It is not uncommon for people to appreciate something solely when it is gone, as in the case of food, water, and oil, where the lack of it points out a dependence many did not even know had existed. Billions of dollars were lost when the Suez Canal was blocked by a cargo ship a few months ago. Furthermore, the reliance of the world economy on sea straits is being made even clearer when looking at January 2020, when oil prices increased as tensions between the US and Iran escalated, and investors feared an Iranian closure of the Strait of Hormuz, which is one of the world’s most important sea straits.
With these events in mind, one can clearly see how vulnerable the world economy is; it is dependent on the sea straits remaining open at all times. If one major sea strait is blocked for a prolonged time, this will lead to significant supply disruptions. These disruptions will not only affect the global oil trade and hence the world economy, but also food security and peace, as food shortages are known to contribute to the outbreak of violence, for which the Arab Spring uprising can serve as an example.
The aim of this paper is to consider the world’s two major sea straits in the Middle East and develop an index in order to estimate the risk that these two straits pose to the world economy.
Content
Abstract
1. Introduction
2. Methods
2.1 Selection of Maritime Chokepoints
2.2 Identifying Relevant Risk Scenarios
2.3. Creating the Risk Index of Sea Straits (RISS)
3. Suez Canal
3.1 Overview
3.2 Security Threats
3.2.1. Naming the Threats
3.2.2. Probability of Terror Attacks
3.2.3. Costs of Potential Terror Attacks
3.2.4 Probability of Egypt Closing the Suez Canal
3.2.5 Costs of Egypt Closing the Suez Canal
3.3. Safety Threats
3.3.1. Naming the Safety Threats
3.3.2. Probability of Accidents
3.3.3. Costs of Accidents
3.4. Risk Index of Sea Straits
4. Strait of Hormuz
4.1. Overview
4.2 Iranian Total Blockade
4.2.1 Iran’s Capabilities
4.2.2 Probability of a Total Blockade
4.2.3 Costs of a Total Blockade
4.3 Iranian Partial Blockade
4.3.1 History of Partial Blockades
4.3.2 Probability of an Iranian Partial Blockade
4.3.3 Costs of an Iranian Partial Blockade
4.4 Risk Index of Sea Straits
5 Outlook
6 Conclusion
7 Literature
8 Appendix
Abstract
The last few decades have seen an exponential growth of international trade, which led to more goods being shipped. As a result of an increase in shipping, the world economy is now heavily dependent on sea straits remaining open at all times. Research on the risks which this dependence comes with, is lacking. This thesis will examine the risks that the Strait of Hormuz and the Suez Canal face. Expert elicitation will be used to quantify the probability of occurrence and the possible costs of risks, thereby creating an index that allows for comparisons. The biggest risks to the Suez Canal are a closure by Egypt, a terror attack, and accidents, whilst the risks for the Strait of Hormuz are a total blockade leading to a war involving Iran and a partial blockade of the strait. Hormuz poses a two times greater risk to the world economy than Suez. The pandemic is likely to lead to more local production, taking pressure away from sea straits. Nevertheless, developing alternative trade routes and making supply chains more agile should be core priorities in order to reduce the world economy’s dependence on sea straits.
