Context: A giant container ship has been stuck in Egypt's Suez Canal for nearly a week now, blocking way for other ships to pass. A Panama-flagged ship, The Ever Given, that carries cargo between Asia and Europe, ran aground on Tuesday 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 Friday. What all does this plan include? How significant is the Suez Canal for global shipping and what would be the implications if this blockage continues. These are some of the aspects we will discuss on this edition of The Big Picture.

About

• The Suez Canal is an artificial sea-level waterway running north to south across the Isthmus of Suez in Egypt, to connect the Mediterranean Sea and the Red Sea.
• The canal separates the African continent from Asia.
• It provides the shortest maritime route between Europe and the lands lying around the Indian and western Pacific oceans.
• It is one of the world’s most heavily used shipping lanes, carrying over 12% of world trade by volume.
• It provides a crucial link for oil, natural gas and cargo being shipped from East to West.
• As per Suez Canal Authority (SCA) data, in 2020, nearly 19,000 ships, or an average of 51.5 ships per day, with a net tonnage of 1.17 billion tonnes passed through the canal.
• The canal is a major source of income for Egypt’s economy, with the African country earning USD 5.61 billion in revenues from it last year.
• In 2015, Egypt announced plans to further expand the Suez Canal, aiming to reduce waiting times and double the number of ships that can use the canal daily by 2023.

History

• The Suez Canal is actually the first canal that directly links the Mediterranean Sea to the Red Sea. It was opened for navigation in November 1869.
• The 150-year-old canal was controlled by British and French interests in its initial years, but was nationalised in 1956 by Egypt.
• Suez Crisis, international crisis in the Middle East, precipitated in July 1956, when the Egyptian president, Gamal Abdel Nasser, nationalized the Suez Canal. The canal had been owned by the Suez Canal Company, which was controlled by French and British interests.
• The Canal was closed five times; the last time was the most serious one since it lasted for 8 years. The Canal was then reopened for navigation in June 1975.

Impact of longest-ever accidental closure of Suez Canal

• Blocking of all Traffic: On March 23rd, due to weather obstructions a giant container ship, MV Ever Given, en route from China to the Netherlands ended up getting stuck in one of the canal’s narrow stretches, thus blocking all traffic. 
• Stress on Global Supply Chain: Over 200 ships are stuck on both sides of the canal putting stress on global supply chains.
• Increased Oil Prices: The long-term impacts of this block will depend on how long it lasts, but some countries have already seen a rise in oil prices after the blockage.
• India- the biggest importer via Suez Canal: India is the top importer of crude oil and products via the Suez Canal, higher than China, South Korea or Singapore. If the issue is not solved early then it will start to have implications on the bigger trade flow and shipping sectors and will begin to affect refining operations on a broader scale
• India-US relations: For India, though, the main hit could be seen on the import and export of ethane with the US, and the imports of crude from Latin America, the uptake of which was recently increased. The longer the closure, the more disruptive the impact is likely to be.
• Global Dependence on this narrow waterway: The incident also raises questions about finding solutions to prevent future accidents and reducing the global dependence on this narrow waterway.