Suez Canal, Egypt’s Economic Lifeline, Stays Open

A boat travels in the Suez Canal
Lars Ruecker | Flickr | Getty Images
A boat travels in the Suez Canal

Despite political turmoil in Egypt, commercial shipping moving through the Suez Canal, a critical sea-route for 4.5 percent of global oil supplies linking the Red Sea with the Mediterranean, will not be disrupted as both the opposition and supporters of ousted President Mohamed Morsi consider the water-way an "economic lifeline" for the country and will keep it open, analysts say.

The army and navy stepped up patrols of the 190-kilometer canal about a week ago and the head of the Suez Canal Authority, Mohab Mohamed Hussien Mameesh, on Wednesday said the waterway is secure and navigation is normal, the Egypt Independent newspaper reported.

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The risk of a Suez Canal closure has been a concern for the U.S. military since January 2011 when anti-government protests unseated President Hosni Mubarak, said Michael Rubin, Middle East Scholar at the American Enterprise Institute.

"I teach classes on deploying U.S. aircraft carriers, and one thing that every admiral has said is that the Egyptian military has kept a strict security parameter around the Suez Canal," Rubin told CNBC's 'Squawk Box' on Thursday.

"The Egyptian pilots who come on board every ship, military commercial or otherwise, have been the consummate professionals throughout all the chaos we've seen beginning in January 2011. That precedent actually gives me some hope that the Suez Canal will be more secure than perhaps some people think," he added.

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Despite the tighter security presence around the Suez, benchmark U.S. crude futures hit 14-month highs above $100 a barrel this week, partly reflecting fears that shipping, including tanker traffic, in the strategically-important sea-lane may yet be sabotaged by the opposition or Morsi's supporters in the Muslim Brotherhood if the political crisis deepens.

Firas Maksad at Washington-based political consultancy Global Policy Advisors, however, said neither side would attempt to close the Canal, which he described as "an economic lifeline" for Egypt. Tolls paid by ships using the canal bring in around $5 billion annually, funds that are much needed to help Egypt's ailing economy hit by a slump in tourism and sliding currency reserves.

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Though economic logic may ensure the smooth passage of commercial shipping, some believe extremists may still target the Canal to make their point. "With each successive revolutionary movement over there, we're getting more and more towards the fringe edge," said Keith Fitzgerald, Chief Investment Strategist, Money Map Press. "We have an entirely different dynamics at work" if a potential attacker believes revenue is less important thank "their religious cause."

July 26 will mark the 57th anniversary of the 'Suez Crisis' when Egyptian President Gamal Abdul Nasser ordered the army to seize and nationalize the Canal in 1956. Though owned and maintained by the Suez Canal Authority, the international treaty states that it may be used "in time of war as in time of peace, by every vessel of commerce or of war, without distinction of flag."