List of Illustrations
Figure 1: The Arabian Peninsula and the two most important sea straits in the Middle East
Figure 2: The Suez Canal from a Satellite Perspective
Figure 3: The Strait of Hormuz from a Satellite Perspective
Editing Programme: https://www.visualwatermark.com/add-text-to-photos/
Map Source: Google Maps
Table Directory
Table 1: Risk Analysis Suez Canal. Using author’s own calculations and previously cited sources
Table 2: Risk Analysis Strait of Hormuz. Using author’s own calculations and previously cited sources
Table 3: Data for the calculation of the average increase in sea distance when the Suez Canal is blocked. One source was used for the ranking according to GDP and another one for the average increase in sea distance
1. Introduction
It is not uncommon for people to appreciate something solely when it is gone, as in the case of food, water, and oil, where the lack of it points out a dependence many did not even know had existed. Billions of dollars were lost when the Suez Canal was blocked by a cargo ship a few months ago.1 Furthermore, the reliance of the world economy on sea straits is being made even clearer when looking at January 2020, when oil prices increased as tensions between the US and Iran escalated, and investors feared an Iranian closure of the Strait of Hormuz, which is one of the world’s most important sea straits.2 With these events in mind, one can clearly see how vulnerable the world economy is; it is dependent on the sea straits remaining open at all times. If one major sea strait is blocked for a prolonged time, this will lead to significant supply disruptions. These disruptions will not only affect the global oil trade and hence the world economy, but also food security3 and peace, as food shortages are known to contribute to the outbreak of violence, for which the Arab Spring uprising can serve as an example.4
The aim of this paper is to consider the world’s two major sea straits in the Middle East and develop an index in order to estimate the risk that these two straits pose to the world economy.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: The Arabian Peninsula and the two most important sea straits in the Middle East. (Google Maps)
2. Methods
2.1 Selection of Maritime Chokepoints
First of all, there are dozens of sea straits around the globe. For purposeful research, this thesis had to be limited in its aspirations. According to the U.S. Energy Information Administration, the following seven chokepoints are the most important for global crude oil trade:5
- Strait of Hormuz
- Strait of Malacca
- Suez Canal
- Bab el-Mandeb
- Danish Straits
- Turkish Straits
- Panama Canal
Out of those seven chokepoints, the highest amount of traffic is being managed by the Strait of Hormuz, the Strait of Malacca, the Suez Canal and Bab el-Mandeb. Three of those chokepoints are located in the Middle East, whilst the Strait of Malacca lies in Southeast Asia and is the world’s second-most important sea strait for the energy sector, after the Strait of Hormuz.6 This paper will examine the risks that the two most important sea straits in the Middle East pose for the world economy, namely how disturbances in the Strait of Hormuz and the Suez Canal could affect the global economy. Both of these maritime chokepoints have recently been in the newspaper, be it because of tensions between the United States and the Islamic Republic of Iran or an accident that clogged global trade for six days.
This paper will offer a very limited yet detailed perspective on the dangers for the world economy that result out of its dependence on maritime chokepoints. Further research is needed. Since there is a similar amount of oil flowing through the Strait of Malacca as there is through the Strait of Hormuz, the world economy is similarly dependent on the Strait of Malacca remaining open. The Bab el-Mandeb chokepoint which lies near Yemen and south of the Suez Canal is another example where research is lacking. The Strait of Malacca and the Bab el-Mandeb, just to name two global maritime chokepoints, are both crucial for world trade and deserve more attention by scholars. Moreover, experts suggest that the Bering Strait, which separates the United States from Russia, will play a pivotal role in the world economy of tomorrow, as the ice in the strait continues to melt and thereby sets free new shipping routes which are expected to lead to a rising share of trade flowing through the Bering Strait by 2050.7,8 The Bering Strait could, over long-term, depict another alternative to the Suez Canal and might diversify the world economy’s maritime trade and hence lead to a less vulnerable world economy. These changes heavily rely on the factor of climate change. Further research into climate change making the Bering Strait passable as well as the Bering Strait eventually opening up new possibilities of trade is deemed necessary.
After having discussed the future prospects of maritime global trade as well as having explained the reasons for the choice of the considered sea straits, this paper will now examine the world economy’s vulnerability of the Middle East’s two most important maritime chokepoints: The Strait of Hormuz and the Suez Canal.
2.2 Identifying Relevant Risk Scenarios
After the relevant maritime chokepoints were now selected, it is crucial to recognise possible risk scenarios for these maritime chokepoints in a second step. Risk to sea straits can be grouped into five categories, namely accidents, extreme weather events, regional conflict, terrorism, and piracy.9 In the following pages, relevant risk scenarios for both straits will be identified. In a second step, it will be elaborated upon the possibility and the potential costs of the occurrence of said risks.
2.3. Creating the Risk Index of Sea Straits (RISS)
At this point, it will be clear which risks both the Suez Canal as well as the Strait of Hormuz face. In a next step, the possibility as well as the costs of the risks will be estimated by using historic data and expert opinions.
