Things to read
Since the inception of the Coronavirus pandemic in the year 2020, several businesses and establishments have perished. Though the losses cannot get evaluated using any standard scale, according to experts, the global economy incurred a loss of close to $4 trillion. The Ever Given cargo’s stranding in the Suez Canal could have caused the already down global trade economy to shrink even more.
The Ever Given ship went off the route and was grounded between mud and sand near Manshiyat Rugola on 23rd March. The ship consisted of 25 Indian crew members, pilots from Suez Canal authorities. Apart from the human beings, The 400 meters Ever Given cargo carried 20000 containers. Due to the vessel’s gigantic physical specifications, it blocked the busiest sea trade between Asia and Europe.
The Ever Given ship has been freed and navigated towards the north of the canal, to allow the passage of traffic on either side. With constant efforts of tugboats and dredgers, the ship got freed on the afternoon of 29th March 2021.
Before the tugboats and dredgers made the Ever Given ship floatable on Monday, several alternatives got considered for the same. The alternatives like offloading the containers and refuelling the ship were time-consuming and had adverse economic impacts.
Thereby, the towing and dredging process was continued using 12 tugboats by the Royal Boskalis Westminster company.
According to several economists and marine experts, the global trade economy suffered adversely because of the six days’ halt in the Suez Canal. The Ever Given ship’s stranding caused the halting of numerous other cargoes on either side of the canal to a standstill.
Owing to this, the combined loss of the marine traders amounted to 9.5 billion dollars per day.
Suez Canal History:
The Universal Suez Ship Canal Company commenced the construction in 1858. And it took approximately ten years and 30000 workers to make the canal tradeable in 1869. The Suez Canal Company handled the operations and management of the canal for the initial 90 years. And in the year 1956, the authoritative powers of the seaway got handed to the Egyptian Government.
Gamal Abdel Nasser, the then President of Egypt, nationalized the canal, intending to uplift the Egyptian trade economy in 1956.
The nationalization of the canal was aimed to compensate for the expense of the Aswan Dam on the Nile River. The cargos got taxed to meet the required expenses, depending on the shipment before passing the Suez Canal. The step of nationalization and taxation angered the British, French & Israelis. And to annex the operations of the Suez Canal, the forces of the three nations attacked Egypt.
The attacks commenced in October 1956 and lasted till March 1957.
The intervention of the United States of America’s then President, Dwight Eisenhower, and The United Nations caused the attacks to cease. And returned the control of the Suez Canal to the Egyptian Government. Also, the United Nations peacekeeping force got used for the first time since their inception in the Suez Crisis.
The Suez Crisis in 1956-57 signifies the economic importance of the Suez Canal to Egypt.
Attempt to Creation of Alternative of Suez Canal
The Suez Canal blockage in 2021 sheds light on the dependence of the import/export industry on single resources. In the current scenario, around 12% of the imports and exports through waterways are done through the Suez Canal. The Ever Given ship’s stranding underlines the importance of an alternative route to avoid such incidents in the future.
In the 1960s, the US considered a proposal to use controlled nuclear bombs to construct a canal near the Gulf of Aqaba. The plan didn’t conclude because of several undisclosed factors.
And left the Suez Canal as the lone trade channel, connecting Asia and Europe.
Economic Impact of the Suez Canal blockage
The Ever Given Ship of the Evergreen Marine Corporation halted the busiest sea trade between Asia and Europe for around five days. As per the information available in the public domain, around a hundred cargos got affected because of the Suez Canal blockage on 23rd March 2021. The Ever Given ship blockage affected the imports and exports of $9.5 billion that pass through the canal each day.
Three critical economic hits incurred at a global scale are-
● With the onus of handling the world’s 12% sea trade, the Ever Given ship blockage impacted the already hit chain of goods supply due to Covid-19.
● The Egyptian Government taxes the cargo passing through the Suez Canal, according to the loaded shipments.
The blockage of the canal by the Ever Given ship made the Egyptian authorities incur a loss of $14 million per day.
● The blockage created an imbalance in the prices of crude oil at both global and national levels.
Such rampant fluctuation in the oil prices got created because of the apprehensions of the ship getting stuck for weeks.
Dependency of the Sea trading industry.
The Ever Given ship incident unmasks the interdependency of the sea trading industry on foreign countries and routes. It reveals how a blockage of a canal in Egypt could impact countries’ economies, especially India. It is so because India ranks at the top of the list of crude oil exporters via the Suez Canal.
The blockage sheds light on the importance of sea routes’ alternatives rather than depending on a single path. Furthermore, it also motivates countries to upscale the production of goods in one’s own country.
Such steps are essential to avert any similar incidents and impact on the global economy.