The economic and geopolitical importance of the Suez Canal

(To Renato Scarfi)
29/03/21

From Tuesday 23 March, the media has been continuously updating us on the situation of the gigantic container ship "Ever Given", of the Ever Green company, stranded in the Suez Canal. This has brought to the attention the importance of that delicate passage, considered by many superficially, as if the free transit through Suez were a matter by now acquired and sure.

This is not the case for two reasons. The first is that the Suez Canal runs entirely on Egyptian territory, and the Arab Republic of Egypt is the legitimate owner. Already in the 20s, when the propaganda that wanted a Mediterranean fully under Italian control was stronger, one consideration was in fact clear: the sea is “nostrum”, but the Canal is “Suez”. A boutade which briefly illustrates the properties and strategic value of the Canal that connects the Mediterranean Sea with the Red Sea, Europe with Asia. The second reason these days is there for all to see. A ship of adequate size is enough to completely block the passage and open a worldwide crisis.

The economic and strategic importance that the Canal would have assumed was clear even before its inauguration. When it was still just a Lamartine idea1, in fact, he wrote “… what is the interest of humanity in the question of the East? It is that the Mediterranean, the great lake, not French, but European, international, once again becomes the vehicle for the great circulation of goods and ideas. The immense Indian empire and China will travel five months closer with the opening of Suez… ”. A strategic importance that was also emphasized during both world wars, as in the period 1914-1918 it was closed to the transit of ships not allied to the Entente and in the period 1939-1945 it was tenaciously defended from the attacks of the Axis forces during the North African countryside.

After the war, the Canal saw its commercial importance grow enormously, being a useful "shortcut" to the Mediterranean and Northern Europe. The connection, already imagined by the Venetians in the 500th century, was inaugurated on November 17, 1869 after "only" ten years of work under the supervision of the Frenchman Ferdinand de Lesseps2. The transit has never been interrupted, with the exception of two periods, during which it remained completely closed, from October 1956 to March 1957 and after the "Six Day War" (June 5-10, 1967) until 1967. Two exceptional events, given that the free passage had been sanctioned with the Convention of Constantinople of 29 October 18883, with which the Canal had been declared a neutral zone under British protection, which had occupied it in 1882 to secure links with India. With its ratification, the Ottoman Empire thus ensured the free transit of international shipping both in time of peace and in time of war.4.

The first closure was due to the military occupation of the area by Israel, in response to the nationalization of the Canal by Egypt by Gamāl 'Abd al-Nāṣir Ḥusayn (Nasser). After two days, France and the United Kingdom intervened militarily, with the excuse of dividing the two contenders, but in fact occupying it together with the Israelis. The United States, the Soviet Union and Canada sided with Egypt and threatened to intervene to free the Canal by force. At that point the occupants decided to withdraw. The rapid crisis, however, had important geopolitical implications. First of all, it was the first time that the USA and the USSR were on the same side of the fence, which was exceptional for those years. Secondly, Canada made decisions that were not in tune with Great Britain, another fact not taken for granted at the time. Third, Nasser's political victory propelled him into the Olympus of Arab leaders as the hero of the then nascent nationalist movement. Finally, the United Nations, at the suggestion of Canadian Foreign Minister Lester Pearson, formed the United Nation Emergency Forces (UNEF), based in Sharm el-Sheick, in the south of the Sinai peninsula, which had the purpose of monitoring the effective withdrawal of the Anglo-French and Israeli troops and of intervening between Egypt and Israel. For having the idea of ​​the UNEF, in 1957 the Canadian minister was awarded the Nobel Peace Prize and is considered the father of the modern concept of peacekeeping.

Ten years later, the decision to withdraw UNEF from Sinai5, hired by the then UN Secretary General U Thant, allowed Nasser to block access to the Gulf of Aqaba, the Israeli outlet to the Red Sea, triggering the military reaction in Tel Aviv and the "six day" war as a result of the which, as mentioned, the Canal was closed again. During that war, waged with surprising decision and speed, Israel conquered the Sinai Peninsula and the Gaza Strip from Egypt, the West Bank and East Jerusalem from Jordan, the Golan Heights from Syria. An event that still influences the geopolitical situation of the area today. For a decade or so, the Suez Canal thus became the border line between Egypt and Israel, with rival armies facing each other on both sides. In 1975, as a gesture of relaxation, Egyptian President Anwar al-Sadat reopened the Canal to maritime traffic. On September 17, 1978, Sadat himself and Israeli President Menachem Begin signed the Camp David agreements, after a negotiation sponsored by US President Jimmy Carter and, on March 26, 1979, they signed the Israeli-Egyptian peace treaty.

On the basis of that Treaty the Multinational Force and Observers (MFO), an International Force (whose General Management is based in Rome), which still today has the task of ensuring compliance with the peace agreements, observing and reporting any possible violation of the same, and which since 25 April 1982 has been operating continuously in Sinai and in the waters around the peninsula. Italy has been part of it since the beginning, the only naval contingent of the MFO, with Navy personnel embarked on three Italian coastal patrol vessels based in Sharm el-Sheick, with the mission of ensuring free circulation in the waters of the Gulf of Aqaba and Straits of Tiran, considered international shipping routes. The success of the International Force is testified by the substantial absence of clashes in the last 39 years.

