How The Suez Accident Changed Global Trade

By Sophie Nepali

Due to high winds and a dust storm, the Ever Given – known to be one of the world’s largest container ships – found itself stuck across the Suez Canal on March 23rd. As a result, global trade was devastated for six days. 

In addition to social media hilarity, this triggered an intense domino effect across supply chains in the Asia -Pacific, thus slowing trade. However, it seemed to accelerate and re-ignite research into other available routes towards Europe. 

Such a disaster has led to compensation negotiations between the Japanese corporation, Shoei Kisen Kaisha Ltd, who own the Ever Given and Egyptian Authorities. Subsequently, and to no surprise, the vessel has been impounded, whereby the Suez Canal Authority referred back to Egypt’s maritime trade law under Articles 59 and 60.

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Japan’s Alternative Routes

Whilst negotiations continue between the vessel owner and Suez Canal authorities, the Japanese government are looking at two alternative routes: the Trans -Siberian Railway and the Northern Sea Route (NSR). Russian President Vladmir Putin is in favour of these routes as they both rely on Russia. This is a win-win situation for both Russia and Japan as it goes in line with the Executive Order on National Goals and Strategic Objectives of the Russian Federation through to 2024 that has been signed by Putin. For Japan’s part, the country’s Minister of Land, Infrastructure, Transport and Tourism Kazuyoshio Akaba believes that it is crucial to secure a variety of transportation routes. There has already been a Japanese company, Hankyu Hanshin Express, that started using the Trans-Siberian Railway in January. Through its success and its two-week decrease in journey time when compared to the sea route, there is potential for more Japanese companies to use the rail route.  

It is evident that Russia and Japan’s continuing intergovernmental efforts could significantly decrease journey time, which holds true for both rail and sea. What would usually take 34-40 days for container ships to reach the Netherlands from Southeast Asian countries through their standard routes, would only take 23 days using the NSR route. 

The geographical positioning of the NSR route has proven to be a challenge due to its icy conditions which threatens its viability. As such, vessels need an icebreaker to navigate their way through the sea. Despite these risks, the number of voyages increased by 58 per cent between 2016 to 2019. Such an increase is partially due to the frightening effects of global warming. August 2008 saw the first merchant ships voyaging through the Northeast and Northwest passage with no icebreakers. Although summer months are warmer and ideal for ships, the length of this warm period is abnormal, and increasing.

Such factors demonstrate significant progress made to deter route blockages in the future in the Suez Canal. However, both have a long way to go, as their cargo volumes are next to nothing in comparison to the numbers that pass through the Suez Canal.

Russia’s Routes

The blockage of the Suez Canal caused by the Ever Given has not only sparked Russia’s interest, but also a canal plan between Israel and the UAE to connect Israel’s Red Sea port of Eilat to the Mediterranean. In order for this project to be a success, it would involve digging canals along the 250km eastern end of the Sinai Peninsula. This means cutting through high hills and costing at least $100bn. It would cost Egypt a third of the Israeli-UAE project cost to either build a canal parallel to the Suez, or expand it. These eye-watering numbers do little to help the project’s economic competitiveness. 

Turkey’s rail route known as the ‘Middle Corridor’ connects Asia to Europe and is a part of China’s One Belt and Road system. Passing through Georgia, Azerbaijan, the Caspian Sea (Caspian transit corridor) and then through Turkmenistan, Uzbekistan and Kazakhstan before finally reaching China is one impressive route with countries on the path being politically or economically risk free. With investments in the Middle Corridor expecting to reach $8 trillion in total, it is an excellent alternative to the Suez Canal that not only deters trade in a situation like that of the Ever Given, but also revives the Silk Road.  

The Future Of The Suez Canal 

Alternative trade routes connecting Asia to Europe have their qualities, like the Trans-Siberian railway and NSR’s shortened travel time, a new canal between Israel and the UAE and Middle Corridor rail route through Turkey. However, it seems the Suez Canal will continue to be the main trade route connecting Asia with Europe as there are official plans to expand and deepen the southern part of the canal, where the Ever Given’s blockage occurred. Whilst Japan seeks other routes, Suez Canal Authority (SCA) losses totalling to $916 million has incentivised Egypt to expand the canal in order to retain its trade lane dominance. Egypt still should remain vigilant of its competitors, as technological advancements may lower the cost of relevant materials in the long run to make sure vessels travelling through the NSR are safe and for the potential UAE and Israel canal to be more feasible. This and global warming may well create a considerable amount of competition for Egypt but will also help mitigate the risks of relying solely on the Suez Canal for maritime trade. 

Sophie Nepali is a staff writer for The InternationalShe runs the Smiles Across Nepal Instagram account, which you can follow here.