Estimating the possibility of a certain scenario occurring during a timeframe of one-year is a difficult undertaking. The possibility of rare events is hard to predict, since there is often not enough empirical data. In order to proceed despite this challenge, this paper will continue by assuming that the future can, in parts, be predicted by the past, which means that when an event first occurred 10 years ago and it occurs again right now, it will be assumed that its yearly chance of occurrence is 10%. Moreover, the method of expert elicitation will be applied, which is “a formal process of collecting and synthesizing opinions from those who are uniquely qualified to provide insight about how to approach complex problems” and is “particularly useful for parameterization and quantifying uncertainty surrounding rare or unpredictable occurrences”. 10
Regarding the estimation of the costs of these risk scenarios, this paper will focus on the risk effects on the global economy, which often manifest themselves in rising oil prices. Nevertheless, a disruption of maritime chokepoints is also likely to lead to food shortages and thereby to a loss of life. This paper will stick to displaying the consequences in economic terms and not consider the grave consequences for humans which a maritime supply disruption could have. This approach allows for higher accuracy since there is more data on the risks of sea straits available from the energy sector than from non-governmental organisations or humanitarian aid networks.
With now having established possible risk scenarios with their estimated cost for the world economy and their probability of occurrence, the next goal is to calculate the Risk Index of Sea Straits which can be abbreviated by RISS. The method how the RISS will be calculated is explained in the following. By multiplying the estimated costs with the estimated probability per year, one can estimate the costs associated to the risk in regards to their possibility. One can then estimate the mean costs these risks have per year. So if a risk scenario costs 100 billion USD and there is a 1% probability of it happening, the “costs per year” are 1 billion USD. The higher the index number, the higher is the vulnerability of the depicted sea strait and the greater is the dependence of the world economy on the flawless operation of said sea strait. This measure makes risks with a different probability of occurrence and different estimated costs comparable. The formula is the following:
(CostsRisk1 x YearlyProbabilityRisk1) + (CostsRisk2 x YearlyProbabilityRisk2) = RiskcostsStraitX
RiskcostsStraitX = Average Riskcosts per year in billion USD = Risk Index of Sea Straits = RISS
3. Suez Canal
3.1 Overview
The Suez Canal is a man-made channel under the sovereignty of Egypt and separates the Arabian Peninsula from the African landmass, thereby separating Asia and Africa. Moreover, the canal connects the Mediterranean Sea with the Red Sea. All in all, the Suez Canal separates two seas and two continents and allows for faster shipping between Asia and Europe. If it did not exist, more oil would flow via the SUMED pipeline from the Suez Canal to the Mediterranean, but goods from Asia, not being able to be transported via a pipeline, would have to be shipped to Europe via the Cape of Good Hope in South Africa, which takes around two weeks11 longer and consumes more fuel. The construction of the Suez Canal was completed in 186912, and afterwards contributed to both the emergence of international trade as well as the development of the Egyptian economy. As the Suez Canal is man-made, it is not as wide as other natural maritime chokepoints such as the Strait of Hormuz. At its narrowest point, the canal is only 200 metres narrow, thereby ranking amongst the narrowest major sea straits, together with the Panama Canal which is 300 metres wide at its narrowest point.13
The main threats for the Suez Canal can be categorised as security threats or safety threats. Security describes the freedom from foreign malicious intentions, whilst safety depicts the freedom from accidents and extreme weather events.14
In the following, several safety as well as security threats will be considered.
Abbildung in dieser Leseprobe nicht enthalten
Figure 2: The Suez Canal from a Satellite Perspective. (Google Maps)
3.2 Security Threats
3.2.1. Naming the Threats
The main security threats for vessels passing the Suez Canal are the risks of terrorism, war, and piracy. The Suez Canal has become a target for terrorism as it is a symbol for international trade and facilitated British imperialism in the past.15
If a terror attack on the Suez Canal was to be successful and lead to a blockade of the canal, this would deliver a costly blow to the world economy. If the attack was not able to lead to a blockade, it would not have long-term consequences, however, the terror attack would lead to higher insurance premiums for the passage of the Suez Canal.16 The higher insurance premiums would not increase the prices of shipped goods significantly because the costs for transport, in which canal passage fees are included, are only responsible for about 10%17 of a good’s total price and are therefore “barely noticeable”18. The world economy would therefore not suffer significantly from a terror attack on the Suez Canal that does not manage to block the canal, as the increased insurance premiums would fail to increase the prices of shipped goods significantly. The risk of an “unsuccessful” attack on the Suez Canal will hence not be considered in this thesis.
