Piracy jeopardising Suez revenues

BRAZEN PIRACY: Traffic through the Suez Canal is being impacted by piracy off the coast off the coast of Somalia. (Getty Images)

Increasingly brazen piracy off the coast of Somalia is jeopardising traffic heading to and from the Suez Canal, a strategic shipping route and key earner for Egypt's economy.

After more than 90 hijackings this year, the final straw came on Nov. 15 when pirates hijacked a Saudi supertanker with 25 crew and a cargo worth $100 million.

They are now demanding a ransom of $25 million.

Some shipping companies have announced they will reroute shipping via South Africa's Cape of Good Hope instead of through the Suez Canal.

Egypt counts on the waterway as an important source of revenue, but emerged empty-handed after hosting an emergency meeting on Friday for Arab Red Sea states to discuss the threat.

"It is very important for Egypt to secure [the canal]. It's one of the most important sources of national income. It's very serious for Egypt," said Imad Gad, an analyst with Al-Ahram Centre for Strategic and Political Studies.

Friday's Cairo meeting, convened at the request of Egypt and Yemen, came up short on specifics about how the threat should be handled.

"Arab countries don't know how to face the situation. Their only option is to work with the real power," Gad said, referring to US, Russian and NATO ships that have been sent to help safeguard shipping in the region.

The Red Sea states said in a final statement at the end of the meeting that they welcomed the support of other countries, as long their sovereignty and territorial waters were respected.

They blamed political turmoil in Somalia for the piracy phenomenon, saying a political solution is vital if the increasingly brazen attacks are to end.

"They must give more attention to Somalia," said Gad. "If they want to diplomatically act against security in Somalia, the source of the problem, it will take time, a minimum of six months to one year."

Such a relatively long-term fix, even if it were to be successful, would not meet Egypt's short-term needs, he added.

Roughly 18,000 ships pass every year through the 190-kilometre waterway, constructed in 1869 to link the Mediterranean Sea with the Indian Ocean. This traffic accounts for 7.5 percent of world commerce annually.

Every day, earnings from shipping top up Egypt's coffers with $15 million, and projected revenue for 2008 is $5 billion.

The canal has become an important passageway for goods from China and India, with its traffic considered an important indicator of global economic health. The piracy threat also worries Egypt because of the world financial crisis.

In October the canal recorded its lowest monthly revenue in six months, canal official Mahmud Abdel Wahab told newswire AFP. "It had nothing to do with piracy," he said.

But with the fall in oil prices, the cost of taking an alternate route to avoid potential pirate attack is beginning to make sense to shippers.

However the waterway can still count on revenue from increased military traffic to counter the pirate threat, which may help to offset some losses.

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