152 years after its inauguration, the Suez Canal is now blocked for the third time in its history. A single ship represents the plug that closes the cheapest route between Asia and Europe, a shortcut normally crossed by 30% of containers, 10% of goods and 4,4% of world crude. In 2019, for example, the Canal saw the transit of about 18.800 ships (+ 3,9% compared to 2018), equal to about 12% of world commercial traffic, which means the passage of 1,03 billion tons of goods (+ 4,9% compared to 2018) and ensures Egypt a revenue for transit rights of approximately 6 billion euros per year6.

The consequences of the blockade are dire, with hundreds of merchant ships (mostly oil tankers) awaiting transit. This had an immediate impact on the costs of petroleum products. The damage we will suffer is enormous, both in the short and long term.

The transit in the Canal and the presence (stop and unloading / loading of goods) of large merchant ships is in fact crucial for the survival and development of the ports of the central and eastern Mediterranean. Many ships have already made arrangements to avoid the Red Sea funnel and are circumnavigating the Cape of Good Hope, although this will extend the voyage by 5.200 nautical miles (approximately 9.600 km), for about 7-12 days of sailing more than at the passage from Suez. This significantly increases the expenses for the shipping company and exposes the ships to a greater risk of attack by pirates, very active in the south-eastern area of ​​the African continent and in the Gulf of Guinea, even if the continued presence of military naval devices multinationals (including two units of the Italian Navy) has significantly reduced its effectiveness. The African circumnavigation could however induce large ships not to enter the Mediterranean and to make stops in Portugal or, at most in Spain (Barcelona, ​​Valencia) to unload their goods, which from those ports would leave for "retail" delivery to the rest. of the Mediterranean aboard much smaller merchant ships. The significant decrease in freight traffic directed, for example, towards Central Europe through the ports of southern Italy or Genoa, Livorno, Trieste, due to delays or cancellations, is capable of causing damage to the national economy that can be calculated, in the short term, in a few billion euros. A damage that would add to the already enormous damage caused by the pandemic and which risks significantly slowing down the recovery, which seemed to be upon us.

As regards the longer-term economic aspect, in the event that the situation is not resolved quickly, the crisis could cause - in a context of very high global competition - the loss of some markets, due to the impossibility of containing the 'price increase due to higher transport costs. The significant increase in the cost of goods could first compress demand and then extinguish it, perhaps in favor of goods of lesser quality but produced by more cynical competitors or supported by a national economy capable of economically making up for the production gaps of its entrepreneurs.

It is therefore a question of damage that could also become political, if prolonged over time.

Looking through history we have an example of what the drastic reduction of maritime transport in the Mediterranean can mean. Without going too far in time, just think of what happened in the fourteenth and fifteenth centuries, when the Turkish conquest of Constantinople (May 29, 1453) closed the entire Eastern Sea to European traffic. At the time, all the merchant traffic coming from the East was managed by our Maritime Republics, with enormous economic and political benefits. This traffic suddenly ceased and Spain, Portugal, the United Kingdom and, lastly, Holland strove to find other ways to trade by sea. The era of the great geographical discoveries had begun, the engine of which was mainly constituted by the need to circumvent the blockade imposed by the Turks on the Middle East. This led to the discovery of America, the opening of new sea routes east and west to reach the East. Huge economic, political and scientific revolutions that have culturally enriched all of humanity, but which brought enormous economic (and political) advantages almost exclusively for the countries that created the new discoveries. For our ancestors, however, these were very hard times because, after the loss of the monopoly of trade with the Levant and the hijacking of the routes of merchant traffic, Italy went through two centuries of decay and, with it, the other Mediterranean countries that were making business thanks to Italian ships. A situation partially remedied by the opening of the Suez Canal which, as Lamartine recalled, has given new breath to the great Mediterranean trades.

It is true that times have changed, but Italy's strong dependence on maritime traffic has absolutely not changed, on the contrary. Certainly the surrounding changes and the enormous technical advances with respect to the sailing navy will cause less dramatic implications than those recorded in the seventeenth and eighteenth centuries and Egypt knows perfectly well that the keys of the Canal bring economic benefits but also a great international responsibility, first of all in the compared to other Mediterranean countries.

For the above, it is in Italy's interest that the Canal be reopened as soon as possible because, as mentioned, our losses could turn into the gains of others, even partner Europeans (or competitors?), placed in the best position to take advantage of its prolonged closure.

