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The Suez Canal Is a Lifeline for Global Capitalism

Laleh Khalili

The Suez Canal blockage inspired a thousand memes, but its consequences for the world economy were deadly serious. The canal has always performed a vital function for capitalist trade, and there’s no reason to think its economic and geopolitical importance is going to decline.

A view of the Huahine crossing the Suez Canal on March 30, 2021 in Ismailia, Egypt. (Mahmoud Khaled / Getty Images)

Interview by
Daniel Finn

The blockage of the Suez Canal by the giant container ship Ever Given created a traffic jam with hundreds of ships carrying goods worth billions of dollars. German insurance company Allianz estimated that a week’s closure of the canal would cost the world economy between $6 and $10 billion.

Since its opening in 1869, the canal has been a vital channel for world commerce. Major developments in global capitalism, from the rise of the Middle East as an oil producer to the shift of manufacturing to the Far East, have only increased its importance. The canal has experienced periods of closure before as a result of political disputes in the region, and analysts have worried about its potential vulnerability to terrorist attacks. But this shutdown was the result of plain incompetence.

Laleh Khalili, who teaches international politics at Queen Mary University of London, is the author of Sinews of War and Trade: Shipping and Capitalism in the Arabian Peninsula. She spoke to Jacobin about the history of the canal and its enduring importance for the world economy.


DF

How did the Suez Canal come to be built? What was the economic and geopolitical context that made the project viable?

LK

The construction of the Suez Canal in the latter half of the nineteenth century speaks directly to both intra-European rivalries — especially between Britain and France — but even more importantly to the intensification of colonization and empire in Asia and Africa. It is significant that both the canal and the laying of submarine telegraph cables were intended to facilitate communication between the metropoles and the colonies. Pressed labor built the canal, and untold thousands died in the course of its construction (not unlike the US construction of the Panama Canal a few decades later).

Technologically, one major development was crucial to the development of the canal, and it also benefited from the canal’s construction: the placing of steam engines aboard ships. Since a sailing ship cannot sail down the canal when transversal winds are blowing, its opening consolidated the hegemony of coal-powered ships over sailing ships. It is no accident that the British colonized Aden, at the bottom of the Red Sea and straddling Bab al-Mandab, a few decades before the construction of the canal and turned it into an important coaling station, first for the vessels of the East India Company and later for those of the Admiralty and other British ships.

But the canal wasn’t only about the European connection to Asia and Africa. The US Civil War, the blockade of Confederate ports by the North, and the general strike — as W. E. B. Du Bois called it — by enslaved African Americans that precipitated the end of the war and continued after it all led to greater emphasis being placed on Egyptian cotton.

As Roger Owen has written in his book Cotton and the Egyptian Economy, by the end of the nineteenth century, cotton had become the primary export commodity of Egypt. Control over cotton and the inability of the Egyptian Khedive to pay back its canal construction debt were both factors in the British military takeover of Egypt in 1882 and its de facto control of the canal.

DF

What ownership structure was adopted for the canal?

LK

The canal construction company was a joint stock company with the French holding the most shares, but the British had effective control over Suez. The Universal Company of the Maritime Canal of Suez (or La Compagnie Universelle du Canal Maritime de Suez) operated the canal until 1956, when Gamal Abdel Nasser nationalized it in one of the most significant moments of post–Second World War decolonization.

In part, the nationalization of the canal by Nasser’s government was to enable Egypt to take over the canal fees in order to fund the construction of the Aswan Dam. But it was also an acknowledgment of how important control over transportation infrastructures is. Only a few years before, when Iran’s prime minister Muhammad Musaddiq dared to nationalize the holdings of the Anglo-Iranian Oil Company — now BP — in his country, one of the most effective measures used to bring him to heel was to prevent any tankers from carrying Iranian oil. Nasser foresaw that control over the canal would also give him a degree of control over the destiny of Egypt which no other measure would do.

DF

What was the outcome of the Suez Crisis and the Anglo-French-Israeli attack on Egypt in 1956 for the canal in particular?

