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4 of the biggest trade chokepoints

Biggest trade chokepoints

A massive container ship blocked the Suez Canal, on stage for the fragility of the global shopping mall. Deutsche Welle is focusing on the main routes that are most at risk due to unforeseen events.

Until now, a 400-meter (1,300-foot) container ship that ran to the ground in Egypt’s Suez Canal on Tuesday has since blocked major sea-lanes between Asia and Europe.

Traffic disruptions through narrow corridors have deepened the global trade problem interrupted by the coronavirus pandemic.

Dozens of ships, including several tankers, are waiting on either side of the Channel, while several others have diverted, according to Reciitiv shipping data. It can add up to 15 days of your trip.

On Friday, The Reuters news agency reported that efforts to free the ship had failed and could now take weeks. Unstable weather conditions can make the water and sand around the boat more complicated.

A study by German insurer Allianz suggests the blockade could cost global trade between $6 billion and $10 billion a week. For example, the cost of transporting petroleum products has doubled, and delays in global production supply chains, especially in the automotive industry, can affect consumers.

Suez, however, is not the vulnerable bottleneck in global trade. Deutsche Welle examines four bottlenecks on which a strong post-COVID economic recovery depends.

 

Hormoz

Maritime routes between the Persian Gulf and the Gulf of Oman to the Indian Ocean are the most critical bottlenecks for oil and gas.

It is about 167 kilometers (90 miles) long, about a quarter of the world’s offshore oil and one-third of the world’s liquefied natural gas on the other side of the strait.

This path is particularly fragile due to the geopolitics of the Middle East. The strait connects many different powers and participants in the oil market, including Saudi Arabia, Iran, the United Arab Emirates, Kuwait, and Iraq.

 

The actual channel width for large tankers is about 3 kilometers, meaning it is easy to control the channel during a conflict.

During the Iran-Iraq War between 1980 and 1988, the two sides tried to disrupt each other’s oil exports in the strait.

Iran has repeatedly threatened to cut off oil shipments across the Strait in retaliation for U.S. sanctions on its energy exports. At one point Tehran threatened to extract water canals.

In May 2019, four ships, including two Saudi tankers, attacked off the coast of the United Arab Emirates near Fuchaira near the Strait.

In January, Iran seized a South Korean-flagged tanker in Gulf waters and detained its crew.

 

Strait of Malacca

The strait is 900 kilometers long and is one of the busiest sea-lanes in the world. The channel connects Asia with the Middle East and Europe and transfers about 40% of global trade. More than 100,000 boats sail in waterways each year.

Located in the narrowest region near Singapore, the strait is only 2.7 kilometers wide, creating natural bottlenecks and the possibility of collisions, strands, or oil spills.

In 2016, about 16 million barrels of oil crossed the water canal every day, making it the second-largest energy source in the world.

For Beijing, the strait is increasingly strategically important, with nearly 80% of Chinese crude oil imports passing through the Middle East and Africa.

 

Canal de Suez

The canal connects the artificial water of the Mediterranean Sea to the Red Sea, preventing ships from passing through promising capes outside South Africa. The canal destroyed the ship’s sailing time of about 8,900 kilometers.

The Egyptian government expanded the channel in 2014, nearly doubling the number of ships it used every day, from 49 to 97. Despite this, some supertankers were unable to enter the channel, and some had to unload some of their cargo onto smaller ships and reload at the other end.

Suez accounted for about 12% of global trade last year. The Suez Canal Authority reports that a record 180 ships will cross the channel in 2020, carrying more than 1 billion tons of cargo.

At least two more ships have stranded in the canals since 2008, one of which has forced to close for three days.

The channel is also considered extremely vulnerable to political instability in the Middle East. However, the 2011 Arab Spring, followed by the fall of Egyptian President Husseini Mubarak, had little effect on traffic.

In 2013, Cairo said it had foiled an attack on a container ship designed to disrupt cargo in the busy Suez Canal.

 

Panama Canal

The 80-kilometer-long Panama Canal covers the narrowest part of Panama, connecting the Atlantic and Pacific oceans. As one of the world’s busiest routes, it has traditionally operated 5 percent of global trade, with nearly 14,000 crossings in the past year.

 

In 2016, Panama launched a $5.4 billion expansion project, three times the size of the canal.

In theory, 98% of the world’s shipping could now pave the way and avoid the long and dangerous Cape Horn route around the southern tip of South America.

Although the channel is not exposed to the same geopolitical risks as other bottlenecks, the pandemic and bad coronavirus weather have created bottlenecks in recent months, delaying container ship shipments and gas supplies from the U.S. Gulf Coast.

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