The Strategic Space of International Transportation

Author: Dr. Jean-Paul Rodrigue

1. The Geostrategy of International Transportation

"Whosoever commands the sea commands trade; whosoever commands the trade of the world commands the riches of the world, and consequently the world itself". Sir Walter Raleigh (c1610).

The basic features of international transportation are constrained by its geography, which involves geopolitical considerations. In the past many wars have been started to gain control over trade routes, to gain control over mineral or energy deposits, to gain colonial control over untapped regions, or to set trade routes via existing ocean ports. This has been particularly important for maritime nations seeking to support the existing trade, expand it and secure its circulation. Through history, passages were subject to many conflicts that generally aimed to assure a control of a strategic location. International transport infrastructures, such as ports, airports and canals were also subject to geopolitical considerations as they can provide access to strategic resources or key markets. The geostrategy of international transportation can be considered from five perspectives:

• Conquest. Transport technology was initially a mean to acquire and conquer oceans, territories and resources. European powers were the first to improve significantly the maritime technology in terms of speed and offense/defense capacity and were thus able to establish maritime trading roads and colonies all over the world. The railroad was also a mean to achieve territorial conquest, notably in North America (nation building) and in Africa (colonialism).
• Competition. International transportation is a mean to compete on the global economy. Traditionally, through cabotage regulations, many nations reserved the right to carry national passengers and freight to national transport companies. Although these regulations are still prevalent for air (air freedoms) and maritime transportation (Jones Act), competition has become a prevalent force in shaping modern transportation systems. For several countries, the development of their international transport system has favored exports and transport related activities such as shipbuilding, trade and insurance. Several newly established maritime nations in East Asia, such as South Korea, Taiwan and now China have grown using this strategy. A new form of international transport competition is related to the usage of flags of convenience where a maritime company can significantly reduce its costs by using the fiscal advantages of another country.
• Jurisdiction. All sovereign nations have the jurisdiction over their territories, including internal water bodies such as lakes and rivers if they do not act as a boundary with another nation. Any international transportation entering, exiting or going through this jurisdiction is subject to national regulations. This jurisdiction also applies to the maritime segment. The United Nations Convention on the Law of the Sea Territorial waters in 1982 formally defined different levels of jurisdiction a nation can have over its adjacent sea. The territorial sea, a buffer of 12 nautical miles (22 km) from the coast is considered as sovereign territory, both for the above airspace and the seabed. Foreign ships are however allowed passage, but by doing so being subject to national regulations. This jurisdiction is partially extended to the Exclusive Economic Zone (EEZ) over which a state has rights to the exploration and use of marine resources (e.g. fishing, oil extraction). By convention, it extents to 200 nautical miles (370 km) but a state cannot prevent free passage through the EEZ.
• Cooperation. Although international transportation mostly involves competition, common interests obviously favor agreements over different aspects involving access to infrastructures or setting standards. By 1792, most countries along the Rhine agreed to free navigation. Canada and the United States started from 1871 a long process of negotiation and common management of the St. Lawrence river that would eventually lead to the development of the St. Lawrence Seaway in 1954. International trade within Europe was enhanced by the adoption of a standard over rail gauges (1.435 meters). International air transportation is subject to regulations over security, access to specific gateways (air freedoms) and prices. Furthermore, the emergence of economic blocs such as the European Union and the North American Free Trade Agreement leans on common rules about transport standards and prices. The emergence of continental landbridges, such as the Northern East-West freight corridor represents a new and complex form of collaboration.
• Control. The control of strategic places is also an important part of international transportation mainly to reduce vulnerability to disruptions. As the global economy becomes more interdependent, economies are becoming vulnerable to supplies of raw materials, energy and food. For instance, as the United States became more dependent on external supplies of oil, its foreign policy shifted at keeping an eye on strategic locations in oil trade, dominantly in the Middle East.

Maritime transportation is the dominant purveyor of international freight distribution and evolves over a global maritime space. This space has its own constrains such as the profile of continental masses and the imperatives it creates. International maritime routes are thus forced to pass through specific locations corresponding to passages, capes and straits. These routes are generally located between major industrial zones such as Western Europe, North America and East Asia (notably Japan and China). Also, major routes involve flows of raw materials, namely minerals, some food products (coffee, cocoa and sugar), and most importantly petroleum, from developing countries to developed countries. The most important strategic passages tend to be shallow and narrow, impairing navigation. Many of them are next to politically unstable or conflictual countries, increasing the risk of compromising their access and use.

