Sharp drop in Suez Canal revenues adds to Egypt's woes

Egypt's already considerable economic problems took a turn for the worse last month as revenues from transit of shipping through the Suez Canal dropped by half as a result of security problems in  the Red Sea and the Gulf of Aden. Attacks by Houthi rebels on commercial vessels forced major shipping companies to divert away from the key global trade artery.

Income from the international strategic waterway last month dropped to $428 million, compared to $804 million in January 2023, Osama Rabie, chairman of the Suez Canal Authority, said in an interview with Egyptian television channel ON TV.

The total number of ships through the Suez Canal last month fell to 1,362 vessels, down 36 per cent from the 2,155 vessels navigating the canal during January 2023, he said.

Houthi militants in Yemen began attacking commercial vessels in October in solidarity with the Palestinians in the Israel-Gaza war, and show no signs of retreating despite the US and Western allies attempting to deter the Iran-backed group with air strikes, which began on January 12. 

Many shipping companies have rerouted their vessels away from the Red Sea to avoid the attacks, opting instead for the longer and more expensive route around the Cape of Good Hope at the southern tip of Africa.

The Suez Canal is the shortest sea route between Asia and Europe. With about 12 per cent of the world's shipping traffic passing through it, the waterway is a major facilitator of global trade.

The canal is also a crucial source of foreign currency for Egypt. The North African economy, already grappling with record inflation and a heavy debt burden was further impacted by the Israel-Gaza war, which has slowed tourism and decreased shipping through the Suez Canal.

Egypt is "particularly exposed" to the Red Sea shipping crisis as the country generates about 2.2 per cent of its gross domestic product in annual balance-of-payment receipts and 1.2 per cent of GDP in fiscal revenue from Suez Canal dues, the International Monetary Fund said in its regional economic outlook in January.

Egypt is also in talks with the IMF to revive and expand a $3 billion loan agreement, which was signed in December 2022, to help it through its economic crisis. However, this comes with strict conditions such as reducing public spending and a free float of the local currency.

"Working with Egypt is a very high priority. Both because it matters to the Egyptian economy and the Egyptian people, but also because it matters more broadly in regional context," IMF managing director Kristalina Georgieva in a press briefing on Friday.

"We are in this very last stretch when we are working on the details of implementation ... but we are close. We are very close. So we are not talking about long protracted period at all."

commonspace.eu with agencies

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Monday Commentary: PEACE IN OUR TIME?

Monday Commentary: PEACE IN OUR TIME?

Making peace between Armenia and Azerbaijan was never going to be simple, nor easy, nor quick. It is taking time, writes Dennis Sammut in this Monday Commentary. “There is a sense of realism coming from the leaders of the two countries – President Ilham Aliyev of Azerbaijan and prime minister Nikol Pashinyan of Armenia, that frankly, is necessary and welcome”, he writes. At a time when conflicts are raging all over the world – from Ukraine to the Gulf, from Africa to South Asia, the prospect that Armenia and Azerbaijan had finally, after decades of conflict that left thousands of dead and many more displaced, decided on embarking on a journey of peace was welcomed. Peace between Armenia and Azerbaijan can be top-down up to a point. Both leaders have spent political capital preparing for a peace deal. But both are aware that their people are not ready for peace yet. In fact, in Armenia, most of the elite are negative toward a peace deal with Azerbaijan. Pashinyan needs time to persuade his countryfolk. That is why 2031 is realistic. Ilham Aliyev runs a tighter shop, but he is also not immune to public opinion. Every time someone hits a landmine in Karabakh, which unfortunately happens often, peace comes into question. Which is why Aliyev chooses to sound hardline, more often than not. In pursuing the peace agenda, both Aliyev and Pashinyan need to proceed cautiously. But they are right in making peace the central issue in their agenda. It is the main issue, and the one that will define them in history. So forward, cautiously but resolutely! In pursuing the peace agenda, Aliyev and Pashinyan need to be supported clearly and unambiguously. There are too many people in Baku and Yerevan who are sitting on the sides, waiting. The international community is not doing enough. It is time to be counted. Otherwise, the spoilers will win, and the region will go back to its bad habits. (Click the image to read the full commentary).

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Monday Commentary: European-Azerbaijan relations need an intensive and multifaceted dialogue that is frank and honest

Monday Commentary: European-Azerbaijan relations need an intensive and multifaceted dialogue that is frank and honest

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Monday Commentary: “The barren rocks of Aden” and “These lands of Yemen are so ruthless”

Monday Commentary: “The barren rocks of Aden” and “These lands of Yemen are so ruthless”

There are two early 20th-century tunes that mark foreign attempts to occupy and “pacify” Yemen. The Scottish tune “The barren rocks of Aden” marks the mobilisation of Highland soldiers, enlisted to be deployed to the Yemeni port of Aden, that in 1837 became the last colony to be incorporated into the British Empire. The tune talks of the harshness of the terrain, but is celebratory, It was even played as a farewell tune to Sir William Luce at the parade in Sharjah celebrating his end as “British Viceroy” in the Middle East in 1966. The second tune is an Anatolian lament. As Ilker Sezer reminded us this weekend, in his weekly feature on “Turkiye Today”, it “mourns the tragic fate of Ottoman soldiers dispatched to the harsh, remote deserts of Yemen during the fall of the empire, young men who marched away from their villages and never returned home. Most of their names, and numbers, were never recorded. Yet, their fate left a mark on the Turkish psyche.” Subsequent invaders have discovered that Yemen is a grave that cannot be overcome by the strength of modern technology, and that whilst Yemeni society is splintered and divided, building a reliable alliance with Yemeni factions is difficult. These are the harsh lessons facing Saudi Arabia, as the Kingdom faces its biggest challenge in its modern history. The leadership of the Kingdom now has to respond decisively. At stake is their very credibility. This is likely to be a long and messy conflict. Saudi military objectives need to be focused: to box in the Houthis rather than destroy them. This is likely to include: (a) regaining territory lost on the Red Sea coast; (b) control over Bab el Mandeb Strait; (c) some kind of cordon sanitaire on the Saudi-Yemeni border; and if things go well (d) the capture of Sanaa. All this would not eliminate the Houthi problem, but it will contain it. In the end the Saudis will have to continue managing Yemen with a mixture of carrot and stick. For the moment, the stick is likely, but the carrot cannot be forgotten either. (click the image to read the Monday Commentary in full)