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Operating the Suez Canal

While the canal was small it required 49 hours for a passage through; the total length being 87 nautical miles (104 miles); by deepening and the removal of curves the time of transit has been reduced to 17 hours in 1911 for vessels furnished with searchlights; without these, ships cannot travel by night. On account of the wind currents in the eastern seas sailing vessel rarely use the canal, but make the trip around South Africa.

The total expenditure in construction up to 1912 has been the sum of $127,000,000; not one-third of the cost of the canal at Panama, although work on the former has been going on for 43 years. Suez was an easy task compared with Panama, which de Lesseps clearly recognized.

As far back as 1871 it had been intimated to the British Government that M. Lesseps and the company were willing to sell the canal to the maritime powers for 12,000,000 , and the payment of the shareholders' dividend, and it was stated that M. Thiers and M. Kemusat had approved of the proposal. It was even suggested that the Italian Government should propose a conference of representatives of the Powers to consider the question of the purchase of the canal, and arrange for freeing commerce from the dues by compensating the company. The Porte, however, objected ab initio to the formation of an international administration on Ottoman territory, and nothing came of the proposal. More than once, however, Lord Derby stated that his opinion was favorable to a transfer of the property of the canal to an international commission, on such terms that all the Governments should have its advantages on condition of equality.

The negotiations upon this particular were quite suspended when Her Majesty's Government were informed, in November 1875, that the Khedive being absolutely in want of 3,000,000 to 4,000,000, was prepared to sell his interest in the Suez Canal to certain French capitalists. Immediately on the receipt of such intelligence Her Majesty's Government telegraphed to Alexandria that they would be ready to purchase the shares on satisfactory terms, and so in a few days an agreement was entered into to the effect that for 100,000,000 francs or 4,000,000, Her Majesty's Government would purchase the shares belonging to the Khedive, that Messrs. Rothschild would pay on the account of the British Goverment 1,000,000 on December 1, on the landing of the shares, and 3,000,000 in December and January. In due time the shares arrived. The amount was paid and the British Government became a large holder of shares in the Suez Canal.

Beginning in 1870, with 486 vessels, having a tonnage of 436,000 tons, there was a steady increase until 1875, when it had reached nearly fifteen hundred ships and over 2,000,000 tons. After a few years of quiescence came a second period of rapid increase, from 1880 to 1883, in the latter year the figures of 3300 ships and 5,800,00a tons being reached. Since then there has been a slowly increasing tonnage, reaching the maximum figure of 8,700,000 tons in 1891, but falling off somewhat since that year. In 1896 the figures were 3409 ships with a tonnage of 8,594,307.

The importance of these figures may be made clearer by recalling the fact that the foreign tonnage entering at the port of New York has rarely exceeded 7,500,000 tons in any year, and that the foreign tonnage for all the ports of the United States, both entering and clearing, is about 35,000,00a tons. That is, the traffic through the Suez Canal, measured by volume, is almost a quarter of the total foreign trade of the United States. But if measured by value, the importance of the canal traffic is seen to be much greater. The imports and exports of India, via the Suez Canal, were equal in value to $360,000,000, which is nearly one-quarter of the value of the foreign trade of the United States. As the Indian trade constitutes rather less than one-half the total traffic of the Suez Canal, the value of the whole of that traffic must be not far from a half of the foreign trade of the United States.

Sailing vessels did not find it advantageous to use the canal, and continued on the old route around the Cape of Good Hope. But the canal, by making practicable the use of steamships in the oriental trade, brought about an even greater revolution in the character of the shipping business to the East. By the Cape route coaling places were few, and the facilities for coaling expensive; the consequence was that the enormous expense of coaling at these out-of-the-way places, with the loss of freight room from the extra space needed for coal, made the use of steamers unprofitable. But by the canal route a steamer could coal at Gibraltar, Malta, Port Said and Aden, where coal could be furnished at moderate rates; while the space saved from coal could be used to carry a larger cargo. Accordingly, a large number of new iron screw steamers were soon constructed for the trade with the East, and replaced a large percentage of the sailing vessels.

One change in the shipping industry that was expected from the construction of the Suez Canal has not been realized. It was predicted that the geographical advantage given to the Mediterranean ports by the new route. would soon enable them to regain the position they had held in the Middle Ages as the carriers of eastern produce to the markets of Europe. In England it was felt that the canal would seriously threaten British maritime supremacy. But the results have been otherwise. It was only in England that the capital was at hand to build the large screw steamers which alone could profitably use the canal: and from the start three-fourths of the vessels using the canal were British.

