with the increasing popularity of container ships of a tonnage above 10.000 TEU’s but still generally holds true) . The larger the tonnage, the longer the routes. The larger the tonnage, the lower the cost per mile, but the longer the route, the higher the cost of transport per ton. And so on.

In the map you can see the strategic passages; those places where a great amount of maritime traffic can be interrupted from a small land position. It is a tribute to the vision of the British Empire the fact that, at the height of its power, all of these were secured by English garrisons, thus allowing it control of all world maritime traffic with minimal land occupation. As a rule of thumb, though, if you want to find out the geostrategic points in the world, just look for small enclaves close to straits controlled by strong naval powers .

Our leisure travelers’ collective mind is so taken by the conveniences of the plane, that many times we miss this simple fact: more than two thirds of the world’s trade value and more than 95% of its tonnage is seaborne, including all commodities. Without maritime traffic, the world is strangled, quite literally.

As we can see, barring the Panama Canal, the US is practically unaffected by geostrategical constrains to its trade. Having huge coasts to both seas gives it a choice of routes and, since these are very long and don’t have to negotiate narrow passages, use of super freighters makes economic sense. A and B in the map are the strategic points of importance to the US and they are mainly related to commodities traffic, especially oil.

Europe is in a much tighter spot and, insofar as it wants to sell stuff to Europe, so is Asia. Lately, congestion of the Panama Canal and the West ports of the US have led Asian exporters to increasingly use the Suez route even for the Eat American destinations. It is estimated that more than 22% of this trade is using now the Suez route. All in all it is estimated that the Suez Canal sees 8% of total world trade.

For Europe, the Suez Canal is a vital waterway for oil and trade with Asia. This is not to say that it is without alternative, since the less traveled Cape of Good Hope could be used, but closure of the Canal would have several consequences:

§  Higher costs for European imports (and exports)

§  Tight supply of super tankers and super container vessels to do the long South African route

§  Possible disruptions of supplies in the short run.

All things considered, it is much more convenient for Europe (and just about everyone) to guarantee save passage of the Suez Canal, although new freighters have considerably lowered the strategical importance of the Canal, probably much below the casus belli it used to be.

However, Europe has other good reasons that I tried to explain in my previous post to have an active role in the North African revolts. As for the US, the question is linked to security concerns and its alliance with Israel, rather than to guaranteeing the flow of trade

Source - cindeurella

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