Last week, a massive container ship wedged itself between both banks of the Suez Canal in Egypt, completely blocking the waterway and affecting 10% of the world’s trade traffic. I could not keep silent about the matter, having been to the canal several times, as I spent two years beginning in 1979 in Cairo studying Arabic during my training stage at the Japanese Foreign Ministry.
It was indeed a perfect diplomatic dilemma: The container ship was a Japanese-owned, Taiwanese-operated, German-managed, Panamanian-flagged and Indian-manned behemoth of a vessel that now finds itself under Egyptian jurisdiction. I cannot think of any other maritime crises more complicated and multi-faceted than this one.
With that said, international reactions to this tragic event were ambivalent at best, if not chaotic. Chief Cabinet Secretary Katsunobu Kato, for example, said “The incident’s possible impact on Japan is limited with no specific influence on the nation’s stable energy supply. Still, we must keep an eye on the prices in the market.”
Global supply chains
The global economic impact seems to be limitless. The Financial Times reported on March 27 that “Crude oil prices have jumped, tankers and container ships are backed up and suppliers of everything from oil to televisions are contemplating sending their cargo around the Cape of Good Hope, potentially adding a week to shipping times.”
People in business circles once again realized how vulnerable the global supply chain really is. However, it was nothing new and therefore hardly unthinkable, as Brad Glosserman wrote in the Japan Times on March 30, that “The canal has been blocked five times: three times by accidents and twice because of regional politics.”
Who is responsible?
The cause of the accident is still under investigation. With that said, according to Lloyd’s List, potential damage or loss caused by this incident is estimated to be up to $9.6 billion a day. Arguably, it was a severe sandstorm with strong winds, a force majeure, which caused the grounding of the ship. If so, then, who is responsible?
Egypt’s Suez Canal Authority reportedly is expected to file a lawsuit against the Japanese owner of the gigantic container ship, seeking compensation for lost revenues as well as the costs to fix the damage caused to the canal. It was also reported that the ship’s owner may have to reimburse other shipping related firms as well.
I do not know the proper legal answer for this. I can easily predict, however, that it would be an extremely lengthy and painful process for all the parties concerned to reach a satisfactory conclusion. The ship’s owner, Imabari-based Shoei Kisen, on March 30 declined to comment on the possible causes of the grounding, citing the ongoing probe.
With that said, the president of Shoei Kisen did not sound pessimistic during his new conference. It was probably because the company has $3 billion in liability insurance coverage through 13 Protection and Indemnity Clubs.
Who will be the scapegoats?
I am more worried about the Indian crew of the container ship. The sailors were freed but may be placed under house arrest in Egypt, where they could face criminal charges for the mishap. The Indian government is concerned about how the Suez Canal Authority will treat the 25 crew members for good reason.
The Suez Canal Authority’s chairman suggested that “weather conditions, including high winds, and human error” could have played a role in the grounding. To make matters worse for the Indian crew, though, Egyptian law reportedly stipulates that the captain, not Egyptian canal pilots, has the final responsibility even if they are on the ship.
Was the incident unthinkable?
A similar incident and resulting crisis, as many maritime experts have warned, could easily happen again, and not just in the Suez Canal. Also at risk are waterways such as the Strait of Hormuz, the Panama Canal and the Turkish Straits. There are basically two reasons for this, one is geopolitical and the other is economic.
The first is people tend to forget that the Suez Canal has been a geopolitical choke point for more than a century. It was the nationalizing of the canal in 1956 by then-Egyptian President Gamal Abdel Nasser that sparked the Suez Crisis that saw British, French and Israeli troops invading Egypt to recover the important waterway.
The second reason is that container ships are getting larger. Suez Canal Authority statistics show that between 1979, when I lived in Cairo, and 2019, the daily number of vessels using the canal has remained about the same at about 55-60, while the total tonnage has risen by 20 million per day to 60 million tons.
The container ship that got stuck, the Ever Given, was the maximum length permitted in the canal. Still, the width and depth of the canal are not enough to realistically accommodate such large vessels. While Egypt renovated the canal just six years ago, spending over $8 billion to deepen the main waterway, such measures can not keep up with the ever-increasing sizes of modern transport ships.
Even worse possibilities
This incident was an eye-opener and hopefully a game-changer for the future. The West may have to reconsider its maritime shipping routes. Russia is promoting the efficacy of Arctic routes from East Asia to Europe. China is investing in infrastructure programs to lessen its dependency on narrow maritime choke points. Such solutions must all be considered.
One real danger that needs to be considered in such narrow waterways is the possibility of a terrorist attack. If I were a terrorist, the most recent Suez crisis and the problems it caused for the global economy would give me ideas. The incident could serve as an inspiration for very economically disruptive attacks.
Are we prepared for such acts? I sincerely hope so. If the Suez Canal Authority has the time to file a lawsuit against the Japanese ship owner or the Indian crew, it should also have the time to review measures to prevent future terror acts that might be inspired by the crisis. It is neither unthinkable nor an impossible probability. What we need to do is use our imaginations and intellect to prevent such dire outcomes.