2. The Panama Canal

The Panama Canal joins the Atlantic and Pacific oceans across the Isthmus of Panama. Running from Cristobal on Limon Bay, an arm of the Caribbean Sea, to Balboa, on the Gulf of Panama, the canal is slightly more than 64 km long. Its operational characteristics involve a depth of 12.5 meters (39.5 feet), a width of 32 meters (106 feet) and a length of 294 meters (965 feet). Its construction ranks as one of the greatest engineering works of all time as it prevents a long detour around South America, thus supporting the maritime flows of world trade. The Panama Canal is of strategic importance to the United States as it enables to link the East and the West coast more quickly, saving about 13,000 km (from 21,000 km to 8,000 km) for a maritime journey. The Panama Canal is composed of three main elements, the Gatun Locks (Atlantic Ocean access) the Gaillard Cut (continental divide) and the Miraflores Locks (Pacific Ocean access).

Interest in a short route from the Atlantic to the Pacific began with the exploration of Central America in the early 16th century. In 1534, the Spanish surveyed the Panama region in order to construct a canal, but the project never came into existence due to acute technical constraints. Overland routes were used instead, initially as paths, but in 1855 the completion of Panama Railway provided a faster and higher capacity link. The United States became interested in the canal building when gold was discovered in California in 1848. A possible path through Nicaragua was also surveyed. However, in 1878 the French Geographical Society of Paris signed a treaty with Columbia (then the owner of the Province of Panama) for the construction of a canal. From 1879 to 1899, the French Canal Company undertook construction but the project failed due mainly to financial problems and the technical difficulties of trying to build a sea level canal.

It is only in the twentieth century that the project would become a reality. Under the rule of Columbia the United States was unsuccessful in attempts to plan a canal. However, in 1903 the Panamanian revolution, supported by the United States, resulted in the independence of Panama. In that same year, the United States and the new state of Panama signed the Hay-Bunau-Varilla Treaty by which the United States guaranteed the independence of Panama and secured a perpetual lease on a 16-km (10 miles) strip for the canal, over which the United States had complete sovereignty. Panama in return got a monetary compensation of $10 million and an inflation-indexed annual compensation.

The Panama Canal was constructed between 1904 and 1916 by American engineers and has a total length of 82 km at a cost of $387 million (including the $10 million compensation to Panama and $40 million to purchase the previous project from the French Canal Company). In 1906, President Theodore Roosevelt, mainly credited for the achievement, put the construction of the canal under the authority of the U.S. Army Corps of Engineers. A total of 70,000 people worked on the project and about 5,600 died in the process. The work was completed in 1914 and involved excavating 143 million cubic meters of earth and sanitizing the entire canal area, which was infested with mosquitoes that spread yellow fever and malaria.

In its 91 years of existence (as of 2005), more than 815,000 vessels transited the canal, carrying 6 billion tons of cargo. About 13,000 ships transit the canal every year, with an average of 35 ships per day. However, the canal has the capacity to handle 50 ships per day and the average transit time is about 16.5 hours if the passage has been reserved in advance and about 35 hours if no reservations have been made. Grains account for about 43% of the traffic transited, while containers and petroleum products account for 11% and 10% of the transited traffic respectively, with a oil traffic of about 0.6 Mb/d. The Panama Canal Authority collects tolls on all ships crossing the canal. A loaded ship pays about $2.57 per net ton and the average toll is about $45,000. The introduction of super-tankers at the beginning of the 1950s forced the reconsideration of its strategic importance as economies of scale in petroleum shipping are limited by the size of the canal. It is synonymous of a standard in maritime transport related to capacity, the Panamax standard, which equals to 65,000 deadweight tons, a draft of 12 meters and a capacity of 4,800 TEUs.

The canal handles about 5% of the global seaborne trade and about 12% of the American international seaborne trade. Under the control of the United States until 1979, its administration was entrusted to the State of Panama by the Panama Canal Treaty of 1977. In December 1999, the canal became again property of Panama under the jurisdiction of the Panama Canal Authority. The same year, the Hong Kong port operator, Hutchison-Whampoa, took control of the operation of port terminals on both the Atlantic (Port of Colon) and Pacific (Port of Panama City) sides of the Canal with a 25 years lease. This raised concerns within the American government as it was perceived that the control of the canal was falling into foreign interests. The company also became involved in the improvement of the rail line between the two ports to handle the growing containerized traffic. This rail line is important as it offers an alternative to the size limitations of the canal. The same rationale applies to oil circulation with the trans-panama pipeline that resumed its operations in 2003, but the additional capacity this pipeline conveys is only about 1 Mb/d.