LK

The Suez Crisis happened in the same year as the Soviet invasion of Hungary with its quashing of the democratic movement there, and the two events are deeply connected. It was in part for fear of “losing” Egypt to Soviet control that President Eisenhower rebuked the tripartite belligerents — France, Britain, and Israel — into withdrawing from Egypt. In some ways, the 1953 restoration of the Shah in Iran and the 1956 war laid the groundwork for the imperial handover in the Middle East from Britain to the US, which was completed at last in the early 1970s.

DF

What impact did the rise of the Middle East as the world’s leading source of oil have on the canal?

LK

Obviously, the discovery of oil in the Persian/Arabian Gulf basin — Iran, Iraq, and on the Arabian Peninsula — meant that one of the primary products steaming through the canal was going to be oil. In fact, by 1970, some 60-70 percent of all seaborne cargo consisted of crude oil and petroleum products. And so much of that oil, of course, was carried to Europe, where reconstruction and industrial production were taking off in the postwar decades of recovery.

The question can be asked the other way around as well. The closure of the canal in 1958 led to a rerouting of these oil tankers around the Cape of Good Hope and thus encouraged the shift to the use of much larger crude carriers to take advantage of economies of scale.

DF

How did the 1967 war and its aftermath affect usage of the canal?

LK

Although the closure of the Suez Canal as a result of the 1967 war lasted much longer, until 1975, it did not have the same kind of effects as the much shorter 1958 closure. One of the more interesting side stories of the 1967 closure, however, was that of the “Yellow Fleet”: ships trapped in the Great Bitter Lake in the canal for years on end, so-called because they were covered by the yellow Saharan sand. I have written elsewhere about the other, global effects of this period of closure.

DF

How has the shift of economic power — and especially manufacturing — from West to East in recent decades affected the canal?

LK

In some ways, this has made the canal even more significant. The closures of 1958 and 1967–1975 led to prospecting for oil by European powers in West and North Africa, and Kazakh and Azeri oil have readily flowed to Europe since the end of the Cold War. As a result, Middle Eastern oil, though still important, was no longer the most significant cargo steaming through Suez. Container ships carrying goods manufactured in China and the rest of East and Southeast Asia are now — at least in terms of economic value — the most important and valuable cargoes going through the canal.

DF

Has China’s construction of a land route from its coastal regions to Europe via Central Asia brought the canal’s future into question?

LK

I really don’t think it has. High-speed rails traverse the land route across the Eurasian mass. These fast trains take approximately three weeks to go from the east coast of China to Budapest and onward to Hamburg and Rotterdam. They are expensive to run, which is why they often carry high-value and time-sensitive goods, like computers and other electronic items. In addition, China’s Belt and Road Initiative land routes go through several areas where the country’s rulers have violently suppressed local populations, most significantly among them the Uighur people of Xinjiang.

Sea routes are by contrast slower, but they can serve cargo that is bulkier and less time-sensitive. The fact that China so completely dominates the top ten list of container ports in the world says something about the importance of maritime transport in the country’s economic strategy.

DF

What does the current fiasco tell us about the canal’s significance for the world economy?

LK

We know that currently, about 12 percent of all globally traded goods go through the canal and that the canal is one of the most significant trade routes — along with the trans-Atlantic and trans-Pacific routes — in the world. But its closure also shows how brittle this trade can be: just-in-time auto manufacturers in Europe were among those most affected by the nearly weeklong closure of the canal. We know that efficiency — which is the holy grail of capital accumulation — is also the antithesis of robustness, and the closure has made this very obvious.

End Mark

About the Author

Laleh Khalili is a professor of international politics at Queen Mary University of London. She is the author of Sinews of War and Trade: Shipping and Capitalism in the Arabian Peninsula, Heroes and Martyrs of Palestine: The Politics of National Commemoration, and Time in the Shadows: Confinement in Counterinsurgencies.

About the Interviewer

Daniel Finn is the features editor at Jacobin. He is the author of One Man’s Terrorist: A Political History of the IRA.

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