Shorter voyages and punctuality of arrivals made it possible for local dealers both in England and on the Continent to order directly from the East, and the change in the method of this business rendered useless to a large extent the immense warehouses at London, Liverpool and other English ports. The termination of the warehouse distribution system of England was one of the forces which led to the disappearance of the class of merchant princes, who had hitherto monopolized the Eastern trade. The system of bank discounts and commercial loans, by enabling men of ability to secure capital at low rates of interest, also played a large part in driving out of trade the old houses doing business on their own capital, from which they expected large rates of interest.

But as long as large stocks of goods had to be kept on hand for six months or more at a time, it was difficult for the new business man to get the credit that would enable him to supplant the old established houses in the Eastern trade. When, however, the new route by the Suez Canal by bringing steamers into use enabled a cargo to be sold and delivered within a month after the order had been sent, the advantages on the side of the man working with borrowed capital were decisive. The confusion and disturbances in the business world were so great that the London Economist said that they constituted one great general cause for the universal, commercial and industrial depression and disturbance of 1873.

When the canal was opened in 1869 most of the trade east was conducted by sailing ships, which made the traffic through the canal exceedingly light for the first few years. From 1870 to 1911 the net tonnage inn creased from 436,000 to 18,324,000 tons; and the passenger increase was from 26,000 to 275,000. The business was rapidly increasing on account of expansion of trade between Europe and America and the far east. In 1906 the number of soldiers going through from Russia to war against Japan increased this line of business; that year the passenger traffic numbered 352,000.

The original cost was $95,000,000, and for the canal by 1914 slightly in excess of $100,000,000. The number of vessels passing through the canal in 1870 was 486, with a gross tonnage of 654,915 tons; in 1875, 1,494 vessels, gross tonnage, 2,940,708 tons; in 1880, 2,026 vessels, gross tonnage, 4,344,519 tons; in 1890, 3,389 vessels, gross tonnage, 9,749,129 tons; in 1895, 3,434 vessels, gross tonnage, 11,833,637 tons; and in 1900, 3,441 vessels, with a gross tonnage of 13,699,237 tons. The revenue of the canal is apparently large in proportion to its cost, the Statesman's Yearbook for 1901 giving the net profits of 1899. at 54,153,660 francs, and the total amount distributed among the shareholders 51,538,028 francs, or about 10 per cent of the estimated cost of $100,000,000.

The number of shares did not remain stationary at 400,000 shares, for in 1910 there were in circulation 379,421 shares, 20,579 shares having been redeemed. On December 31, 1911, there were in circulation 378,231 shares of stock. In 1875 Great Britain purchased the shares held by the Khedive, but this did not give England control of the company; the French people held the majority of stock; but England secured her control over the canal by securing political power over Egypt. The company paid dividends of 4.7 per cent for the first 5 years; these gradually increased until 1911 when they amounted to 33 per cent. The investment is so profitable that the shares are rarely offered for sale; they at times have sold at 1,000 per cent premium. Great Britain as a nation holds nearly one-half of the stock; and these large profits are not secured by allowing any vessels to escape paying tolls. The owners are not donating tolls to coastwise trade, but are operating the canal strictly for profits, and it is evident that they are abundantly successful.

The neutrality of the Suez Canal was provided for in a treaty entered into at Constantinople on October 29, 1888, to which Austria, Egypt, France, Germany, Great Britain, Italy, the Netherlands, Russia, Spain, and Turkey were the signatory parties. The treaty provides that the maritime canal at Suez shall be open at all times, in peace as well as in war, to commercial vessels and to ships of war of all nations, without distinction of flag. The signatory parties agree to place no obstructions upon the use of the canal, either in peace or war; they also agree that the canal shall not be made the subject of a hostile blockade; that military obstructions shall not be placed in the waters of the canal or those of its feeders, and that no acts of hostility shall be permitted in the canal itself or within a marine league of its terminal ports.

Britain considered the canal vital to the maintenance of its maritime power and colonial interests. Therefore, the provisions of the Anglo-Egyptian Treaty of 1936 allowed Britain to maintain a defensive force along the Suez Canal Zone. However, Egyptian nationalists demanded repeatedly that Britain evacuate the Suez Canal Zone, and in 1954 the two countries signed a seven-year agreement that superseded the 1936 treaty and provided for the gradual withdrawal of all British troops from the zone.

After July 1952 Revolution, president Gamal Abd El Naser publicized the canal in announcement in (26 July, 1956) making the management of the canal a 100% Egyptian, which enraged the major countries leading to the Triad assault on Egypt in (29 October, 1956) which caused to the closing of the canal and it was reopened in (March 1957). 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 canal remained under the control of two powers until Nasser nationalized it in 1956; it has since been operated by the Suez Canal Authority. The second closure occurred after the June 1967 War with Israel and lasted until 1975, when Egypt and Israel signed the second disengagement accord.




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Page last modified: 05-08-2014 18:12:24 ZULU