Egypt Faces Economic and Security Challenges as Shipping Giants Suspend Suez Canal Operations

by | Dec 19, 2023 | Economy | 0 comments

In a major blow to both global trade and Egypt’s national security, the four largest shipping companies worldwide announced the suspension of sailing through the Suez Canal due to attacks by the Houthis. The decision is expected to significantly reduce ship movement in the Suez Canal, jeopardizing Egypt’s income and posing a threat to the country’s economic stability and security.

The Suez Canal, a critical waterway for international trade, facilitates approximately 20% of the world’s consumption of oil and gas. Moreover, around 98% of ships traversing the canal, connecting Europe to the north and Asia to the south, face potential disruptions. Approximately 30% of global container traffic and 12% of the world’s trade in goods pass through this vital maritime route.

The Suez Canal is a cornerstone of Egypt’s foreign exchange income, with annual revenues reaching a peak of $9.4 billion in the last fiscal year. The canal’s economic significance is underscored by the daily influx of $25 to $30 million into Egypt’s coffers, collected through fees from ships and additional services provided by the Suez Canal Authority.

Egypt experienced the consequences of disrupted canal traffic in March 2021 when the EVER GIVEN ship blocked the waterway for six days, causing an estimated $100 million in damages to the Egyptian public purse. However, the global economic impact during those six days amounted to tens of billions of dollars, highlighting the canal’s unparalleled importance to international trade.

Despite efforts to keep a low profile and downplay the impact of Houthi attacks, Egypt faces a daunting challenge. The dwindling traffic in the Suez Canal not only damages the country’s revenues but also tarnishes its image as a responsible custodian of this critical maritime passage. Over recent years, Cairo has invested significantly in securing the canal against potential threats from jihadist organizations, seeking to maintain its standing among regional and global players.

As Egypt grapples with economic distress, the current situation demands a shift in approach. The potential use of military force cannot be ruled out if the damage to the Suez Canal persists. In coordination with the United States and relying on accurate intelligence, Egypt may consider targeted attacks against Houthi targets to safeguard its vital interests. The public in Egypt, understanding the strategic importance of the Suez Canal, may lend support to such measures.

Having said that, diplomatic channels will likely be explored first. Reports suggest that the Sultanate of Oman has initiated communications with the Houthis on behalf of third parties, with Egypt possibly among them. Additionally, Egypt is anticipated to join an international coalition, led by the U.S., aimed at securing shipping traffic in the Red Sea and the Arabian Sea. This coalition is expected to include other Arab nations such as Jordan and Saudi Arabia, showcasing a unified front against the disruptions threatening maritime trade routes.

Main article photo: Suez Canal. Suez Canal Authority/Via Reuters.


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