Because of the capacity limits of the current canal, many shipping companies have changed the configuration of their routes. This became increasingly apparent as a growing share of the global containership fleet was at a size beyond its capacity, which came to be known as "post-panamax" containerships. The increasing usage of those ships along the Pacific Asia / Suez canal / Mediterranean route as well as the development of the North American rail landbrige have created a substantial competition to the canal as an intermediate location in global maritime shipping. In addition usage of the Canal facilities continues to grow and estimates indicate that the Panama Canal may reach capacity by 2009-12. There are thus plans to increase its capacity and accommodate larger containerships, a decision which was finally reached in 2006 by the Panamanian government. The expansion project involves building a new set of locks on both the Atlantic and Pacific sides of the canal to support a depth of 60 feet, a width of 190 feet and a length of 1,400 feet, which would accommodate ships up to 14,000 TEU. The dredging of access channels as well as the widening of several sections of the existing canal will also be required. This would allow Aframax and Suezmax vessels to pass through the canal, thus permitting new opportunities for container services such as the re-emergence of round-the-world services. It is expected that the new infrastructures will become online by 2014 or 2015.

3. The Suez Canal

The Suez Canal is an artificial waterway of about 190 km in length running across the Isthmus of Suez in northeastern Egypt which connects the Mediterranean Sea with the Gulf of Suez, an arm of the Red Sea. It has no locks, because the Mediterranean Sea and the Gulf of Suez have roughly the same water level and thus is the world's longest canal without locks. It acts as a shortcut for ships between both European and American ports and ports located in southern Asia, eastern Africa, and Oceania. Because of obvious geographical considerations, the maritime route from Europe to the Indian and Pacific oceans must contour the Cape of Good Hope at the southernmost point of the African continent. The minimum width of the channel is 60 meters and ships of 18 meters (62 feet) draft can make the transit. The canal can accommodate ships as large as 220,000 deadweight tons fully loaded.

The first canal between the Nile River delta and the Red Sea was excavated about the 13th century BC. Its purpose was to expand trade between the Mediterranean and the Middle East, which became significant by 100 AD. During the next 1,000 years, the canal was neglected, but at different times Egyptian and Roman rulers modified it. Restoration efforts were abandoned in the 8th century AD as the Roman Empire collapsed and Mediterranean trade dropped. Transshipping the goods across the Isthmus was judged more profitable than supporting the maintenance of a canal. This situation endured until the nineteen century when powerful maritime interests saw the need to make a Mediterranean - Red Sea connection a reality again.

The Suez Canal was constructed between 1859 and 1869 by French and Egyptians interests with a cost of about 100 million dollars. The opening of the Suez Canal in 1869 brought forward a new era of European influence in Pacific Asia. The journey from Asia to Europe was considerably reduced by saving 6,500 km from the circum African route. In 1874, Britain bought the shares of the Suez Canal Company and became its sole owner. According to the Convention of Constantinople signed in 1888, the canal was to be open to vessels of all nations in time of peace or in war. However, Great Britain claimed the need to control the area to maintain its maritime power and colonial interests (namely in South Asia). In 1936, it acquired the right to maintain defense forces along the Suez Canal, which turned out to be of strategic importance during World War II to uphold Asia-Europe supply routes for the Allies.

The second half of the 20th century saw renewed geopolitical instability in the region with the end of colonialism and the emergence of Middle Eastern nationalisms. In 1954 Egypt and Great Britain signed an agreement that superseded the 1936 treaty and provided for the gradual withdrawal of all British troops from the zone. All the British troops were gone by June 1956 as the canal was nationalized by Egypt. This triggered problems with Israel, as Israeli ships were not permitted to cross the canal. This threat was also extended to France and Britain, the former owners of the canal because they refused to help finance the Aswan High Dam project, as initially promised. Israel, France and Britain thus invaded Egypt in 1956. Egypt responded by sinking ships in the canal effectively closing it between 1956 and 1957. An agreement about the usage of the canal was then reached.

