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Industrial Port coming up in the Suez

Construction is set to get underway on a Russian industrial port in the Suez Canal following a deal reportedly agreed with Egypt, according to media in both countries.

Russia’s Trade Minister Denis Manturoc has announced that Egyptian President Abdel Fattah al-Sisi had allocated Moscow an 80 hectare area in Port Said that could later be expanded to an industrial zone of some 2,000 hectares (20 sq. km). Construction is set to start next year. Moscow initially agreed with Cairo on the construction of a Russian industrial zone in Egypt in 2014.

However, negotiations on a deal ground to a halt after a Russian airliner was downed over the Sinai in October 2015 in a suspected terrorist attack. Russia has said that the new industrial zone will provide 77,000 jobs, with $4.6 billion expected to be invested in the construction of the area by 2035. Russian firms are set to design and construct the facility and will be allocated tax breaks.

Cairo is currently in the midst of modernising the Suez Canal with plans to develop additional Chinese, and Italian industrial parks previously on the table.

Two years ago Egypt announced the modernization of the Suez Canal, which is one of the world’s major transportation routes. Originally, it was planned to complete the work in three years, but later it was reduced to 12 months. The new Suez Canal will include a vast range of services, as well as several industrial parks, including Russian, Chinese and Italian.

The Suez Canal is being used by fewer ships than usual as the trade route has become more expensive than the roundabout way via the Cape of Good Hope. The region may face a new wave of destabilization as Egypt has invested billions in the expansion of the channel and is now facing serious losses, a German newspaper wrote.

It took almost 20 years to build the Suez Canal which has played a key role in international trade connecting the Red Sea and the Mediterranean for many decades. As the ships in the past century have become bigger and the trade volumes have increased, the Egyptian government has decided to expand the channel due to its importance.

The Egyptian authorities have expected the traffic to grow from 50 ships a day to 97, but low oil prices have led to a decrease in traffic. Fewer and fewer ships go through the Suez Canal, and now take the original route through the Cape of Good Hope at the southern tip of Africa instead, DWN wrote.

According to the German newspaper Deutsche Wirtschafts Nachrichten (DWN), over 100 ships had chosen the second route between October 2015 and December 2015, although the way is about 6,500 kilometers longer than the one which passes through the Suez Canal.

Low oil prices have affected the price of the marine diesel, which declined from $400 to $150 per ton. Taking into account the fact that drive-through costs in the Suez Canal reach about $350,000 per ship passage, the roundabout via the cape currently proves cheaper than the way through the Suez Canal.