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Egypt

Investigation begins into how ship got stuck on Suez Canal

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Formal investigations into how the giant container ship Ever Given ran aground in the Suez Canal, shutting down shipping in the major global waterway for almost a week, begin on Wednesday, a canal official told Reuters, writes Yusri Mohamed.

Suez Canal Authority (SCA) Chairman Osama Rabie has suggested weather conditions, including high winds, and human error could have played a role in the grounding on 23 March.

The investigation will include examining the seaworthiness of the ship and its captain’s actions to help determine the causes, Rabie advisor Captain Sayed Sheasha told Reuters.

The Ever Given’s captain was committed to fully complying with the probe, which will start on Wednesday, Sheasha said.

The six-day blockage threw global supply chains into disarray after the 400-metre-long (430-yard) ship became jammed diagonally across a southern section of the canal, the shortest shipping route between Europe and Asia.

The incident is expected to give rise to flurry of insurance claims, with Lloyd’s of London expecting a “large loss”, possibly amounting to $100 million or more, according to its chairman.

The Japanese owner of the Ever Given said it had not received any claims or lawsuits over the blockage.

Investigators had already boarded the ship, which is in a lake that separates two sections of the canal, on Tuesday, a canal source and a shipping agent said.

The SCA has scheduled accelerated shipping convoys to clear a backlog of more than 400 ships that built up at either end of the canal and along its course after the Ever Given became stranded.

It has said it hopes the queues can be cleared by the end of the week.

Egypt

Huge ship blocking Suez Canal partially refloated, more work needed

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A massive container ship blocking Egypt’s Suez Canal for nearly a week has been partially refloated, the Suez Canal Authority (SCA) said on Monday (29 March), raising hopes the busy waterway will soon be reopened for a huge backlog of ships, write Yusri Mohamed, Nadine Awadalla and Aidan Lewis.

Huge ship partially refloated, more work needed

The 400-metre (430-yard) long Ever Given became jammed diagonally across a southern section of the canal in high winds early last Tuesday (23 March), halting shipping traffic on the shortest shipping route between Europe and Asia.

After further dredging and excavation over the weekend, rescue workers from the SCA and a team from Dutch firm Smit Salvage worked to free the ship using tug boats in the early hours of Monday, two marine and shipping sources said.

The SCA said Ever Given has been straightened in the canal and further tugging operations would resume once the tide rises later on Monday. Marine traffic through the canal will resume once the ship is directed to the lakes area, a wider section of the canal, it added.

Graphic: Ever Given afloat again, being secured by authorities

Reuters Graphic

BIG BACKLOG

At least 369 vessels were waiting to transit the canal, including dozens of container ships, bulk carriers, oil tankers and liquefied natural gas (LNG) or liquefied petroleum gas (LPG) vessels, SCA Chairman Osama Rabie said.

“It is very possible that by today noon shipping activity would resume, god willing,” Rabie told Egyptian state television on Monday. “We will not waste one second.”

Completing refloat of Suez Canal ship won't be easy: Boskalis CEOVideo appears to show Ever Given's stern swung towards canal bank: social media

The SCA has said it can accelerate convoys through the canal once the Ever Given is freed.

“We have movement, which is good news. But I wouldn’t say it’s a piece of cake now,” Peter Berdowski, the CEO of Smit Salvage’s parent company Boskalis, told Dutch public radio.

High pressure water would be injected under the bow of the ship to remove sand and clay but if that was unsuccessful, containers might have to be removed from the ship, which would cause a considerable delay, he said.

A source involved in the salvage operation told Reuters on Monday they were re-ballasting the ship and expect that with a favorable tide, cargo will not need to be removed.

“The good news is she’s moved. But she is still stuck in the mud. A second large anchor-handling tug will arrive this morning. Hopefully they will be able to pull her free.”

The ship’s technical manager Bernhard Schulte Shipmanagement (BSM) said operations to ensure the vessel is completely refloated were still ongoing.

Graphic: Ever Given contained vessel refloated, but massive ship jam remains at Suez Canal -

Reuters Graphic

CHEERS ERUPT, CRUDE PRICES FALL

Video posted on social media appeared to show the ship had swung around, opening space in the canal. Other footage, which could not be immediately verified by Reuters, included cheering and ships’ horns sounding in celebration.

Crude oil prices fell after news of progress in refloating the ship, with Brent crude down by $1 per barrel to $63.67. Shares of Taiwan-listed Evergreen Marine Corp - the vessel’s lessor - rose 3.3%.

About 15% of world shipping traffic transits the Suez Canal, which is a key source of foreign currency revenue for Egypt. The current stoppage is costing the canal $14-$15 million a day.Slideshow ( 3 images )

Shipping rates for oil product tankers nearly doubled after the ship became stranded, and the blockage has disrupted global supply chains, threatening costly delays for companies already dealing with COVID-19 restrictions.

Some shippers rerouted their cargoes around the Cape of Good Hope, adding about two weeks to journeys and extra fuel costs.

A note from A.P. Moeller Maersk seen by Reuters said it had so far redirected 15 vessels around the Cape after calculating that the journey would be equal to the current delay of sailing to Suez and queuing.

