May 10, 2021

Tweetasm

Read The World Today

Israel’s Alternative Project to Suez Canal

6 min read
cargo ship near port

Photo by Tom Fisk on Pexels.com

Spread the love

A giant container ship the length of four
football pitches has become wedged across

Egypt’s Suez Canal, blocking one of the world’s
busiest trade routes.

Dozens of vessels were stuck, waiting for
rescue boats to free the 400 meter-long ship.

The blockage sent oil prices climbing on international markets.

Therefore, Israel is seeking ways to open
a new channel as an alternative to the Suez Canal.

A large container ship got stuck in Egypt’s
Suez Canal on March 23, halting marine traffic

through one of the busiest waterways in the world.

The ship, a vessel named the Ever Given, ran
aground after strong winds and a sandstorm

caused low visibility and poor navigation.

One of the world’s largest freight vessels,
the Ever Given was bound for Europe’s busiest

port of Rotterdam prior to the mishap.

The ship, at 400 meters, is almost as long
as the Empire State Building is tall.

The Suez Canal opened in 1869 and has become
one of the world’s most important trade routes.

The waterway provides a crucial link for oil,
natural gas, and cargo being shipped from East to West.

Close to 19,000 ships used the canal last
year, carrying more than one billion tons

of cargo, according to the Suez Canal Authority.

It is a pillar of Egypt’s otherwise struggling
economy and one of the country’s top foreign currency earners.

The canal brought Egypt a total of $5.6 billion
in revenue in 2020.

Though parts of the waterway were expanded
to accommodate the world’s largest vessels

in 2015, some stretches remain as narrow as 300 meters.

As 12% of global trade flows through the waterway,
supply disruptions could eventually lead to

price hikes for consumers.

Experts worry that if Ever Given isn’t freed
soon, the logjam could impact the oil market,

shipping, and container rates, leading to
a rise in the cost of everyday goods.

An analyst at insurance brokerage McGill and
Partners Ltd. believes that the Suez Canal

blockage caused by the Ever Given containership
is likely to cost insurers and reinsurers

more than $100 million.

Due to the potential of problems, Israel is
seeking ways to built an alternative canal.

Actually, the US had plans to use 520 nuclear
bombs to carve out an alternative

to the Suez Canal through Israel in the 1960s.

The plan never came into a fruition, but having
an alternative waterway to the Suez Canal

could have been useful today, with a cargo
ship stuck in the narrow path and blocking

one of the world’s most vital shipping routes.

According to the 1963 memorandum, which was
declassified in 1996, the plan would have

relied on 520 nuclear bombs to carve out the waterway.

But the plan didn’t work and today, Israel
still looks forward to create new opportunities

to establish an alternative route.

Andrew Josef from the Israeli Times analyses
this issue in his article, titled

“The Case For An Israeli Suez Canal Alternative”.

The Suez canal has facilitated the transit
of 841.5 million tons of goods in the last decade.

Many ships, including Israeli ones, heading
east utilize it to reach their destinations

quicker than by sailing around Africa.

Permanent closure of the Suez will heavily
hit international trade.

Nineteen days following the historic Abraham
Accords peace declaration’s signing by Israel,

the UAE, and Bahrain, there are claims of
a “major” Egypt-UAE dispute about “preliminary

arrangements and consultations” between
Abu-Dhabi and Jerusalem over a potential Suez-Canal-like

waterway passing through Eilat.

Whether Israel and the UAE discussed this
idea remains outside this discussion’s scope.

What is relevant, however, is the idea itself.

The case for building an Israeli Suez Canal
alternative, and consequently ending Egypt’s

monopoly on Red Sea-Mediterranean transit,
is that such a canal will benefit Israel’s

and the world’s economy and benefit Israel’s
international relations and security.

Between 2015 and 2020, the Suez Canal brought
Egypt $27.2 billion — an increase from the

$25.9 billion earned during 2010 and 2015.

In 2019, the Suez Canal hit an all-time-high
traffic record, attaining a new peak in tonnage-per-day

since its construction.

These numbers prove that demand for Red Sea-Mediterranean
transit has been rising, bringing Egypt a

revenue-boom (assuming COVID-19 is a temporary,
adverse demand shock).

