The recent Suez Canal crisis uncovered a hidden facet of the economic interests of some of Egypt’s closest allies, who raced to make gains at the expense of Egypt’s predicament, which lasted nearly one week.
When the giant Japanese cargo ship Ever Given floated out of control and became wedged between the canal’s banks, it blocked the passage of hundreds of ships through the world’s most important waterway and disrupted the supply chains of world trade.
Although the calamity was overcome, the ship towed, and maritime operations returned to normal in the Suez Canal, the impact of the crisis unveiled incessant attempts by major powers to offer alternative shipping routes for global commerce to end the Suez Canal’s monopoly of nearly 12 per cent of global trade.
Countries eager for their waterways to become viable alternatives to the Suez Canal take advantage of such crises to attract attention to their own shipping routes. Since not much is said during normal times, it is obvious these alternatives are not viable and too expensive for global shipping.
Russia was the first in line to try to play the Ever Given’s misfortune to their advantage and promote its existing Arctic sea route to transport Asian goods to Europe. However, this route is not as economically feasible as the Suez Canal.
Arguing the opposite, Russia’s Deputy Prime Minister Yury Trutnev said in a news conference on Wednesday that the Northern Sea Route (NSR) is a backup option for global trade if shipping is disrupted in the Suez Canal.
“It is a mega project that aims to create a new international transportation corridor,” Trutnev declared. “Its importance was highlighted when movement through the Suez Canal was interrupted. I think the world feels it is a good idea to have a backup route, and the only option is the NSR.”
The frozen NSR is managed by the Russian energy giant and state-owned Rosatom, which uses this route to ship natural gas and oil to various European markets. Moscow wants this route to become an official course for gas transporters to coincide with the impending surge in gas discoveries in the east Mediterranean Sea, massive explorations in deep waters, and many countries’ focus on re-exporting liquefied gas around the globe.
Russia does not always prefer to respond pragmatically to alliances in the East Mediterranean Gas Forum (EMGF), which is comprised of key countries, including Egypt, Jordan, Israel, the Palestinian Authority, Greece, Cyprus, Italy, and France. The US has permanent observer status, which strengthens Washington’s official presence in the region.
Seismic surveys in the depths of the east Mediterranean show it sits above the largest natural gas basin in the world, with estimated reserves of 122 trillion cubic feet, and 1.7 billion barrels of oil. These are estimates that will likely increase.
According to estimates published by the US Geological Survey and figures from gas exploration companies, the east Mediterranean basin is one of the world’s key gas basins and can meet the needs of the European market for up to three decades.
This is why it is important for the US to remain present in this region and add the topic of energy to its strategic dialogue with Cairo, where the headquarters of the EMGF is based. The EMGF has become an international organisation capable of steering the global gas market.
Russia’s scheming came one year after Moscow announced at the forum of The Belt and Road Initiative (BRI) that it is researching a way to connect the NSR and China’s Maritime Silk Road. This means there is a chance “to create a competitive route connecting northeast, east, and southeast Asia with Europe.”
Iran looks on approvingly on the moves by Russia and China. IRNA, Iran’s official news agency, published the following tweet by Iranian ambassador to Moscow Kazem Jalali on Saturday: “Accelerating the completion of infrastructure and activating the North-South Route as an alternative to the Suez Canal have become more critical than ever before.”
The Suez Canal is a passageway for ten percent of the global liquefied gas and oil trade, which is a substantial volume of hydrocarbons on the world market. This became clear when the prices of oil and gas spiked as soon as news broke that a cargo ship has blocked the Suez Canal.
The price of one barrel of oil jumped by five percent during the crisis but dropped again after the Ever Given was freed. The response of the global market to this critical event demonstrates the vitality of the Egyptian canal. Reports indicated that during the crisis, companies began using their oil reserves because of disrupted supply.
No viable alternatives
Russia carefully plotted to pull the rug from underneath the Suez Canal and lure shipping to its northern route across the Arctic Ocean. It earmarked financial incentives and compensation for any possible damages, and reassured shipping lines with plans for transporting liquefied natural gas through the northern route. It made a plan for developing the Arctic, which confirmed Russia’s determination to lure business away from the Suez Canal, and intensified publicity of the route as a means of transportation in the coming years until 2030.
These financial incentives would solve the problem of commercial carriers refusing to pay the cost of insurance and renting ice breakers that travel in front of ships to clear a path for them. Russia created a state-owned company to regulate the movement of ships, compensate commercial carriers for any disruptions, cover the high cost of insurance for polar voyages, and transport cargo between the Kamchatka Peninsula in the far east of Russia and the port of Murmansk in the west over a distance of some 3,000 nautical miles known as the NSR.
Ahmed El-Shami, an Egyptian shipping expert, said it is impossible to consider the Russian Arctic route, where no more than 60 million tonnes of goods sailed through in the past ten years, as an alternative to the Suez Canal, where ships carrying nearly 1.2 billion tonnes pass annually.
El-Shami said “The North Pole is not an approved shipping route, and cannot be relied upon until the ice melts, which is expected by 2050 at the earliest.”
The global movement of cargo and containers illustrates that the Russian route cannot compete with the Suez Canal as a maritime passageway, with some 18,500 ships sailing through the latter annually. This is a massive number compared to other man-made waterways around the world.
Russian machinations, however, face serious obstacles, as detailed in a study by the University of Turku in Finland. These include the cost of transporting goods via the NSR being 36 percent higher than the Suez Canal, and the NSR being open for business only between July and October.
Fouad Thabet, member of the Port Said Investors Association, was surprised by the Kremlin’s dabbling.
He said “If the Russian route was a real competitor, why did Moscow not operate it more profitably for all these years? The Suez Canal has been especially important since its inauguration, with about 40 percent of global cargo passing through it.”
Ships passing through the Suez Canal can cut shipping costs by 30 percent, which makes this waterway a competitor with the Cape of Good Hope. It also shortens cargo shipping between ports by nearly two weeks. Thus, Russia’s frozen route cannot be considered serious competition, but Russian jostling will reoccur when another crisis strikes the Egyptian waterway, despite warm political relations between Cairo and Moscow.
*The writer is the deputy-head of the Economy section at Al-Ahram daily newspaper