The second security threat to the Suez Canal is war. History has shown that Egypt is determined to close the Suez Canal if this comes with a military advantage. The Suez Crisis led to a closure of five months and the canal was reopened in March 1957.19,20 The Arab-Israeli war in 1967 however, led to the closure of the Suez Canal for an entire eight years.21,22
One minor security threat to the Suez Canal is maritime piracy, which naturally occurs where low state capacity is being combined with a high amount of maritime traffic and trade. The main acts of piracy are now being committed near the Western coast of Africa, and not anymore in the proximity of the Horn of Africa. For the Suez Canal, terrorism and “attacks on both sides of the Suez are a graver concern” 23 than piracy. The risk of piracy in the Suez Canal will not be considered, as the canal is under full sovereignty of Egypt and is therefore being adequately protected. However, the decision to pass the Suez Canal includes additional risks further south, namely in the Red Sea as well as in the Gulf of Aden, which should be addressed by further research.
3.2.2. Probability of Terror Attacks
In 2013, there was a terror attack on a vessel traversing the Suez Canal. Members of the Furqan Brigade attacked the vessel with two rounds of a Rocket-Propelled Grenade, thereby striking the “artery of the commerce of the nations of disbelief and tyranny” 24 . The Suez Canal has become a target because it acts as a symbol for global trade and facilitated imperialism in the past25, and is therefore being despised by Islamic fundamentalists.
In 2014, an expert concluded that “the threat of serious attacks by militants -operations that could sink a major vessel and thus block the canal- is a real one” 26.
The terror attack pointed out the vulnerability of ships passing the Suez Canal, and there were concerns about the security of the Suez Canal. This then led to Egypt implementing extensive surveillance and security measures in order to avert future terror attacks in the proximity of the Suez Canal.27 Egypt cannot allow for the Suez Canal passage to be seen as insecure, as it aims to secure one of its major revenue sources and enable the Suez region to develop into an industrial hub.28,29
In the year of 2015, and with the new security measures in place, Egyptian authorities managed to prevent a terror attack which aimed at the disruption of shipping through the Suez Canal by using bombs.30 One of the thirteen arrested men was an employee of the Suez Canal Authority, which is tasked by the Egyptian government to manage the Suez Canal.31 The fact that one of the accused was a Suez Canal official is especially delicate, as all the implemented security measures are just as effective as their weakest part.
In more recent years, the Suez Canal has seen more calm times; there were no acts of terrorism and piracy committed in the Suez Canal in the year of 2020. There was terrorist activity in the Sinai region, however it was not within a 50-kilometre distance of the Suez Canal.32 As of 2021, Egypt is policing the 200 kilometres-long Suez Canal with military checkpoints every 20 kilometres as well as helicopters and aircrafts.33
Whilst the Suez Canal is being kept relatively safe, there were several terroristic incidents34 in Cairo and eastwards from Port Said, where the Suez Canal meets the Mediterranean Sea. These incidents reveal that even though shipping through the Suez Canal is being well-protected, the canal still lies in an unstable region. Furthermore, the attack in 2015 has seen an employee of the Suez Canal Authority actively plan an attack on the canal. By working together with officials of the Suez Canal Authority, terror groups might be able to circumvent the security measures that were put in place.
