Aug 6, 2015 | 05:01 GMT

8 mins read

The New Suez Canal: Egypt Polishes Its Image

The New Suez Canal: Egypt Polishes Its Image

The ceremony for the opening of what is being called the New Suez Canal will be full of pageantry and grandiose visions for Egypt's economic future. The completion of a new 72-kilometer (45-mile) waterway should double the canal's capacity and will cut the waiting period for vessels transiting the canal, according to the Suez Canal Authority. But even if Cairo's lofty projections for increased revenue from canal traffic are realized, completion of the waterway will do little in the short term to change Egypt's economic profile.

The Suez Canal, Egypt's most strategic national asset, links the northern Atlantic with the broader Indo-Pacific Basin and is the dominant transport corridor between East Asia and Europe. The U.S. East Coast is also a significant customer base for the Suez, though it faces competition from the Panama Canal and the Cape of Good Hope route. Before the new waterway was built, the narrowness of the canal in places meant that for long stretches, traffic could proceed in only one direction. A carefully choreographed dance of two southbound convoys and one northbound convoy would leave at set times each day. 

The New Suez will not accommodate continuous parallel traffic throughout the entire canal, but it should improve the situation enough to reduce the wait time for vessels from 11 hours to three hours in the optimal case. This has been accomplished by widening one of the narrowest parts of the canal and by deepening and widening the Bitter lakes and the Ballah bypasses. Though this will not significantly change the overall time it takes for a ship to get from its origin to its destination, it makes transiting the Suez easier. The total number of ships the Suez can handle daily will increase from an average of 49 to 97. The Suez Canal Authority predicts that by 2023, annual revenues from the canal will increase from the current $5.3 billion to $12.2 billion.

A Small First Step

Despite these advancements, at least in the short term, the New Suez will not alleviate Egypt's economic woes. Egypt can widen the canal but it cannot conjure increased global trade, which is the basis for the revenue derived from the canal. The East Asia-Europe route will likely see continued cargo growth in the coming years because of unidirectional growth in trade from Europe to a growing East Asian consumer market, but that will be dampened by Europe's economic recession. Moreover, Asian trade to the East Coast of the United States will face stiff competition because of low fuel prices and the renovation of the Panama Canal, which is set to be complete in April 2016. Egyptian projections are therefore optimistic, especially considering that the approximately $8 billion financed by Suez Canal Authority bonds will have to be paid back before increased revenue starts to pay dividends for Cairo. 

Though the work on the New Suez has widened choke points in the canal itself, the Suez has not been deepened enough to handle the largest crude-oil tankers. Very Large Crude Carriers (VLCCs) will still have to unload their cargo into the Suez-Mediterranean pipeline or take alternative routes, and Ultra Large Crude Carriers (ULCCs) will have to avoid the Suez entirely. With the opening of the improved canal, Egypt will be able to let more of the same types of ships pass through, but it will not be able to accommodate more types of vessels.

The construction and opening of the New Suez is part of a larger project called the Suez Canal Area Development Project, which aims to develop the canal cities of Suez, Ismailia and Port Said. Egypt is struggling to lower its unemployment rate, which was 12.8 percent in the first quarter of 2015, and to address overcrowding: Some 80 million people inhabit an area roughly the size of Maryland. The development project hopes to create a million new jobs over the next 15 years in the targeted canal cities. The construction of seven tunnels linking Sinai, Ismailia and Port Said has proceeded concurrently with the construction of the New Suez, but as of yet it has not been completed. 

Moreover, the most important parts of ensuring the success of the overall development project are the creation of special economic zones for manufacturing and industry and even the creation of new cities. But these projects are only in their infancies and are challenged by numerous factors, not the least of which is a violent, destabilized Sinai Peninsula and a lack of tangible outside investment.

The New Suez was completed quickly, an impressive feat to be sure, but Cairo cannot claim full credit for the accomplishment. The Egyptian military, which is heavily invested in Egyptian manufacturing and heavy industry, was supposed to coordinate and lead the New Suez project but ended up having to turn to foreign expertise. A significant portion of the construction was turned over to six companies, five Western and one Emirati. The construction of the New Suez, then, is not necessarily a reflection of Egypt's ability to design, construct and execute the type of large-scale plans called for by the development project, and it is far from an encore to previous Herculean efforts such as Gamal Abdel Nasser's massive Aswan Dam.

Security Considerations

Stratfor has in the past studied the security of the Suez Canal and has found that it has minimal security vulnerabilities. Though the canal is narrow enough so as to be threatened by small-arms fire, no Egyptian or other kind of militant organization has proved capable or equipped enough to disable the large ships that traverse the canal. Small arms, rocket-propelled grenades or even anti-tank missiles would not do the trick without a good bit of luck. It could be possible to obstruct traffic temporarily by scuttling a vessel, but even then it would be difficult to seriously disrupt the canal.

Anti-ship missiles would be necessary to disable a ship in the canal, but the prospect of a "boat bomb," as when the USS Cole was bombed in 2000, is a limited possibility at best. The area is patrolled by sea, land and air and is kept very secure. Attacks on the envisaged special economic zones are a more likely threat than attacks on actual canal infrastructure or on passing ships. Factories or cities filled with workers would be a relatively soft target for groups such as Wilayat Sinai or Ansar Beit al-Maqdis. The threat would become particularly pronounced if development displaced businesses and communities along the canal: Displacement and economic upheaval make fertile recruiting grounds for militant groups.

The canal itself will arguably be in the most danger during the opening ceremonies in Ismailia, when the administration of Egyptian President Abdel Fatah al-Sisi hopes to demonstrate the success of its endeavors both to its own population and to the world. Al-Sisi himself will participate in a naval parade; freshly delivered French Rafale warplanes and U.S. F-16s will be flaunted; and numerous foreign dignitaries will be present. More than 10,000 Egyptian policemen will reportedly be tasked with securing the ceremony, so it is unlikely an incident will occur. Nevertheless, it is the perfect target for any militant group hoping to make a splash.

Showing Off for the World

Al-Sisi and his administration will devote as many resources to the Aug. 6 unveiling, both security and monetary, as necessary. Since coming to power by military coup in July 2013, al-Sisi has worked hard to restore the legitimacy of the Egyptian government and of the military-industrial complex that undergirds it. Sober economists may criticize Egypt for spending $8 billion on a project that, while beneficial in the long run, was not the most pressing issue facing Egypt. But such rationalizations fail to account for the international fanfare and domestic legitimacy al-Sisi hopes to gain from the re-opening. It is hardly a coincidence that on Aug. 3 al-Sisi finally signed a law that paves the way for long-delayed parliamentary elections in Egypt, yet another step toward restoring confidence in the Egyptian government.

Al-Sisi's administration is hoping that the completion of such a significant construction project, even with the numerous challenges ahead, will raise Egypt's estimation in the eyes of foreigners. $8 billion is a lot to spend for simply reducing wait time in the canal by a few hours, but it is a small sum if it means foreign powers will look at Egypt as a place for viable investment and if Egyptian citizens feel that after years of chaos, their government is capable of delivering on a promise aimed at the betterment of Egypt. In the ancient world, Egypt erected the colossal pyramids that to this day are Egypt's defining image. In modern times, Nasser nationalized the Suez Canal in 1956, built the Aswan Dam and jump-started Egypt's forays into industrialization by building large numbers of factories. Al-Sisi's strategy is similar, if less ambitious: Build to impress, and the rest will follow. Egypt has a long way to go before it can call its much-touted Suez Canal Area Development Project a success, but it has taken a 72-kilometer first step in the right direction.

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