Suez Canal

When you think Egypt, think Suez

Many want to believe that recent uprisings that began in Tunisia are essentially about human rights. As discord cascaded into Egypt and then to various points north, south, east, and west including Tehran, Iran to Madison, Wisconsin, some might want to believe that it was a redux of the Prague Spring of 1968. However, around the globe, economic gain is fundamental to current upheaval.  As Madonna Gauding described so well in her Occasional Planet article “Why Wisconsin is ground zero of the billionaires’ assault on America,” understanding greed is central to explaining political discord.

Why is it that the United States and other western powers maintained their support for Egyptian dictator Hosni Mubarak for so long?  It certainly was not because of his altruism or commitment to the well-being of the people of Egypt. It was largely due to two factors.  First, Egypt was largely benign in the Arab tension with Israel as a result of the Camp David Accords negotiated by President Jimmy Carter in 1978. Second, the viability of the 102-mile long Suez Canal, connecting the Red Sea with the Mediterranean, was essential to the free flow of oil from the Middle East.

For millennia, there have been conflicts among the people in the Middle East. But one of the defining moments for the region came thousands of miles away in Western Pennsylvania in 1859.  It was in that year that Edwin Drake drilled the first oil well.

It was another 52 years before oil was extracted in the Middle East.  The first discovery of petroleum in the Middle East was in Iran.  By 1911, a British concern, the Anglo-Persian Oil Company (APOC) began producing oil in Iran.

But as important as the presence of oil is to the Middle East, so are the transportation routes for shipping crude oil to refineries and 30 markets in Europe, the United States, Japan, China, and a host of other countries.

This is in part why what has recently occurred to Egypt is of such important economic importance to the United States and others.  Yes, the U.S. has a certain measure of concern about human rights in Egypt, and it certainly wants to maintain a geopolitical alignment in which Israel is as safe as it can be. But oil and money are central to the U.S.’s interest in Egypt.

When the Suez Canal opened in 1869, it provided the link necessary for ships to traverse directly from the Indian Ocean to the Mediterranean without circumnavigating virtually all of Africa.  Fifty years later when oil became a major export of the Middle East, and when the industrialized world had developed an insatiable desire for petroleum, the Suez Canal took on much greater importance.  Were it to be shut down, seriously damaged, or even destroyed, it would mean that tankers shipping all Persian Gulf oil would have to add over 12,000 miles to the journey to Europe or North America.

In the Western HemisphSuez Canalere, the Panama Canal was a political football for nearly a century, involving Colombia, Panama, and the United States.  At noon on December 31, 1999, the United States turned full control of the Canal over to Panama.  Like the Suez Canal, its significance is such that major powers would be unlikely to allow it to be closed.

The Suez Canal was initially controlled by Egypt. Only six years later, Egypt was in such financial difficulty that it sold a 44% interest in the Canal to the British.  Seven years after that (1882), Britain invaded, occupied part of Egypt and took de facto control of the canal.

The Canal was not without controversy during both World War I and World War II. However. it was in 1956, when the Cold War turned hot, that fighting ensued over the Canal.  In July of that year, Egypt declared that it was nationalizing the canal, thus initiating the Suez Crisis.  The mixture of tensions included Egypt recognizing the People’s Republic of China rather than Taiwan and President Abdel Nassar’s plan to annex the Sudan to Egypt.

Thus, beginning in October, 1956, Britain, France, and Israel each attacked Egypt, and each for its own reason.  This resulted in strange bedfellows, as the United States joined with the U.S.S.R. and the United Nations to oppose the actions against Egypt. In particular, it was a difficult time for U.S. President Dwight Eisenhower to side with the U.S.S.R. rather than Britain, France, and Israel. However, his opposition to the war strengthened U.S. relations with Saudi Arabia, and in an era when “oil was king,” this was important.

If a new government in Egypt shut down the Suez Canal, the result could be devastating to western countries, without causing too much damage to Saudi Arabia and the host of other oil-producing countries in the Middle East. Until Western commitment to alternative energy sources becomes characterized more by actions and less by talk, Mid-East oil will be essential to North America and Europe. Mid-East countries would still profit from Western demand for petroleum, but Western countries would be struck with a huge spike in prices because of the cost of transporting the oil the additional 12,000 miles around the Horn of Africa.

Fifty five years ago, President Eisenhower opposed western intervention to seize control of the Suez Canal. But that was at a time when the United States was much more self-sufficient when it came to oil.

Back in Wisconsin, Governor Scott Walker has not been subtle about his economic motives for wanting to break the unions. As with everything else, the Middle East is complicated. But as we observe future developments, let’s not forget the economic interests that the U.S. has in the region. This is one time when the stock market is a good barometer of what’s happening; we may all want to keep a closer eye on it.