Despite the turmoil in Egypt, the Suez Canal is operating normally — for now. But if something happened, what would China (and more specifically, the Chinese navy) do?
Immediate concerns about the canal have centered, understandably, on the price of oil. However, the hub-and-spoke system of international shipping means that if there’s a clog in a key area, the rest of the system is disrupted. It’s a domino effect similar to what happened to air travelers worldwide when airports from Atlanta to New York were socked in with heavy snows over Christmas.
In the case of shipping, a canal clog would result in containers stacking up in various ports, and exporters not being paid because their goods were sitting on the dock in Mumbai, Rotterdam, etc., instead of at the buyer’s warehouse. If the situation deteriorated, some exporters, being short of cash, would have to lay off workers, if not close their doors entirely.
And which single nation leads the world in exports? China.
Which country has the most to lose from an interruption in trade? China.
With its dependence on exports, China’s stake in a smoothly-operating Suez Canal should not be underestimated. While some have focused on America’s ability, via the Fifth Fleet, to assure stable canal operations, I doubt that China would willingly take a back seat in that situation. It’s not a stretch to imagine that China would send in its navy as a show of strength in the region. Plus, China could use the canal as a reason to further increase its seapower.
And what about … Russia? What would Mr. Putin do?
Clearly, there’s more at stake than the price-per-gallon at your neighborhood gas station. If there’s a problem at the Suez Canal, things could get very interesting very fast. Stay tuned.
Joanne Butler is a senior economics fellow at the Caesar Rodney Institute of Delaware. You can email her at email@example.com.