Egypt’s Suez Canal has been an important artery for global commerce since it opened in 1869.
Now, this lifeline is being threatened as the Houthis, the rebel group backed by Iran who control most of northern Yemen. In the wake of the Oct. 7th terrorist attack on Israel, these militants have been using drones and missiles to target ships sailing in the Red Sea.
Subsequently, several important shipping and oil companies are now avoiding the Suez Canal, a development that will impact the speed and expense related to global trade.
The Suez is a vital artery for container ships and fuel tankers. Goods and fuel from Asia and the Middle East have made their way to Europe and the United States through the passage since it opened in 1869. Britain and other world powers have fought wars and engaged in geopolitical intrigue over the canal, controlled by Egypt now, for more than a century.The Suez is a vital artery for container ships and fuel tankers. Goods and fuel from Asia and the Middle East have made their way to Europe and the United States through the passage since it opened in 1869. Britain and other world powers have fought wars and engaged in geopolitical intrigue over the canal, controlled by Egypt now, for more than a century.About 50 vessels go through the Suez Canal a day, and recent data suggested that, as of Monday, at least 32 had been diverted, said Chris Rogers, head of supply chain research at S&P Global Market Intelligence. He noted that nearly 15 percent of European imports were transported by sea from Asia and the Persian Gulf, most of which go through the Suez.Peter Sand, chief analyst at Xeneta, a shipping market analytics company, described the problems in the Red Sea and the canal as “a slow-burning disaster that really blew up on the weekend.” He added, “Everybody involved in global shipping, especially with supply chains connected by the Suez Canal, is trying to find out where their goods are, where they are heading.”
One nation that is immediately impacted by the Houthi’s war on Red Sea Shipping is Egypt. Legal Insurrection readers may recall my stories on the last significant problem with the Suez Canal, which occurred when a ship became lodged in the narrow passage. Egypt’s estimated losses were $100 million from the six-day crisis.
This current disruption is even more of a threat, and Egypt intends to enhance its profile in the region to respond.
Beyond revenue loss, the diminishing traffic poses a significant image problem for Egypt, a country that views the canal as a national symbol. Authorities in Cairo have previously invested many efforts to secure the canal against potential threats from jihadist organizations. The potential threat from Houthi attacks may force Egypt to abandon its low-profile stance and take action to minimize the damage.. . . . The current situation is different and could lead Egypt to coordinate with the U.S. and deploy military action against Houthi targets if the Canal continues to suffer. Public sentiment in Egypt may support such measures, given the Canal’s paramount importance. However, diplomatic avenues will likely be explored before resorting to military force.Reports suggest that Oman is conveying messages to the Houthis on behalf of third parties, including Egypt, but as of now, there has been no response from the Yemeni rebels.Egypt is also expected to join an international coalition, led by the U.S., to protect shipping traffic in the Red Sea and the Arabian Sea, along with other Arab nations like Jordan and Saudi Arabia.
African ports, to which the ships are being rerouted, are becoming overwhelmed.
South Africa’s major ports, including Durban, one of Africa’s largest in terms of container volumes handled, as well as Cape Town and Ngqura ports are among the worst performing globally, a World Bank 2022 index released in May found.”Even the state that Durban is in now, it is still the most advanced and largest port in Africa, so ships rerouting around the continent have very limited choices for berthing for replenishment,” Alessio Lencioni, a logistics and supply chain consultant told Reuters.Other large African deep-water ports along the Cape route, such as Mombasa in Kenya and Dar es Salaam in Tanzania are too ill-equipped to handle the expected traffic over the next couple of weeks, Lencioni said.
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