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Egypt-Suez Canal





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The French played a significant role in the building of the Suez Canal, which links the Red Sea and the Mediterranean. French engineer Ferdinand de Lesseps designed and supervised the construction of the project. In addition, the French, who, like other European powers, sought to shorten the trip between Europe and Asia, funded most of the construction. Completion of the 160- kilometer long waterway, however, took ten years of excruciating and poorly compensated labor by Egyptian workers, who were drafted at the rate of 20,000 every ten months from the ranks of the peasantry.

The canal was opened to navigation in November 1869 under a concession to Britain and France scheduled to expire in 1968. Although the French were the force behind the project, Britain stood to gain the most because of its extensive possessions in Asia. In the 1870s it "bought" the shares of the Egyptian khedive. The canal remained under the control of both powers until Nasser nationalized it in 1956; it has since been operated by the Suez Canal Authority (see Abbas Hilmi, 1848-54 and Said, 1854-63 , ch. 1).

The canal was closed to navigation twice in the contemporary period. The first closure was brief, coming after the tripartite British-French-Israeli invasion of Egypt in 1956, an invasion primarily motivated by the nationalization of the waterway. The canal was reopened in 1957. The second closure occurred after the June 1967 War with Israel and lasted until 1975, when Egypt and Israel signed the second disengagement accord.

The tonnage passing through the canal increased consistently except for a short interruption after 1985-86, when the Iran-Iraq War hampered oil production and navigation in the Persian Gulf. Between 1976 and 1983, net tonnage rose from 187 to 378, increasing at the rate of 10.5 percent annually. Traffic in the canal depended partially on oil shipments. Tanker tonnage made up more than 40 percent of total traffic in 1976, and about 36 percent of the total in 1983.

Revenues increased throughout the period, growing at an annual rate of 8.7 percent between 1979 and 1985. They were expected to reach US$1.3 billion in 1988. The canal thus emerged as the third major source of foreign exchange after workers' remittances and oil exports. Receipts from the canal continued to climb, in spite of the reduction in tonnage, partly because the canal toll was raised from 2 to 6.5 percent annually between 1981 and 1985. Also, because the toll was evaluated in SDRs of the IMF, revenues did not suffer in terms of the United States dollar value in 1986 although the dollar depreciated that year against the SDR.

Growth in canal revenues was likely to remain modest. The canal's size limited the volume of traffic that could pass through it, and if tolls were raised beyond certain limits, tankers and other vessels could opt for other routes. Economists accordingly estimated that future receipts would perhaps grow in line with world trade at the rate of 4 to 5 percent annually.

Data as of December 1990











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