Article: Logistics Chokepoints of Global Trade

4 Maritime Bottlenecks

4 Maritime Bottlenecks

Jun. 15, 2019

by Babak Babali

Aside from the Strait of Hormuz, which other maritime bottlenecks are critical to the global economy?

Explosions that damaged two tankers south of the Strait of Hormuz on June 13, 2019 come a month after four vessels were targeted in "sabotage attacks" off the coast of the United Arab Emirates. ISNA/Handout via REUTERS

On June 13, two oil tankers operated by Japanese and Norwegian companies were assaulted and damaged in the Gulf of Oman, just after navigating through the Strait of Hormuz.

The US has pointed the finger of blame at Iran, as Iran had previously warned that all shipping activities through the chokepoint would come to a standstill if the US imposes new sanctions on the country.

However, Iranian authorities deny any involvement in the matter.

The attacks come a month after a similar set of assaults targeting four oil tankers near the Strait of Hormuz on May 12, which raises concern regarding the security of the strategic maritime route.

It is estimated that 20% of the world's crude oil—coming from Saudi Arabia and other Gulf states—needs to pass through the Strait of Hormuz, and that any destabilizing activity in the region could throw the world's energy security into uncertainty. Here we briefly review the geopolitical importance of not only the Strait of Hormuz, but other key bottlenecks of global maritime transportation.

Strait of Hormuz

The strait connects the Gulf to the Sea of Oman, and its basin countries include Iran to the north and the UAE and Oman to the south.

However, Saudi Arabia, Qatar, Bahrain, Kuwait, and Iraq are also among the direct beneficiaries of the waterway.

The Strait of Hormuz is the only access point from the Gulf—where a large portion of the world's hydrocarbon reserves are located—to international waters.

The strait has been the scene of hostilities in the past, including stand-offs between the US Navy and Iranian forces in 2007, and tanker wars between Iran and Iraq in 1984.

Given the existing tension between Iran and the US as well as the GCC countries—which are all US allies—it is always feared that in extreme scenarios, Iran may attempt to shut down the strategic chokepoint, which may consequently lead to American intervention and potential military confrontation.

Suez Canal

The Suez Canal is yet another critical waterway for international maritime transit, and has been the scene of hostilities in the past.

The man-made canal, in its modern form, was officially inaugurated in 1869 and owned until 1956 jointly by Britain and France.

The Suez Canal's nationalization by Gamal Abdel Nasser resulted in the Suez Crisis in 1956, and later on, the canal was blocked by Egypt between 1967 and 1975 due to Arab-Israeli conflict.

It is impossible to exaggerate the canal's importance for the global economy. By linking the Red Sea and the Mediterranean, the canal considerably shortens the sea routes between Asia and both sides of the North Atlantic.

Up to 50 merchant ships and warships pass through the canal every day.

Panama Canal

The Suez Canal and the Panama Canal are often compared to each other, though the latter is a far more spectacular feat of engineering than the former.

The Panama Canal employs an elaborate series of water locks and artificial lakes to adapt to the rugged terrain.
Construction work began in 1881 by the French, who later gave it up citing difficulties with both the land and the climate. The US took over in 1904 and inaugurated the Panama Canal exactly a decade later.

The waterway links the Atlantic and Pacific oceans, saving ships the bother of navigating around South America.

The US's interest in the project ultimately led to Panama's separation from Colombia in 1903 and the canal's handover to Panama between 1977 and 1999 was not free of friction.

The invasion of Panama by the US between 1989 and 1990 marked the peak of unrest in the region and led to the canal's second closure in its history.

Since then the Panama Canal has not been the scene of any conflict.

Strait of Malacca

An 890km long natural waterway separating the Malay Peninsula and Sumatra, the Strait of Malacca is a strategic shipping route for the global economy.

It is estimated that up to 25% of the world's crude oil—mainly coming from the Gulf—passes through the Strait of Malacca before reaching Asia.

Over 250 ships pass through the Strait of Malacca each day, making it one of the most jammed waterways in the world. The strait is a major shipping lane connecting some of Asia's biggest economies, including China, Japan, South Korea, and India.

The strait's security is of particular importance for China, as up to 80% of its required hydrocarbons come through the Strait of Malacca.

Though piracy was, from time to time, a nuisance in the Strait of Malacca, few or no attacks have been reported after 2000, making the strait by-and-large safe.