We can therefore do nothing but hope that the transit along the Canal will be re-established as soon as possible, possibly also making an effort to provide financial and technical means for the removal of the cargo that obstructs its passage. It is, in fact, conceivable that Egypt may have an interest in requesting international collaboration for the technical interventions necessary to remove the container ship or to collect international contributions to cover expenses and accelerate the reopening of the waterway. Nor is it excluded that this experience may suggest to Cairo to evaluate the possibility of an expansion of the Canal, or a duplication of it, or in any case its adaptation to the new needs of commercial navigation, dictated by the increasing size of the ships. This will entail the need to find substantial funds for the realization of the necessary works. In this case, Italy will have to be present, with its companies, to guarantee itself the foreseeable economic and political returns, perhaps obtaining something more than the qualification of mere "users" of the Channel.

Italy has a vital interest in the regular functioning of the Suez Canal and it is therefore necessary to be active and act with perspicacity, timeliness, foresight and commitment, including economic, despite the many difficulties, in order to be present in a country and a vital area for our interests. Our prolonged inertia would risk compromising the chances of success, which should be considered strategic, that is, capable of securing influential positions in the central-eastern Mediterranean area in the medium and long term.

The persistence of the closure and our possible inertia could cause our progressive isolation in a sea that is getting narrower every day and the scene of exasperated competition. Of the three major Mediterranean countries of the European Union (Italy, France and Spain), only Italy has no other sea outlets, while France and Spain have extensive coasts and alternative sources on the Atlantic.

To what has been said must be added the risks associated with the threat posed by piracy. A threat still present along the alternative routes to that of Suez. A threat that, despite having been considerably reduced in its effectiveness in recent times, is still alive and thriving. The increase in traffic along the routes that pass through the Cape of Good Hope does nothing but increase the possible "prey", considerably complicates operational problems and makes it more difficult for multinational naval military devices present in areas more easily subject to pirate attacks.

But how did it happen that a ship blocked the Canal?

From the first statements of Osama Rabie, president of the Authority that manages the Canal, it is clear that the wind and adverse weather conditions "... were not the main reasons ..."7. The outcome of the foreseeable investigation will tell us if the event is due to an accident or a human error, as many believe, or if it is a premeditated act, as some speculate, a sort of test "to see the effect it has" of a blockade of the Canal in the XNUMXst century, a poisonous "pizzino" by unknown authors sent for political reasons to Egypt and Europe ... or to Taiwan.

In this regard, Gian Carlo Poddighe, del Center for Geopolitics and Maritime Strategy Studies, underlines how, without wanting to be conspiracy theorists at all costs, some coincidences have recently been occurring that cannot fail to intrigue those interested in maritime issues. First of all, a whole series of strange accidents of different nature that are affecting merchant ships along the routes of the Red Sea and the Indian Ocean, such as the bizarre8 and impromptu missile attack against the Israeli ship sailing in the Arabian Sea, between India and Iran. Secondly, the strengthening actions (also in the Mediterranean) of certain non-NATO navies, some of which are reaching a level of excellence in the underwater sector, with cruise missile capabilities. Added to this are two recent events of Cyber ​​attack, through which of the hacker have entered the automatic control system of merchant ships, trusting in the widespread computerization of on-board systems, now used for every need, from navigation control to localization and unloading of container. Events that would aim to make sea transport more difficult and insidious and would play in favor of the development of new traffic lines, including land (although hugely less effective than maritime ones), which are instead in the interest of some other countries.

All this makes it clear, even to those who wanted to deny the evidence, how important sea transport is for the world economy. In fact, 90% of the volume of trade travels on water and represents 70% of the global economy. It is for this reason that the naval instrument must be enabled to be present where it is most necessary to protect national interests and protect the free usability of all the main maritime trade routes, in order to allow the economic and social development of the home state. . This is not an expense, but an investment capable of repaying the country both in the medium and in the long term, both in economic terms and in terms of international prestige.

1 Alphonse Marie Louis de Prat de Lamartine (1790-1869) was a French poet, writer, historian and politician.

2 The French entrepreneur and diplomat in 1881 was also promoter of the Panama Canal which, unlike Suez, was unable to achieve due to various technical and financial obstacles that made the attempt fail. Even his successor, Gustave Eiffel, did not have more luck in 1885, as he ended his experience with the failure of the initiative in 1889.

3 Signed by Austria-Hungary, Italy, France, Germany, the Netherlands, Russia, Spain and the Ottoman Empire.

4 Art. 1 "... the Suez Sea Canal will always be free and open, in times of war as in peacetime, to any commercial or war ship, regardless of flag ... consequently the other contracting parties agree not to carry no impediment to the free use of the Canal in wartime as in peacetime. The Canal will never be subject to the right of blocking… ”.

5 According to some observers, the withdrawal took place for purely economic reasons (lack of contributions). For others, however, the return of the UN forces was ordered because the Secretary General had understood that war would soon break out. Neither version has ever been tested.

6 Source: Suez Canal Authority, January 2020

7 Source: AGI foreign agency of 27 March 2021 at 16 pm

8 The ship, although hit, did not receive any other attacks and continued its navigation undisturbed.

Photo: CBS / web / kees torn