Suez Canal to reopen soon, but not before incurring billions of dollars worth of economic damage from stuck container

The giant Japanese-owned container ship, Ever Given, that has been blocking the strategic Suez Canal for six consecutive days has finally been dislodged, but not before seriously disrupting global trade and shipping. 

The giant ship, measuring some 1,312 feet (400 meters) or approximately the same length as the Empire State Building in New York, blocked the international waterway for nearly a week.

The Suez Canal opened in 1869 with the purpose of dramatically reducing shipping route times from Europe and the Mediterranean region to the Indian Ocean and Asia. Roughly 120 miles in length (193 kilometers), the artificial canal enables direct shipping between Europe and Asia. Prior to the completion of the canal, ships from Europe had to travel the considerably longer route around Africa in order to reach China, Japan and the Far East. 

The famous Rothschild family played a key role in the financing of the Suez Canal, which quickly emerged as one of the most important water lanes in the world. For its first 87 years, France and Great Britain owned and operated the canal until the independent state of Egypt nationalized it in 1956. During the Suez Crisis, France and Great Britain unsuccessfully tried to retake the canal while Egyptian and Israeli military forces fought against each other in the Sinai Peninsula. Since the Egyptian-Israeli peace treaty in 1979, Israeli ships, like other international ships, have been allowed to pass through this crucial waterway. 

The blocked Suez Canal has already had negative implications for countries in the Middle East region. For the host nation Egypt, the Suez Canal constitutes a crucial source of income. In 2020, the Egyptian government received some $5.61 billion of revenue in tolls collected from ships passing through the canal. Therefore, Egypt has a very strong interest in having the canal reopened as quickly as possible. 

Meanwhile, war-torn Syria has reportedly been forced to ration fuel because of an oil deficit in the country caused by the blockage of the Suez Canal. 

In a released statement, the Syrian Ministry of Petroleum and Mineral said that the Suez blockage had “hindered the oil supplies to Syria and delayed arrival of a tanker carrying oil and oil derivations to Syria.”

While also affected negatively, Israel is less vulnerable than most countries in the region due to the Jewish state’s unique access to both the Mediterranean and the Red Sea. 

The potential long-term impact on the global economy is considerable. Oil prices recently started bouncing back due to fears of a prolonged blockage. If the blockage continues for an extended period of time, oil prices could spike even further. 

The Suez Canal constitutes one of the world’s most important shipping lanes for oil, refined fuels and trade between Europe and Asia. Middle Eastern oil from the Persian Gulf to European countries is regularly shipped through the Red Sea and the Suez Canal before entering the Mediterranean Ocean. 

While it is too early to more accurately evaluate the longer-term economic fallout of the Suez blockage, the price tag is going to be steep. Every day, traffic of goods valued at almost $10 billion passes through the canal. Since the blockage is on its sixth day, it already means significant losses for delayed deliveries of goods worth some $60 billion.