Why is the Suez Canal so Important to Egypt? (5 minute read)

23 April 2021. It’s been a few weeks since the 400 metre long Ever Given cargo ship ran aground in the Suez Canal. This event blocked up the vital trade route and delayed millions of dollars’ worth of trade. After 6 days and having seen more than 340 ships form the world’s largest traffic jam, the ship was finally re-floated. But the Ever Given’s troubles didn’t end there. The Egyptian government has now impounded the ship and is demanding $916 million in fees for the delays and reputational damage caused. We thought we’d explain why the Egyptian government has done this – why is the Suez Canal so important to Egypt?

 

What is the Suez Canal?

Completed in 1869, the Suez Canal is a 120 mile long, man-made canal. It was created to connect Asia and the Mediterranean, which itself feeds into the Atlantic Ocean. The canal removes the need for ships to take the long route around the Cape of Good Hope at the southern tip of Africa. For example, to reach London from the Arabian Sea now takes approximately three days fewer than it would have done in the early 1800s. This saves vital time, fuel, and money for shipping companies. In total, around 12% of global trade passes through the canal, making it crucial to the global economy.

The Suez Canal quickly became one of the most strategic geographic locations in the world when it opened. Whoever controls the canal has a large say in world trade. The 1956 Suez Crisis occurred when Egyptian President Gamal Abdel Nasser nationalized the waterway. It had previously been controlled by Britain and France, who were deeply unhappy about their loss of control. Israel, the UK, and France eventually invaded Egypt over this, in an episode which humiliated the invaders. Egypt has controlled the canal ever since.

 

Why is the canal so important to Egypt?

As mentioned, the Suez Canal has been under Egyptian control since 1956. Specifically, it is managed by the Suez Canal Authority. The canal forms a huge part of Egypt’s economy, generating more than $5.6 billion in revenue for the government in 2020. This is despite the COVID-19 pandemic. The canal had recently been expanded in an $8 billion project too, making it even more understandable why the Egyptian government are so furious about the six day blockage caused by the Ever Given.

 

So what is happening now?

The Suez Canal Authority has impounded the Ever Given whilst it pursues the ship’s Japanese owners for damages. They are demanding $916 million and the crew of the Ever Given are currently stranded aboard the ship, unable to leave. For obvious reasons, the owners do not want to pay this astronomical sum of money. So this is a stalemate which could rumble on for some time.

Meanwhile, the impact of the blockage will be felt for months. Delays in shipping take time to filter through the supply chain. But already there are reports of shortages of items across the world as a result of the blockage. Most notably in the UK, a shortage of garden gnomes has been reported! All of the ships which formed a queue at the canal whilst waiting to pass through will now be arriving at their destinations at similar times. It is thought this will cause a severe backlog at European ports for several months. This will obviously have knock on effects for consumers and businesses.

 

Whilst social media had a good laugh, as did many of us, the grounding of the Ever Given had real effects on the world and will be remembered, particularly in Egypt, for a long time to come.

You won’t see the Suez Canal on tour with us in Egypt, but you will discover the legendary Pyramids, cruise the River Nile, and visit some of the country’s finest museums. Check out our range of tours if you’d like to visit Egypt for yourself!

 

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