However, geopolitical problems persisted as tensions between Israel and Arab nations increased in the 1960s. The Six Days War between Israel and Egypt and the invasion of the Sinai Peninsula by Israel caused the closure of the Suez Canal between 1967 and 1975. This event significantly destabilized international transportation and favored the development of ever larger tankers to use the long circum Africa route. The canal was finally re-opened in 1975 as Egypt agreed to let Israel use it. Significant improvements were made between 1976 and 1980, mainly the widening of the canal to accommodate very large crude carriers (VLCC) of about 200,000 tons supporting the oil trade between Europe and the Middle East. The minimum width of the channel is 60 meters and ships of up to 16 meters (58 feet) of draft can make the transit. This means that ultra large crude carriers (ULCC; tankers of more than 300,000 tons) cannot pass through the Canal when fully loaded. A common practice is to unload parts of Mediterranean bound ships and use Sumed pipeline. With additional deepening and widening projects, the depth of the canal has reached 22.5 meters in 2001.

The canal has the capacity to accommodate up to 25,000 ships per year (about 78 per day), but handles about 20,000, on average 55 ships per day, which roughly account for 15% of the global maritime trade. Since the canal can only handle unidirectional traffic, crossings must be organized into convoys of about 10-15 ships. Three convoys per day, two southbound and one northbound, are organized. The transit time is about 10 hours northbound and 12 hours southbound. Missing a convoy involves supplementary delays to the point that many maritime companies (particularly containers) will skip a port call to insure that their ships arrive on time at the Suez Canal to be part of a specific convoy. A rail line also runs parallel to the canal.

Controlling access to the Suez Canal is the Strait of Bab el-Mandab, a strategic link between the Indian Ocean and the Red Sea. It has between 48 and 80 km of width, but navigation is limited to two 3 km wide channels for inbound and outbound traffic. The sizable amount of tanker traffic makes navigation difficult along the narrow channels. A closing of this strait would have serious consequences, forcing a detour around the Cape of Good Hope and in the process demanding additional tanker space.

4. The Strait of Malacca

The Strait of Malacca is one of the most important strategic passages of the World because it supports the bulk of the maritime trade between Europe and Pacific Asia, which accounts for 50,000 ships per year. About 30% of the world’s trade and 80% of Japan’s, South Korea’s and Taiwan’s imports of petroleum transits through the strait, which involved approximately 11.7 Mb/d in 2004. It is the main passage between the Pacific and the Indian oceans with the strait of Sunda (Indonesia) being the closest alternative. It measures about 800 km in length, has a width between 50 and 320 km (2.5 km at its narrowest point) and a minimal channel depth of 23 meters (about 70 feet). It represents the longest strait in the world used for international navigation and can be transited in about 20 hours.

Traditionally, the Strait was an important passage point between the Chinese and the Indian worlds and was controlled at different points in time by Javanese and Malaysian kingdoms. From the 14th century, the region came under the control of Arab merchants who established several fortified trading towns, Malacca being the most important commercial center in Southeast Asia. Again, the control of the trade route shifted as the era of European expansion began in the 16th century. In 1511, Malacca fell to the Portuguese and this event marked the beginning of European control over the Strait.

In 1867, England took control of the passage with Singapore as a main harbor and other important centers such as Malacca and Penang, forming the Strait Settlements. This control lasted until the Second World War and the independence of Malaysia in 1957. As the Pacific trade increased considerably after the Second World War, so did the importance of the passage. Singapore, located at the southern end of the Strait of Malacca is one of the most important ports in the world and a major oil refining center.

One of the main problems about the Strait of Malacca is that at some points it requires dredging, since it is barely deep enough to accommodate ships of about 300,000 deadweight tons. The Strait being between Malaysia, Indonesia and Singapore, an agreement is difficult to reach about how the dredging costs should be shared and how fees for its usage should be levied. Political stability and piracy along are also major issues for the safety of maritime circulation, especially on the Indonesian side with the province of Aceh in a state a civil unrest.

The Strait of Malacca ends up in the South China Sea, another extremely important shipping lane and a region subject to contention since oil and natural gas resources are present. The Spartly and Paracel groups of islands are claimed in whole or in part by China, Vietnam, Malaysia, Indonesia, Brunei and the Philippines. The region has proven oil reserves estimated at about 7.0 Bb with oil production accounting for 2.5 Mb/d. With the substantial economic growth taking place in the region large flows of oil, liquefied natural gas and other raw materials (iron ore, coal) are transiting towards East Asia. About 25% of the global shipping fleet transits through the region each year, underlining the importance of the South China Sea as an extension of the Malacca chokepoint.

