Hidden in Plain Sight: The Strategic Significance and Vulnerabilities of Maritime Chokepoints
Shree Priya Thakur | 19 April 2024
Summary
Maritime chokepoints are narrow passageways crucial for global commerce and security, funnelling the bulk of global trade. Their strategic locations, lack of practical alternatives, and the land-lockedness of certain states make them focal points of weaponised interdependency.
The Suez Canal, Strait of Hormuz, Panama Canal, and Strait of Malacca demonstrate the unique challenges of these regions that led to extended transit times, surge in logistical costs, and impact on the resilience of global supply chains.
Security challenges like the attack on ships in the Red Sea, blockage by the Ever Given Ship, and over-reliance on certain routes for energy security can result in a significant threat that smaller island nation-states can inflict upon major economies.
Of all the world’s oceans, a few narrow passages play an outsized role in global commerce and security. Maritime chokepoints are strategic, narrow passages connecting two larger areas, elemental to international trade. These passages are not only conduits of the world's maritime traffic, including the transportation of oil, natural gas, and goods; but they also double as strategic chokepoints. Their strategic importance makes them vulnerable to structural risks, geopolitical tensions, and piracy, making them a potent manifestation of weaponised interdependency. Four maritime chokepoints, in particular, highlight the vulnerability of global trade networks.
Suez Canal: A Critical Artery of Global Trade
The Suez Canal, connecting the Mediterranean Sea to the Red Sea, is one of the world’s most crucial maritime passages, handling 12% of global maritime commerce. It functions as one of the shortest routes between the East and the West, acting as a bridge between Asia and Europe to facilitate the transportation of consumer goods. Its importance was highlighted by the recent attack on ships in the Red Sea in late 2023, which forced approximately 470 container vehicles to reroute around the Cape of Good Hope. This alternative passage extended the turnaround time by almost 17 days, leading to an escalation in shipping rates that affected textile (Levi Strauss & Co.) and automotive industries(Volvo & Tesla). Further, the incident of Ever Given, a 400m ship blocking the canal for six days, highlighted the canal’s criticality. While rerouting away from the Suez increased logistical costs, it facilitated a commensurate increase in shipping rates from Shanghai to LA by 133%, and from Shanghai to Rotterdam by 158%. Such events spark debates on the resilience of international trade networks and the need for diversifying trade routes.
Strait of Hormuz: The Oil Gateway
Heralded as the world’s most critical oil transit chokepoints, the Strait of Hormuz is a 167 km passageway which sustains 20-30% of global oil trade. Every year, 20% of the world’s LNG supply (80 million metric tons) travels through Hormuz, connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. While most choke points can be circumnavigated, there are no alternatives to Hormuz for states like Qatar, Bahrain, and Kuwait. Any disruption in this narrow passage can sharply impact global oil and gas prices. Historically, the closure in 1973 and 1979 led to a 300% surge in oil prices.
Panama Canal: Climate Change Challenges
The case of the Panama Canal is particularly unique as it faces greater environmental challenges than political ones. The Panama Canal links the Atlantic and Pacific Oceans, preventing the alternative reroute around Cape Horn (southern part of South America). This artificially constructed passageway accounts for 5% of the global container trade. The El Niño phenomenon recently led to an alarmingly low water level in the Gatún Lake, which supplies water to the canal. Earlier, the canal could carry approximately 38 ships daily, whereas now its capacity has been reduced to 30 ships/day. A McKinsey report warns of severe repercussions in the event of droughts, wherein the alternative adjustments could increase the transport costs by $1.1 billion/annum and turnaround time by another four days.
Strait of Malacca: A Geopolitical Flashpoint
The bridge between the Indian & Pacific Oceans, the Strait of Malacca, is a lifeline to several economies. It accounts for 30% of global trade and almost 80% of China’s energy imports. Its narrowest point of only 2.7 km makes it a hotspot for piracy, theft, and potential blockades. Disrupts here could disproportionately impact the automotive industry, especially electric vehicles, where China plays a significant role in the supply chain. Other sectors centring their manufacturing in East Asia, include the retail and textile industry, and the pharmaceutical sector, which sources Active Pharmaceutical Ingredients (APIs) from China. China relies on the deliveries expedited by the Strait of Malacca. Stemming from its importance, it is a major hotspot for geopolitical tensions, as reflected in the South China Sea dispute between China and members of ASEAN. The alternative routes (such as the Lombok Strait) increase costs by 20%, rendering several companies incompetent in the face of competitive pricing. The fragility of the Strait of Malacca subsumes within it more than “half of the world’s shipping fleet”, as stated by the U.S. Energy Information Administration.
Maritime chokepoints integrate geopolitical risks and economic vulnerabilities into narrow waterways. While these straits form critical global trade networks, preventing this interconnectedness from being weaponised is necessary. Diversifying shipping routes to unveil more transport choices (such as through combination freights), leveraging Artificial Intelligence to achieve synchronisation of vessels and trajectory, and establishing contingency planning through geo-risk assessment and forecasting are essential steps forward.
Forecast
Short-term: The Red Sea Blockage highlights the likelihood of non-state actors occupying strategic passageways. Ongoing territorial disputes can likely result in increased militarisation. States are likely to ensure their naval presence around the shores of important waterways, including in Djibouti.
Long-term: States will be highly likely to explore the possibility of maritime Special Economic Zones, regions where economic laws are relaxed and competitive infrastructure facilities are provided to incentivize businesses. As the multipolarity and interdependency increase, countries reliant on maritime chokepoints will likely invest in alternative routes to circumvent geopolitical and environmental risks.
