Middle East 101, Week VII

The Suez War

“The Suez Canal might be thought of … as a giant fulcrum on which balances the might of East and West—whoever controls Egypt and the canal has taken a long step toward world domination” —William Frank Longgood, 1957.

Nasser, center, cheered by his supporters.

A month ago, The Economist warned: “A new Suez crisis threatens the world economy.” Plus ça change.

Since December 15th four of the world’s five largest container-shipping companies, CMA CGM, Hapag-Lloyd, Maersk and MSC, have paused or suspended their services in the Red Sea, the route through which traffic from the Suez Canal must pass, as Iran-backed Houthi militants, armed with sophisticated weapons, escalate their attacks on global shipping flows. As one of the world’s major trade arteries suddenly closes, America and its allies are ramping up naval activity in the Middle East, and may even attack the Houthis, in order to re-establish free passage. …

The crisis has two big implications: one for the world economy and the other regarding the risks of military escalation in the Middle East as Western countries try to reestablish order. Start with the economy. Revenue from the Suez Canal is a major source of income for Egypt, which is already in the midst of a financial crisis. (Israel will be less affected, with only about 5 percent of its trade passing through Eilat, its Red Sea port.) For the world economy a prolonged closure of the Suez route would raise the costs of trade as shipping is rerouted around Africa, taking more time, and insurance premiums soar. Short-term supply-chain snarls could also result from wide-scale rerouting of trade: in 2021 the Ever Given, a Taiwanese-operated ship, ran aground and blocked the canal for six days, intensifying a global supply-chain crunch. If the Red Sea security crisis is perceived to threaten shipping in the nearby Arabian Sea, through which perhaps one-third of global seaborne oil supply passes, the economic costs would be dramatically higher.

The Suez crisis, notes AFP, triggered Israel’s first occupation of Gaza.

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