5. Other Important Passages

• The Strait of Hormuz. Forms a strategic link between the oil fields of the Persian Gulf, the Gulf of Oman and the Indian Ocean. It has a width between 48 and 80 km, but navigation is limited to two 3 km wide channels, each exclusively used for inbound or outbound traffic. Circulation in and out of the Persian Gulf is thus highly constrained, namely because the sizable amount of tanker traffic makes navigation difficult along the narrow channels. In addition, islands that insure the control of the strait are contested by Iran and the United Arab Emirates. The security of the strait has been often compromised. Between 1984 and 1987 a “Tanker War” took place between Iran and Iraq, where each belligerent (Iran-Iraq War of 1980-1988) began firing on tankers, even neutrals, bound for their respective ports. Shipping in the Persian Gulf dropped by 25%, forcing the intervention of the United States to secure the oil shipping lanes. About 88% of all the petroleum exported from the Persian Gulf transits through the Strait of Hormuz, bound to Asia, Western Europe and the United States. Its importance in global oil circulation cannot be overstated. For instance, 75% of all Japanese oil imports transit through the strait. There are thus very few alternative outlets to oil exports if the traffic of about 14 million barrels per day going through Hormuz was compromised.
• The Strait of Bab el-Mandab. Controlling access to the Suez Canal is the Strait of Bab el-Mandab, a strategic link between the Indian Ocean and the Red Sea. It has between 48 and 80 km of width, but navigation is limited to two 3 km wide channels for inbound and outbound traffic. The sizable amount of tanker traffic makes navigation difficult along the narrow channels. A closing of this strait would have serious consequences, forcing a detour around the Cape of Good Hope and in the process demanding additional tanker space.
• Gibraltar. As a peninsula between the Atlantic and the Mediterranean oceans, Gibraltar represents an obligatory passage point between these two oceans. The strait is about 64 km long and varies in width from 13 to 39 km. Under British control since its conquest from Spain in 1704 and its formal cession by the treaty of Utrecht (1713). During the Second World War, Gibraltar blocked the access to the Atlantic to the Italian and German fleets of the Mediterranean, which represented a major strategic stronghold.
• Bosporus. The Passage of Bosporus has a length of 30 km by of width of only 1 km at its narrowest point linking the Black Sea to the Mediterranean Ocean. Its access was the object of two conflicts, the War of Crimea (1854) and the battle of the Dardanelles (Gallipoli, 1915). The passage was fortified by Turkey after the Convention of Montreux in 1936 which recognized its control of Bosporus but granted free passage in peace time to any commercial vessel without inspection. With the passage of the Dardanelles, Bosporus forms the only link between the Black Sea and the Mediterranean Ocean. In the current context, Bosporus represents a passage of growing strategic importance, notably after the fall of the Soviet Union. The Caspian Sea has vast oil reserves and a large amount of it must transit trough the Black Sea and Bosporus to reach external markets, namely around the Mediterranean Ocean. Although pipelines offer an alternative, the cost differentials are clearly advantaging the use of maritime transportation. For instance, the cost of moving oil along the Baku – Ceyhan pipeline ranges between $1 and $2 per barrel while shipping oil by tankers through the Black Sea costs 20 cents per barrel. About 50,000 ships, including 5,500 tankers, are transiting through the passage each year, which is getting close to capacity. Oil transiting through the Bosporus has growth substantially in recent years with the exploitation of oil fields around the Caspian Sea and about 2.8 Mb/d were transiting through the passage in 2003. The future growth of petroleum circulation through Bosporus is thus highly problematic, notably the risk of collisions and oil spills in the midst of Istanbul. In response, the Turkish government forbade in 2002 the use of the passage during the night by large tankers.
• The Strait of Magellan. Discovered in 1520 by the Portuguese explorer Ferdinand Magellan. Separates South America to Tierra del Fuego. It is 530 km long and 4 to 24 km of width. Held secret during more than one century to assure the supremacy of Portugal and Spain for the Asian trade of spices and silk. With the construction of the Panama Canal in 1916 and later on the setting up of the North American transcontinental bridge in the 1980s, this passage has lost some of its strategic importance.
• The Cape Good Hope. Extreme tip of Africa discovered by the Portuguese at the end of the fifteenth century. It separates the Atlantic and Indian oceans. It took its name because of the fact that it offered a maritime passage towards India and Asia, thus the hope of a fortune for the one who passed it. Vasco de Gamma got around it in 1497 and was the first European to reach India by sea. Since the widening of the Suez Canal in the 1970s, the Cape of Good Hope has lost some of its strategic importance but still remain an important passage.