The Suez Canal Incident and The Issues of Global Governance

On March 23, 2021, the Ever Given container ship ran aground in the Suez Canal. The incident attracted worldwide attention, and not surprisingly: about 12% of global freight is carried via the Suez Canal, including a million barrels of oil a day and 8% of global LNG exports.

The reasons for this unfortunate incident still need to be investigated. In any case, the global economy came out of the incident virtually unscathed: in six days, the container ship was refloated so that traffic via the Suez Canal could be restored. Nonetheless, by 29 March, there was a 450-vessel queue waiting to pass through the canal, while Egypt had lost about $90m in revenues. The overall financial losses from the Canal being blocked for six days have been estimated at between $5bn and $10bn. While being significant, these costs are far from excessive, if split between the deep-pocketed transport and insurance companies affected by the incident.

It has largely become an article of faith that water transport constitutes the “blood circulatory system” of global trade, as it accounts for some 90% of international trade turnover in physical volumes and about 70% in monetary value. If river transport is the capillaries of global trade, maritime routes are its veins and arteries. The overall stability of the global transport system rests on the smooth functioning of but seven “bottlenecks” in the World Ocean: the Strait of Malacca, the Strait of Hormuz, the Bab el Mandeb, the Suez Canal, the Bosporus, Gibraltar, and the Panama Canal.

Not all of the seven “bottlenecks” are easy to block. Canals are generally more vulnerable than natural straits, while straits differ greatly one from another. The Bosporus and Gibraltar are hardly comparable in terms of security and navigation. But what if some four to five out of the seven vulnerable straits and canals were blocked at once?

What would happen to the global economy in such a situation?

It is easy to predict that the blow to the global economy would be crushing indeed. The damage would run not even into hundreds of billions; it would cost trillions of dollars. The global economy would be plunged into a profound crisis with a number of concomitant social and political implications both for individual states and for humanity at large.

Commenting on the Suez Canal incident, the American Admiral James G. Stavridis suggested that a new international security system be created for the most vulnerable maritime arteries. Adm. Stavridis believes this work should be done under the auspices of the UN International Maritime Organization to include regular training exercises of emergency response and measures to ensure the “bottlenecks” stay open during crises, while affording opportunities for the transport infrastructure to be subject to international monitoring.

All these measures appear important and highly relevant. Yet, it would be a mistake to limit oneself to the immediate tasks of ensuring the security of international transport arteries. The Suez Canal incident is another stark illustration showcasing that the world needs a better global governance system, which would include such a crucial aspect as the global transport system. Being one of the major public goods, this system belongs to humankind as a whole, and we need to carefully preserve it, while developing it even further. The international community should actively participate in projects aiming to establish alternative routes—which could be used instead of the transport corridors running through the overloaded canals and straits (the Bosporus, the Suez Canal and the Panama Canal),—as well as launch new transport corridors (the Northern Sea Route, the Northwest Passage) and improve the unified standards for transport infrastructure. Naturally, such participation would entail developing coordinated medium- and long-term development visions for global maritime freight carriage but also the adequate financial means and instruments to apply them right.

On March 23, 2021, the Ever Given container ship ran aground in the Suez Canal. The incident attracted worldwide attention, and not surprisingly: about 12% of global freight is carried via the Suez Canal, including a million barrels of oil a day and 8% of global LNG exports. On average, 50 vessels pass along the Canal every day. It generates about $6bn of Egypt’s annual revenues, which is about 2% of the country’s total GDP. In the hypothetical case of Suez Canal traffic coming to a complete halt, some estimates put global economic losses at between 0.2 and 0.4% of annual growth. In such a situation, costs of maritime freight carried between the Middle East and Europe, should it be re-routed around the Cape of Good Hope, would likely double.

The reasons for this unfortunate incident still need to be investigated. The ship ran aground when she was caught in a gust of side wind with a speed of about 40 knots an hour. Yet, was that really enough to throw one of the world’s largest container ships off course or was the unfavorable weather coupled with serious errors on the part of the pilot? In any case, the global economy came out of the incident virtually unscathed: in six days, the container ship was refloated so that traffic via the Suez Canal could be restored. Nonetheless, by 29 March, there was a 450-vessel queue waiting to pass through the canal, while Egypt had lost about $90m in revenues. The overall financial losses from the Canal being blocked for six days have been estimated at between $5bn and $10bn. While being significant, these costs are far from excessive, if split between the deep-pocketed transport and insurance companies affected by the incident.

