Gist of Suez Canal Crisis Notes | Study Gist of Rajya Sabha TV / RSTV (now Sansad TV) - UPSC

Introduction

• The recent Suez Canal crisis has put global trade in peril. A giant container ship has been stuck in Egypt's Suez Canal, blocking way for other ships to pass.
• A Panama-flagged ship, The Ever Given, that carries cargo between Asia and Europe, ran aground in the narrow canal that runs between Africa and the Sinai Peninsula.
• Authorities have been making all possible attempts to free the vessel and reopen the waterway, which is very crucial for global shipping.
• According to news reports, the blockage of the canal has resulted in a massive maritime traffic jam, causing delays in global shipment chain.
• According to official figures, some 19,000 vessels passed through the canal last year.
• India has chalked out a four-point plan to deal with the situation arising from the blockage of the Suez Canal, including advising ships to re-route via the Cape of Good Hope.
• This plan was chalked out in a meeting convened by the logistics division, department of commerce, government of India.
  • What all does this plan include?
  • How significant is the Suez Canal for global shipping?
  • What would be the implications if this blockage continues?

These are some of the aspects that are to be discussed on this edition of The Big Picture.

Edited Excerpts from The Debate

What is the importance of Suez Canal for international trade?

• Joining nerve: Suez Canal has been in operation for almost 100 years plus. It is a very critical nerve which joins the Mediterranean and then with Europe.
• Opportunity cost: Though, there are several other such channels (Strait of Malacca, Panama Canal) in the world and they are all critical, but Suez canal has its higher importance in terms of the opportunity cost. If the Suez canal is blocked, the diversion is very long, which makes it much more important.
• Safest passage: After the doubling of the Canal since 2015, it became faster and even safer.

Has the Canal been designed to handle such a large crowd?

• Put the perspective on the dimension of the features and the ship (400 metres long) which has run aground inside the canal.
• The Suez Canal’s width, where the vessel has run aground is about 200 metres and the ship is double the width of the canal.
• So, there is no way the ship can turn around.

MV Ever Given (The current crisis)

• MV Ever Given is 400m-long and it weighs 200,000 tonnes, with a maximum capacity of 20,000 containers.
• Currently, it is carrying 18,300 containers.
• It is operated by Taiwanese transport company Evergreen Marine and is one of the world's largest container vessels.
  

What will the impacts of such blockages?

• Tens of billions of dollars worth of trade would be stuck, that too, when all economies are trying to picking up after the COVID pandemic.
• Repercussions are very fast these days due to the sensitivity of the markets.

What is India’s ‘Four-point plan’?
In order to deal with the situation arising from the blockage of the Suez Canal, India has laid a ‘four-point plan’, which includes –

• Cargo Prioritization: Cargo will be identified jointly by APEDA, FIEO and MPEDA. Perishable cargo would be prioritized for movement and work with the shipping lines for the same.
• Freight Rates: Container ShippingLines Association (CSLA) assured that the freight rates as per existing contracts will be honored. Furthermore, a request is made to the shipping lines to maintain stability in freight rates for the crisis period.  
• Advisory to Ports: Once the blockage is over, it is expected that some bunching may take place, especially at the ports of JNPT, Mundra, and Hazira.
  • Ministry of Ports, Shipping and Waterway assured to issue an advisory to these ports to gear up arrangements and to further ensure efficient handling during the forthcoming busy period.
• Re-routing decisions: Shipping lines were advised through CSLA to explore the option of re-routing of ships via the Cape of Good Hope. It was pointed that such re-routing usually takes 15 additional days.

Conclusion

• Though various plans have been made to free the situation, if the blockage continues for a few more days, ramifications are going to be huge and could impact the entire supply chain.

Value Addition

Important facts about Suez Canal

• Total length: 193 km
• Commissioned in: 1869
• The sea-level water canal is a critical shipping route that connects the Mediterranean and Red Seas through
• The canal provides a direct route between the North Atlantic and northern Indian Oceans.
• Connecting Ports: It extends from the northern terminus of Port Said to the Southern end of Port Tewfik at the city of Suez.
• The artificial canal is the shortest sea link between Asia and Europe since 1869.The longest canal with no locks is one of the busiest trade routes.
  The Canal carries

Alternative route for shipping