Suez Canal Revenue Drops As Vessels Reroute Due To Rising Conflict In Yemen

The Suez Canal, an essential worldwide commercial route between Asia and Europe, has experienced a significant drop in revenue due to the escalating conflict in Yemen. Major shipping companies have had to reroute due to attacks by Yemeni terrorists on their vessels in the Red Sea, avoiding the channel and resulting in an almost 50% decrease in revenue for Egypt’s Suez Canal Authority in January. Suez Canal Authority chief Osama Rabie stated that revenue fell from $804 million in January 2023 to roughly $428 million in January 2024. Rabie also reported a 36% drop in the quantity of ships using the canal.

Despite airstrikes by the United States and its allies intended to dissuade the Houthi militants, whom Iran backs, the battle in Yemen has escalated. These attacks, together with the October Israel-Hamas war, have made Egypt’s economic problems worse. The nation is currently experiencing its worst financial crisis in decades.

The Suez Canal is Egypt’s leading source of foreign exchange, bringing in over $10.25 billion by 2023. However, the canal’s recent setbacks have raised concerns about its stability and significance in Egypt’s economic revival. Egypt had invested in the canal’s expansion before the war to make enough space for bigger ships and boost its capacity.

Rabie emphasised the exceptional aspect of the crisis, noting that sales on a monthly and annual basis had generally increased before the current decline. This slowdown is crucial for Egypt, which is close to reaching an agreement with the International Monetary Fund (IMF) to support its economy. With further assistance from other partners, the proposed arrangement could double Egypt’s existing $3 billion rescue package.

The circumstances highlight the complex interactions among geopolitical developments, worries about maritime security, and the dynamics of international trade. The short-term financial gains from vessel rerouting may benefit specific industries, but there are significant long-term effects on international trade and Egypt’s economy. Diplomatic efforts to end the Yemeni war and guarantee the safety of maritime routes may lessen the negative impacts on world trade and Egypt’s current economic difficulties.

Reference: Economic Times

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Source: Maritime Shipping News