Summarising, the Suez Canal has been and still is the target of terror attacks, though a successful attack in 2013 led to the implementation of stern security measures. These taken measures soon proved to be effective when they allowed Egyptian authorities to prevent an attack on the canal in 2015. As Egypt depends on the trust shipping companies put into the Suez Canal and aims to develop the Suez region into an industrial hub, it knows of the importance of establishing adequate security measures. Nevertheless, regarding the instability of the region in which the Suez Canal lies as well as the potential for employees of the Suez Canal Authority to collaborate with terrorists, the effectiveness of the implemented security measures can never be absolute, and the danger of a successful terrorist attack on one of the world’s most crucial waterway persists.
Looking back, the Suez Canal has seen several attempts of terrorist attacks in the last 8 years, namely in 2013 and 2015. While the attack in 2013 was carried out, the planned terror attack in 2015 was prevented by security forces. It is likely that since then, there have been more failed attempts to attack the Suez Canal that were not made public by the Suez Canal Authority.
Out of these two attacks on the Suez Canal, one was successful. One can therefore estimate that per year, there is a risk of an average 12.5%35 for a terrorist attack on the Suez Canal to occur. It is relatively unlikely that a terrorist attack on the canal would end in a blockade, as the vessels passing the Suez Canal are resilient enough to withstand an attack with a rocket-propelled grenade. This probability is difficult to estimate, as this scenario has never occurred before. When assuming that a terrorist attack on the Suez Canal would end in a blockade in one out of ten cases, the yearly probability of a terror attack leading to the closure of the Suez Canal is 1.25% 36.
3.2.3. Costs of Potential Terror Attacks
Now it is crucial to consider the impact on the world economy that would result out of a terror attack on the Suez Canal. If a terror attack were to lead to a blockade of the Suez Canal, shipping would be re-routed by the Cape of Good Hope. A terror attack which does not lead to a blockade of the canal will lead to higher insurance costs for a passage of the Suez Canal, thereby making shipping via the Cape of Good Hope more attractive, albeit not in the same extent as it would be the case with a total blockade of the canal. Navigating the route via the Cape of Good Hope will take around eight days longer than the standard route via the Suez Canal, thereby creating additional costs for fuel and wages. 37 Nevertheless, by using the African alternative, shipping companies could circumvent the Suez Canal fees which often amount to 500’000 USD.38 The decision to re-route around the southern tip of Africa is also heavily affected by the question if oil prices are low enough in order for the journey to be more feasible than the passage of the Suez Canal.
Depending on the fees for the Suez Canal, the geopolitical risks, the oil price as well as the urgency of the deliverance of the cargo, shipping companies decide on whether to navigate the Suez Canal or the alternative Cape of Good Hope.
From the view of Egypt, this contradicts their interests diametral, as the canal generates 5.639 bn. USD of state’s revenue out of fees for the passage of the Suez and is thereby responsible for about 2% of Egypt’s Gross Domestic Product.40 Moreover, the revenue from the Suez Canal is important to keep the struggling Egyptian economy afloat, as it was heavily affected by the pandemic. 41 Facing a decreasing demand, the Suez Canal Authority would likely propose to lower the fees for the passage in order to convince vessels not to take the alternative route via the Cape of Good Hope, as it happened in 2021.42 If shipping would move towards Africa and away from the Suez Canal due to terror attacks and the underlying security concerns, Egypt would lose a major source of revenue, which has the potential to create civil unrest if the government of Egypt tries to compensate for the loss of revenue by reducing expenses and cutting food subsidies.43
Regarding a total blockade of the Suez Canal, t he German insurer Allianz recently published a study where it estimates that during the first week, the blockade of the Suez Canal by the cargo ship Ever Given costs the world economy about 6-10 bn. USD per day. 44 When one assumes that the terror attacks would had similarly grave consequences as the 2021 Suez blockade by the ship Ever Given had, one can assume that the blockade will last for around one week. With this assumption, one may now use the estimation of a cost of 6-10 bn. USD per day and conclude that the closure of the Suez Canal for one week, triggered by a terror attack, is expected to cost the world economy an approximate 42 - 70 bn. USD. The reason for these high costs is the damage to supply chains that follows a blockade of the Suez Canal. Due to the complexity of global supply chains and the efficient just-in-time system, supply chains are increasingly vulnerable. Just one container filled with electronic systems that needs to surpass the blocked Suez Canal via the Cape of Good Hope, has the power to stop the production of an entire automotive factory and cause missed sales, therefore imposing staggering costs on the world economy as a whole.
