History of Suez Canal, Its Economic Importance

On November 17, 2024, the Suez Canal marked its 155th anniversary. The construction of the canal stands as one of the most significant events in world history. Today, the Suez Canal remains one of the busiest maritime routes, handling approximately 12% of global commerce. 

The Suez Canal

• The opening of the Suez Canal on November 17, 1869, marked a pivotal moment in global trade and geopolitics, forever altering the course of maritime history. 
• Previously, transporting goods or travelling between the East (such as India or China) and the West took much longer and was far more costly. 
• Stretching 193 kilometres, the artificial waterway connected the Red Sea to the Mediterranean, offering a shortcut between Europe and Asia. 

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Historical Background

• Earliest Attempts: A trade route through Suez connecting Europe and Asia can be traced to antiquity. 
  • There is some evidence of a canal being constructed in the region during the reign of Pharaoh Senausret III, who ruled in the second millennium BCE.
• Napoleon’s Attempts: In 1799, Napoleon Bonaparte attempted to build a canal, but his efforts were hampered by inaccurate measurements.
• Ferdinand de Lesseps’s Vision: The modern Suez Canal was the brainchild of French diplomat and engineer Ferdinand de Lesseps.
  • In the mid-19th century, de Lesseps succeeded in garnering support from Egypt’s viceroy, Sa’id Pasha, for the canal’s construction.   
  • Universal Suez Ship Canal Company: In 1858, the Universal Suez Ship Canal Company was established to manage the project, which would be leased to the Egyptian government for 99 years upon completion.  
• Harsh Working Conditions: According to future Egypt’s leader, Gamal Abdel Nasser, over 120,000 workers lost their lives during the canal’s construction.
• Completion: The canal was completed in 1869, opening the pathway for international maritime trade.
• A Crucial Link for European Powers: From its opening, the Suez Canal became a key strategic and economic asset for European powers, particularly France and Britain.
  • French and British investors controlled most of the shares in the Suez Canal Company, and the canal was used to maintain colonial interests in Asia and Africa.
• Treaty for Stationing of British Troops: The British, in particular, maintained a significant military presence in the Suez Canal Zone. 
  • A treaty signed in 1936 ensured British troops would remain stationed in Egypt to safeguard the canal, reflecting its importance to the British Empire’s control over its maritime routes to India and beyond.

Suez Crisis of 1956

• Colonial Struggle Over Canal: As European colonial powers began to wane, the Suez Canal became a flashpoint for regional tensions. 
  • In 1954, facing mounting pressure from Egyptian nationalists, Britain agreed to withdraw its forces in the next seven years from the Suez Canal Zone. 
• Nationalisation of Canal: Egyptian President Gamal Abdel Nasser’s 1956 (mere two years later) decision to nationalise the canal triggered a military confrontation. I
• Reason Behind Nationalisation: Nasser’s aim was to use the canal’s revenues to fund the construction of the Aswan High Dam, a major infrastructure project designed to control flooding and generate hydroelectric power for Egypt.
• Crisis: This decision led to the Suez Crisis, when Britain, France, and Israel launched a military campaign against Egypt.
• Outcome: Despite military success, the conflict ended politically in favour of Nasser, who emerged as a hero for Egyptian nationalists.
  • Many small and newly independent countries were in favour of Naseer. 
  • International pressure, including from the United States and the Soviet Union, led to a ceasefire, and the UN deployed peacekeeping forces to mediate the situation.

Conflicts and Blockages

• The Suez Canal has remained a site of geopolitical tension over the years. 
• Egypt vs Israel: In 1967, Egypt ordered UN peacekeepers to leave the Sinai Peninsula, which led to Israelis occupying Sinai. 
  • In retaliation, Egypt closed the canal for eight years, further underscoring its strategic importance.
  • This impacted the world economy and led to an increase in oil and food prices.
• Blockage of 2021: In March 2021, the MV Ever Given, a massive container ship, became stuck in one of the canal’s narrower stretches. The six-day blockage caused a significant disruption in global trade.
  • Impact: The six-day blockage in 2021 triggered inflation globally. In fact this delay cost the global economy an estimated $400 million per hour.

Economic Role of the Suez Canal Today

• Today, around 12 percent of global commerce, 7 percent of the world’s oil, and 30 percent of daily container traffic pass through this vital waterway. 
• More than 20,000 ships navigate the canal annually, making it an essential route for international shipping.

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Emerging Alternatives

• Ben Gurion Canal: The U.S. has proposed the creation of a new canal through the Israeli-controlled Negev Desert, known as the Ben Gurion Canal. 
  • The Americans proposed to use nuclear weapons to blast a waterway through the Negev Desert.
• IMEC: India-Middle East-Europe mega economic corridor will provide transport connectivity to accelerate the development and integration of Asia, the Arabian Gulf, and Europe as a new locus of global power. 
  • It envisions a reliable, cost-effective railway and ship-to-rail transit network to supplement maritime and road routes, enabling goods and services to move between India, the UAE, Saudi Arabia, Jordan, Israel and the EU.

Conclusion

The Suez Canal remains one of the most significant engineering feats in human history, shaping the global economic landscape since its opening in 1869. As global trade continues to evolve, the Suez Canal will undoubtedly remain a symbol of both the potential and fragility of interconnected global commerce.