| Panama | Aug 04, 2022
How are the world’s most strategic maritime chokepoints faring in light of new developments in 2022?
Maritime chokepoints are a crucial topic due to the number of factors that have been influencing maritime activities in 2022, the most important of which is the return to normalcy after two years of lockdowns and border closures.
In 2022, strains placed on global business by the pandemic was almost lifted for the first time in two years, leading to a rise in shipping worldwide.
Another development was the Russian invasion of Ukraine, which shut down several trade routes to and from ports across the Black Sea, while putting extra pressure on alternative routes.
Predictably, there has been a jump in the cost of maritime trade due to the overburdening of port infrastructure and the shipping fleet.
The cost of dry bulk transportation increased by 60% between February and May 2022, according to the United Nations Conference on Trade and Development.
Increasing oil prices in 2022 are not helping the situation, but tankers are traveling far and wide to deliver crude oil to refineries.
Adding to the atmosphere of uncertainty is the seemingly never-ending friction between the US and Iran in the Gulf and and the remote but dangerous possibility of China beginning a military “operation” in Taiwan.
Maritime chokepoints are the most vulnerable nodes in the global shipping network and the first place where signs of trouble manifest themselves.
Here is a brief update on the most critical shipping chokepoints in the world in the second half of 2022.
The Panama Canal
The world’s most important man-made waterway saw a huge traffic of passing ships this summer.
At times, over 100 cargo ships and tankers were in the queue to enter the canal—something which had not happened in years.
Some have attributed this to the increased number of ships from Asia heading for the East Coast ports of the US. The expansion project of the Panama Canal, which costed over USD5 billion in 2016, has made the water passage more attractive for Asian mega-container ships.
The traffic jam has eased toward mid-summer, but the anti-inflation protests which began in Panama in July 2022 pose another threat to the continued operation of this critical chokepoint.
The Suez Canal
Linking the Mediterranean to the Red Sea, the Suez Canal has been busy since the beginning of 2022.
The Suez Canal Authority (SCA) announced the fiscal year 2021-2022 as its most profitable year in history.
The transit fees paid by passing merchant ships amounted to over USD7 billion by the end of the fiscal year, showing a robust 20% growth year-on-year.
This critical waterway which handles some 10% of the world’s maritime trade will hopefully continue its operations without a hitch, as several maintenance projects were completed this summer.
Many of the trade routes passing through the Bosphorus are affected by the Russian invasion of Ukraine.
The Bosphorus links the Black Sea to the Mediterranean.
Shipping through the Strait of Bosphorus took a nosedive this year with the specter of war over the Black Sea.
Turkey found itself in a difficult situation when, in keeping with international laws, it had to stop Russia’s Black Sea fleet crossing the strait for military purposes.
Despite closing the Bosphorus to Russian warships, Ankara has avoided a confrontation with Moscow, maintaining its neutrality in the conflict.
The fate of the Bosphorus is inevitably tied to the ongoing war in Ukraine, which is in progress a few kilometers away.
A welcome development happened on August 1, 2022, when Ukraine’s first shipment of grain since the beginning of the hostilities passed through the Bosphorus en route to Lebanon.
The Strait of Malacca
The narrow body of water between the Malay Peninsula and the Island of Sumatra continues to be the route of choice for many ships and tankers traveling between the Indian Ocean and the Pacific.
The strait has thankfully not seen a surge in piracy in 2021-2022, despite economic disparities in the region caused by pandemic-related lockdowns.
Something even more sinister, however, is threatening the safety of transportation in the strait.
China’s naval activities near the Malaccan Strait have been on the rise, and senior US generals have repeatedly expressed their concerns about what China is up to in the region.
As of August 2022, China continues to ramp up its military presence at the nearby South China Sea, prompting worries about a potential military “operation” in Taiwan similar to that of Russia in Ukraine.
The strategic waterway, however, continues operations as usual, with a quarter of all oil tankers in the world passing through it on their way.
In the end…
Three out of four strategic chokepoints for international maritime trade are currently under threat because of military aggression or domestic protests, which shows just how troubled our times are.
However, sea transportation in none of these strategic water passages has come to a standstill so far—and hopefully will not!