All in all, a terror attack on the Suez Canal that leads to its blockade for one week will cost the world economy around 56 bn. USD 45 . An attempted terror attack that does not result in a blockade of the canal has less drastic effects. Nevertheless, such an attack would erode confidence in the security of the Suez Canal and thereby prompt more shipping companies to navigate around the Cape of Good Hope. The decision to take the African detour will not affect the world economy significantly, for if its additional costs would be significant, shipping companies would use the Suez Canal despite its vulnerability to terror attacks. Even though a re-routing via Africa would not considerably hamper the world economy, Egypt would lose a main source of its revenue. It would therefore be likely to impose austerity measures, which have the power to deteriorate the already tense food situation in the country and spark civil unrest.
3.2.4 Probability of Egypt Closing the Suez Canal
As history shows, the Suez Canal has been blocked twice by the State of Egypt. Firstly, the Suez Crisis of 1956, a dispute between France, Great Britain, Israel, and Egypt, led to the latter closing the canal for several months. Secondly, the Egypt-Israeli war led to the Israeli occupation of parts of the Suez Canal, which prompted Egypt to block the Suez Canal for an entire eight years, until both states reached an agreement in 1975 and Egypt reopened the Suez Canal.46 A peace treaty was reached in 197947 and subsequently Egypt did not attempt to block the canal again. Two core reasons provide reasoning why a closure of the Suez Canal by Egypt is improbable to happen in the future.
Firstly, Egypt is unlikely to give up the significant revenues from passage fees as well as the military and economic aid48 it receives from the United States, which in case of a closure of the canal is expected to come to a halt.
Secondly, unlike at the beginning of the eight-year blockade, the relations between Israel and Egypt are now stable, and the two states even cooperate militarily.49
Despite being unlikely, a closure of the Suez Canal by Egypt could happen, or as James Homes from the U.S. Naval War College puts it: “Never say never”.50,51 Considering the facts that Egypt closed the Suez Canal twice in the last 65 years, Egypt’s dependence on revenues from the canal and foreign aid as well as Egypt’s relatively calm relations with Israel, the yearly chance of Egypt closing the Suez Canal will be estimated at 2% 52.
3.2.5 Costs of Egypt Closing the Suez Canal
In order to estimate the costs for the world economy that would result out of a closure of the Suez Canal by Egypt, one must make several assumptions. Firstly, it is necessary to estimate how long a closure of the canal would last. In a second step, the costs of the blockade will be calculated using two research findings.
The importance of the Suez Canal is rising; between 2011 and 2019, the amount of cargo that passed it increased by 49%53 to 1 billion tons. Especially Northern and Western Europe’s as well as Southeast Asian imports and exports flow via the Suez Canal, which makes both of these regions dependent on the canal remaining open. The Americas import about one fifth of the European quantity, therefore relying less on a free flow of goods through the Suez Canal.54
In 1967, the Suez Canal was blocked by Egypt for eight consecutive years. This thesis argues that a closure of the Suez Canal would nowadays be much more short-lived, as Egypt’s revenues from the Suez Canal have risen; in April 2021, the Suez Canal Authority even managed to generate a record-high monthly income.55 Moreover, a closure of the canal would provoke a reaction by the regions that most depend on it, mainly Southeast Asia and Western Europe, who would be likely to impose economic sanctions and thereby pressure Egypt into opening the Suez Canal. A second resort could even be the clearance of the canal by military means, as it happened during the 1956 Suez Crisis when French and British troops intervened in order to reverse the nationalisation of the Suez Canal that was previously decided by the former Egyptian president Gamal Abdel Nasser.56
With the aforehand mentioned situation of Egyptian, European, and Southeast Asian dependence on the Suez Canal in mind, one can expect an eventual closure of the canal by Egypt to be relatively short. Starting in 1967, the canal was blocked for eight years. Now, due to increased dependence by several parties, this thesis suggests that an eventual blockade in the future would last approximately one year. Having estimated the duration for which the canal would be closed, one can now estimate the costs of a one-year blockade of the Suez Canal.
