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The Long Struggle Over the Suez

Since its construction just over 150 years ago, the Suez Canal has been at the heart of the global capitalist system – and has played a key role in the Arab world's struggle against its old colonial masters.

Last week, maritime traffic through the Suez Canal was paralysed as the Ever Given, a mammoth container ship, was wedged across the canal’s entire width. The accident highlighted both the fragility of global capitalist commerce and the role of the Suez Canal as a major link in international maritime trade and a strategic prize sought by European imperial powers and, more recently, Israel.

On average, 50 ships a day traverse the 193 km (120 mile) canal. They carry nearly 30 percent of all container ship traffic, 12 percent of the world’s total maritime trade, 10 percent of all crude oil and refined products, and one third of Britain’s liquid natural gas imported from Qatar.

With traffic in both directions blocked, well over 300 ships queued to transit the canal. Each hour of delay cost an estimated $400 million in insurance and delayed delivery penalties, according to Lloyd’s List. With no certainty about how long it would take to clear the canal, some ships chose to travel around the Cape of Good Hope, lengthening their voyage by two weeks and increasing their fuel costs by $26,000 a day. The estimated revenue loss to the Egyptian government from the Ever Given accident is $95 million.

The Ever Given is owned by a subsidiary of a large Japanese shipbuilding company. It is chartered and operated by a container shipping firm headquartered in Taiwan. A German company is responsible for its technical management. It is registered in Panama.

Like several other countries, Panama maintains an ‘open registry’, which allows vessels whose owners and operators have no connection to the country to fly its flag. This practice was introduced during the era of prohibition in the United States to allow US-owned ships to register in Panama and serve alcohol to their passengers, circumventing the law.

Today, Panama permits ship owners to register online. It does not require them to pay income tax. And Panama’s labour and safety standards are more lax than traditional North Atlantic maritime countries. The morass of registry, ownership, and operating responsibilities for the Ever Green, as well as the required presence of two Egyptian pilots on all ships transiting the canal, will make it extremely difficult to assess responsibility for the accident.

In part because very large and ultra-large crude carriers (VLCCs and ULCCs)—tankers that carry two million barrels of oil or more—cannot transit the Suez Canal fully laden, its importance as a global shipping artery has been diminished. Nonetheless, its material and symbolic importance for Egypt is enormous.

An Imperial History

The Suez Canal was dug as a result of the mid-nineteenth century imperialist rivalry between Britain and France throughout the Middle East and North Africa. The British, who had begun to build a concessionary railway network in Egypt, preferred a land route linking Egypt to India via the Sinai Peninsula.

To circumvent them, French entrepreneur Ferdinand de Lesseps obtained a concession from the Egyptian government to build the Suez Canal in 1854. In 1858, de Lesseps registered the Universal Company of the Maritime Canal of Suez in Paris. In exchange for the concession, 44 percent of its shares were allocated to the government of Egypt.

De Lesseps prevailed on Egypt’s rulers to compel Egyptian peasants to do the work of actually digging the canal for minimal pay. By 1862, over 55,000 men and boys lived in overcrowded work camps with minimal shelter as they laboured. An estimated 100,000 Egyptians died during the construction of the canal from 1859 to 1869.

During the American Civil War (1861-’65), the North blockaded Southern ports, causing a world cotton shortage. With prices for Egyptian cotton at a historic high, European banks eagerly lent its ruler, Viceroy Ismail, huge amounts of money for ambitious infrastructure and cultural projects at exorbitant interest rates.

When the Civil War ended and Southern cotton returned to the global market, cotton prices fell, and Egypt could not repay its debts. In 1875, Viceroy Ismail sold Egypt’s shares in the Suez Canal company to the British government at a bargain-basement price. Britain secured total control of the canal by invading and occupying Egypt in 1882.

The 1950s Crisis

In 1952, the Free Officers, led by Gamal Abdel Nasser, overthrew the Egyptian monarchy and established a praetorian republic. Nasser and his junta sought to expel the British occupiers, secure full Egyptian independence, and Egyptianise the commanding heights of the economy which was dominated by European firms and local non-Muslim minorities.

The last British soldiers left Egypt in June 1956. By that time, Nasser had become a global leader of the Non-Aligned Movement, which sought to establish an alternative to the international system defined by the Cold War.

Despite Nasser’s anti-communism, the United States refused to sell arms to Egypt. Nasser turned to the Soviet bloc, and on 27 September 1955, Egypt announced an arms deal with Czechoslovakia.

Hoping to entice Egypt to rejoin the Western camp, the United States and Britain agreed to finance construction of the Aswan High Dam, Nasser’s top priority development project. But the Manichean world view of US Secretary of State John Foster Dulles could not tolerate Nasser’s continuing advocacy and practice of non-alignment. On 18 July 1956, Dulles reneged in an intentionally insulting note to Egypt withdrawing the US financing offer. Britain followed suit.

Nasser countered more boldly than anyone anticipated by nationalising the Suez Canal. In response, in October 1956, France, Britain, and Israel invaded Egypt. Israel’s military forces easily prevailed over Egypt and occupied the Sinai Peninsula and Gaza Strip. Both the United States and the Soviet Union insisted that Israel withdraw. But before the fighting ended, Egypt sank 40 ships in the canal, blocking shipping traffic for eight months before they were cleared.

After Israel again attacked Egypt in the June 1967 Arab-Israeli War, Egypt blockaded both entrances and scuttled ships and laid mines in the canal. Passage was blocked for eight years until the beginnings of an Egyptian-Israel peace process after the 1973 Arab-Israeli War restored full Egyptian control of the canal in June 1975.

Current Conditions

The closure of the Suez Canal during the 1956 and 1967 wars spurred the development of container ships and created the conditions of the Ever Given accident.

Containerisation enables loading and unloading of standard-sized metal boxes containing any commodity directly to and from ships and trucks or trains. This innovation sharply reduced the number of longshore workers required to staff ports – both the wage bill of shipping companies and the size of what had historically been a particularly militant sector of the working class were sharply reduced.

The closure of the Suez Canal for extended periods required maritime traffic to take the longer route around the Cape of Good Hope. This encouraged maritime operators to seek higher rates of profit through economies of scale by deploying ever larger container ships. The Ever Given, measuring 400 meters (1,300 feet) in length, is one of the largest in the world. Such enormous vessels with containers loaded high on their decks are vulnerable to high winds, a factor in the Ever Given accident.

In 2014-’15, Egypt launched the massive Suez Canal Corridor Area Project, which entailed both extensive regional development projects and the construction of a new 35 km lane parallel to the original Suez Canal at a cost of $8.2 billion. The new canal allows ships to sail in both directions simultaneously for most of the length of the canal. The Ever Given accident occurred in a stretch of the canal which is still one-way.

The Egyptian government claimed that by doubling the canal’s capacity to 97 ships a day, or 35,400 a year, the new lane would increase annual revenue from the Suez Canal to $13.5 billion by 2023. But in 2020, 18,840 ships crossed the Suez Canal, paying tolls of $5.61 billion. International trade has not grown sufficiently for Egypt to recoup its investment and is not projected to do so in the foreseeable future.

Just as imperialist interventions deprived Egypt of most of the benefits of the Suez Canal in the nineteenth century, its subordinate position in the global capitalist market will likely prevent Egypt from obtaining its development objectives linked to the canal in this century too – even now that the Ever Given is no longer blocking its way.

About the Author

Joel Beinin is the Donald J. McLachlan Professor of History and Professor of Middle East History, Emeritus at Stanford University. His book A Critical Political Economy of the Middle East and North Africa is published by Stanford University Press.