Now let us imagine as if the Suez Canal were blocked following a well-planned and professionally executed terror attack. For obvious reasons, modern container ships are not equipped with security systems comparable to those installed on passenger planes, which potentially makes them highly vulnerable to terror attacks. Makeshift explosive devices can easily be concealed in containers, while container ship crews are too small to resist terrorists effectively; besides, they lack any professional training. It does not take a particular flight of fancy to outline a realistic scenario of a successful terror attack which could include hostage-taking, putting forward political demands, appealing to the global community, etc.

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The attack itself does not necessarily have to be limited to a single container ship. It is easy to imagine terrorists simultaneously hijacking and partially scuttling several ships at various places on the Suez Canal in order to block it not just for a few days but for several weeks at the least. The Canal is 193 km long, while its average width is no more than 205 m, with its depth reaching a maximum of 24 m. In order to block the Canal as solidly as possible, terrorists could select the rocky stretches of its shores and bottom instead of sandy shoals. Generally speaking, the canal built in the 19th century is not a very good fit for 21st century ships, and its vulnerability to terror attack increases rather than decreases over time. It is obvious that, should a terror attack succeed, even if the terrorists are ultimately annihilated, the damage will amount to tens of billions instead of just a few billions.

Let us make the problem even more complicated and take it to a new level. It has largely become an article of faith that water transport constitutes the “blood circulatory system” of global trade, as it accounts for some 90% of international trade turnover in physical volumes and about 70% in monetary value. If river transport is the capillaries of global trade, maritime routes are its veins and arteries. The overall stability of the global transport system rests on the smooth functioning of but seven “bottlenecks” in the World Ocean: the Strait of Malacca, the Strait of Hormuz, the Bab el Mandeb, the Suez Canal, the Bosporus, Gibraltar, and the Panama Canal. Certainly, there are more “bottlenecks” on the map but the other actively used straits, such as the English Channel, the Great and Little Belts, the Drake Strait and the Bering Strait, are too wide or too deep to imagine them being blocked even hypothetically.

Not all of the seven “bottlenecks” are easy to block. Canals are generally more vulnerable than natural straits, while straits differ greatly one from another. The Bosporus and Gibraltar are hardly comparable in terms of security and navigation. But what if some four to five out of the seven vulnerable straits and canals were blocked at once? Such a large-scale subversive attack would require a high level of planning and coordination—however, it should hardly be considered impossible for today’s international terrorist groups, given the high level of their technological advancement.

What would happen to the global economy in such a situation?

A seismic shift in the geography of maritime shipping—through boosting the capacity of the Northern Sea Route, for example—is highly unlikely, since it would take years and colossal infrastructure investment. The prospect of promptly replacing maritime freight carriage with rail and road carriage seems even less realistic, while the idea of shifting the center of gravity to freight carriage by air is ultimately implausible. There are, simply put, too few aircraft in the world, and their capacity is hardly a match for container ships (the Ever Given alone could carry 18,000 containers), let alone the astronomical cost and many technical difficulties that would arise in case such a solution were to be implemented.

It is easy to predict that the blow to the global economy would be crushing indeed. The damage would run not even into hundreds of billions; it would cost trillions of dollars. The global economy would be plunged into a profound crisis with a number of concomitant social and political implications both for individual states and for humanity at large.

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Commenting on the Suez Canal incident, the American Admiral James G. Stavridis suggested that a new international security system be created for the most vulnerable maritime arteries. Adm. Stavridis believes this work should be done under the auspices of the UN International Maritime Organization to include regular training exercises of emergency response and measures to ensure the “bottlenecks” stay open during crises, while affording opportunities for the transport infrastructure to be subject to international monitoring.

All these measures appear important and highly relevant. Yet, it would be a mistake to limit oneself to the immediate tasks of ensuring the security of international transport arteries. The Suez Canal incident is another stark illustration showcasing that the world needs a better global governance system, which would include such a crucial aspect as the global transport system. Being one of the major public goods, this system belongs to humankind as a whole, and we need to carefully preserve it, while developing it even further. The international community should actively participate in projects aiming to establish alternative routes—which could be used instead of the transport corridors running through the overloaded canals and straits (the Bosporus, the Suez Canal and the Panama Canal),—as well as launch new transport corridors (the Northern Sea Route, the Northwest Passage) and improve the unified standards for transport infrastructure. Naturally, such participation would entail developing coordinated medium- and long-term development visions for global maritime freight carriage but also the adequate financial means and instruments to apply them right.

Market mechanisms in and of themselves could not optimize the international transport system and minimize the political and economic risks looming on the horizon. As humanity continues to rely on market mechanisms, this will increasingly serve to transform the hypothetical threat of a transport collapse into a historically predetermined outcome.

First published in GlobalBrief.