Several studies are helpful in estimating the costs of a closed Suez Canal. First of all, by using various country pairs and measuring the effect which the 1967-1975 blockade of the Suez Canal had on the amount of bilateral trade, economist James Feyrer from Dartmouth College found that a 10% increase in ocean trade distance comes with a 5% increase in trade.57 Now it is important to calculate the average increase of the distance that vessels would need to navigate if the Suez Canal were blocked. Feyrer calculated the average increase in shipping distance by country.58 By weighting these average sea distance increases per country with their respective share of global GDP59, I was able to calculate that, on average, a closure of the Suez Canal comes with an increase in sea distance of 4.44%.60 As Feyrer suggests, this increase in average sea distance will result in a decrease of international trade by 2.22%. Feyrer further estimates that “every dollar of increased trade raises income by about 25 cents” By implication, one can conclude that a decrease in international trade by 1% comes with a reduction of global GDP by 0.25%.61 Applied to the scenario of a closed Suez Canal reducing international trade by 2.2%, this will lead to a decrease in global GDP of 0.55% which, in 2020 equalled 465,9 bn. USD.62,63 In an optimistic, respectively pessimistic setting, the costs for the blockade can be expected to be 20% higher respectively lower. Optimistically, the costs would therefore amount to 372 bn. USD, whilst they would be 559 bn. USD in a pessimistic scenario.
[...]
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34 Terrorist incidents include active terror attacks as well as passive attacks such as in the form of Improvised Explosive Devices (IEDs)
35 Author’s own calculation. 1 / 8 = 0.125
36 Author’s own calculation. 0.125 * 0.1 = 0.0125
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45 Average of 42 and 70 bn. USD
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49 Jonathan Marcus, ‘Israel’s “air Strikes” in Sinai Show Its Growing Arab Ties’, BBC News, 5 February 2018.
50 The Diplomat, ‘James R. Holmes’, accessed 4 July 2021.
51 James R. Holmes, ‘Never Say Never: What If Egypt Did Close the Suez Canal?’, accessed 4 July 2021.
52 Assuming that an Egyptian Suez Canal closure occurs 32.5 years (65/2), the yearly chance is 3.1%. Current stable circumstances reduce this risk by an estimated 30%, thereby reducing the risk of occurrence to 2%.
53 Suez Canal Authority, ‘Navigation Statistics, “Yearly Statistics”’, 2019.
54 Suez Canal Authority. ‘Navigation Statistics, “Yearly Cargo Ton by Region (Cont.)”’, 2019.
55 Mohammad Hanafi, ‘Despite Blockage Crisis, Suez Canal Achieves Record Revenues’, Al-Monitor, 10 June 2021.
56 HISTORY, ‘Suez Crisis’, HISTORY, 9 November 2009.
57 James Feyrer, ‘The 1967-75 Suez Canal Closure: Lessons for Trade and the Trade-Income Link’, VoxEU, 23 December 2009.
58 James Feyrer, ‘Distance, Trade, and Income - The 1967 to 1975 Closing of the Suez Canal as a Natural Experiment’ (National Bureau of Economic Research, December 2009).
59 The Global Economy, ‘Percent of World GDP by Country, around the World’, 2018.
60 For this analysis, data of the top 63 state contributors to worldwide GDP was used. The data of states whose share of global GDP of 2018 was less than 0.1% were not being considered. Furthermore, it was assumed that countries engage in international trade proportionately to their share of global GDP. In total, 73.76% of global GDP is represented within the sample. Countries whose data is not included in Feyrer’s analysis were omitted, these are 25 out of 63 (39.7%). For details, see the table in the appendix.
61 Assuming the income-approach in calculating GDP.
62 World Bank, ‘GDP (Current US$)’, 2020.
63 84’700 bn. * 0.0055
- Quote paper
- Nathanael Schabrun (Author), 2021, Risks of the World Economy's Dependence on the Suez Canal and the Strait of Hormuz, Munich, GRIN Verlag, https://www.grin.com/document/1119138
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