This revenue, considered a lifeline for Egypt’s
economy, pays for some of Egypt’s state

expenditures and has been responsible for
the Arab republic’s economic recovery since

its 2011 political crisis.

Israel, like Egypt, has a geographical advantage
favorable to the construction of a competing waterway.

Egypt’s edge, which enabled the Suez’s
creation, was the Isthmus of Suez, resulting

from the Gulf of Suez jutting in and reducing
the land distance between the Mediterranean

and the Red Sea.

Israel has a similar advantage, with the Gulf
of Aqaba being close to the Mediterranean.

The distance between the Gulf of Aqaba and
Israel’s West coast is only slightly greater

than that between the Gulf of Suez and the
Mediterranean.

However, Israel can negate the effects of
that by offering lower prices and better service.

This Israeli geographical advantage, and the
rise in demand for the Suez, signals that

if Israel digs a Mediterranean-Red Sea canal,
it can channel some of the revenue from ships

sailing between the two seas away from Egypt
towards itself.

Furthermore, the canal’s construction will
also create new jobs and spur the development

of communities nearby.

The benefits of an Israeli canal won’t be
exclusive to Israel — the world stands to gain.

In recent months, reports emerged of ships
avoiding the Suez by going around southern Africa,

choosing longer travel time, because
of Egyptian tolls, which go up to 700,000$.

Egypt’s near-monopolist position and the
relatively inelastic demand for the canal

allow them to charge high fees without suffering
much loss in demand.

Some ships need the Suez for certain goods,
despite the expenses.

However, when Israel constructs another canal,
ships now forced to go around Africa can retake

a shorter route, thanks to fees for Red Sea-Mediterranean
transit falling due to Israel-Egypt competition.

No longer will Egypt be powerful to set whatever
price it wants for the Suez because Israel’s

canal will become a close substitute.

If Egypt sets prices too high, ships will
use Israel’s waterway.

And vice versa.

The falling prices will then serve as a price
signal, encouraging more shipping through

both canals, thus benefiting international trade.

One might ask how falling prices will benefit
Israel; will they not reduce Israel’s revenue?

To find an answer, one must consider Israel’s
advantage — it hasn’t built a canal yet.

Hence, Israel can use available knowledge
on the Suez to plan a waterway with fewer

operation costs and greater efficiency and capacity.

Egypt does not have this edge because it already
has the Suez, and modifications might require

expensive destructive changes.

Therefore, using insights gained from a study
of the Suez, Israel can then construct a canal

permitting them to charge prices below what
Egypt can afford to levy while handling more

ships, thus, ensuring Israel profits well
through an economy of scale.

The Israeli canal will also give international
trade security by offering the world an alternative

Mediterranean-Red Sea canal.

Any adverse shocks to the movement of goods
between the two seas, due to closure resulting

from civil unrest or repairs, would be less
damaging if there were two canals instead of one.

And the economic importance Israel will gain
from its waterway will help its foreign policy

and security.

Many countries in the Gulf, East Africa, and
Asia need the Suez to send and receive ships

to and from northern Europe and the Mediterranean region.

When Israel opens its canal, offering lower
tolls, these countries will be incentivized

to use Israel’s waterway, thus engaging
in transactions with Israel.

Questions arise, however, about the impact
an Israeli canal will have on Israel-Egypt ties.

It might create short-term Egypt-Israel tensions,
an expectable situation when a new player

enters a market long dominated by one.

However, in the long run, as Egypt improves
the Suez to facilitate lower prices and more

traffic, both countries will acclimatize to
coexisting in the market.

In conclusion, an Israeli-built Suez alternative
will benefit Israel’s economy, the global

economy, Israel’s international relations, and security.

The canal will also help the global economy
by lowering prices for Mediterranean-Red Sea

transit through Israel-Egypt competition.

The lower prices will then stimulate an expansion
of international shipping.

Having two canals (including the Suez) will
also provide the global economy security against

the other’s closure.

The case for an Israeli-built Suez Canal alternative,
therefore, remains strong.

  •  
  •  
  •  
  •  
  •  
  •  

Leave a Reply

Your email address will not be published. Required fields are marked *