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Egypt

EU launches a new agenda for the Mediterranean

EU Reporter Correspondent

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Today (9 February) Olivér Várhelyi, European Commissioner for Neighbourhood presented a relaunch of the EU’s strategic partnership with the EU’s “Southern Neighbourhood” called “a  new agenda for the Mediterranean”. 

The new agenda includes a dedicated Economic and Investment Plan to spur the long-term socio-economic recovery in the Southern neighbourhood. Under the new EU's Neighbourhood, Development and International Cooperation Instrument (NDICI), up to €7 billion for the period 2021-2027 would be allocated to its implementation, which aims to mobilise up to €30 billion in private and public investment in the region in the next decade.

Commissioner for Neighbourhood and Enlargement, Olivér Várhelyi said: “With the renewed partnership with the Southern Neighbourhood we are presenting a new beginning in our relations with our Southern partners. It shows that Europe wants to contribute directly to a long-term vision of prosperity and stability of the region, especially in the social and economic recovery from the COVID-19 crisis. In close dialogue with our partners, we have identified a number of priority sectors, from creating growth and jobs, investing in human capital or good governance.

“We consider migration to be a common challenge, where we are ready to work together to fight irregular migration and smugglers together”

“This Communication sends a crucial message about the importance we attach to our Southern Neighbourhood,” said High Representative/Vice-President Josep Borrell, “A strengthened Mediterranean partnership remains a strategic imperative for the European Union. We are determined to work together with our Southern Partners on a new Agenda that will focus on people, especially women and youth, and help them meet their hopes for the future, enjoy their rights and build a peaceful, secure, more democratic, greener, prosperous and inclusive Southern neighbourhood.”

The new agenda focuses on five policy areas:

Human development, good governance and the rule of law: Renew the shared commitment to democracy, the rule of law, human rights and accountable governance

Resilience, prosperity and digital transition: Support resilient, inclusive, sustainable and connected economies that create opportunities for all, especially women and youth

Peace and security: Provide support to countries to address security challenges and find solutions to ongoing conflicts

Migration and mobility: Jointly address the challenges of forced displacement and irregular migration and facilitate safe and legal pathways for migration and mobility

Green transition: climate resilience, energy, and environment: Taking advantage of the potential of a low-carbon future, protect the region's natural resources and generate green growth.

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Economy

Contract dispute in #Egypt underscores perils for investors

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Over the past few weeks, Egypt’s economy has been plunged into disarray, erasing some of the nation’s recent economic success. Now, Egypt and other countries throughout North Africa are looking hard at foreign investment, as they struggle to find a path forward amidst an unprecedented oil crisis and a collapse in tourism.

In Egypt’s case, its pitch to foreign investors is straightforward enough, highlighting its recently-enacted economic reform measures, its reductions in public debt, as well as the rise of the Egyptian pound despite the ongoing coronavirus crisis. It is making this case against the backdrop of a 5% growth rate in the past two years.

But as promising as that pitch may sound to investors, it will not do Egypt any good if the country fails to uphold the rule of law – and its contractual obligations particularly. Anything less would send a troubling message to investors about the willingness of Egypt’s government to honour its commitments. And that would be a dangerous step because investors need assurance that the Egyptian government will pay its bills.

Regrettably, though, Egypt is undermining that trust. Consider the Egyptian government’s handling of its contract with the Damietta International Port Company (DIPCO). In February, the International Court of Arbitration issued an award in favor of DIPCO and against the Damietta Port Authority (DPA)—an affiliate of the Egyptian Ministry of Transport—ordering the DPA to pay DIPCO a total of $427 million, including $120 million in lost profits, as a result of the DPA’s decision to illegally terminate a 40-year concession agreement with DIPCO to build and operate a sea port in Damietta, Egypt.

The expansion of the Damietta Port would have created long-term benefits for Egypt and its developing economy. In addition, as shareholders in the project, the DPA and Egypt stood to reap a huge financial windfall in expanded customs fees from the new port facility. Instead, the International Court of Arbitration panel found that the DPA breached the concession agreement, acted in an arbitrary manner and illegally violated the terms of the contract.

This latest arbitration award against Egypt illustrates an existing pattern of inviting foreign investment only to undermine the projects being backed.  Indeed, the DIPCO award is just one of a long string of arbitration disputes and awards against Egypt since the Arab Spring in 2011.

The city of Damietta itself, for example, has been the site of several other international arbitrations involving the natural gas industry. In a recent case, Unión Fenosa Gas, SA (UFG)—one of the three largest gas operators in Spain—had a $2 billion decision rendered against Egypt by an ICSID tribunal.

To be fair, Egypt is not alone in getting into disputes with investors. For example, Kuwait is the subject of separate arbitration involving Egyptian real estate investors. That case stems from the cancellation of a contract for the Sharq Heritage Village project by Kuwait's Ministry of Finance.

The Sharq Heritage Village was planned as a major urban-development project, including the restoration of historic buildings, as well as the operation of a hotel, restaurants and several commercial buildings in Kuwait City. But the contract wound up being cancelled, raising legal issues similar to those in the Damietta case.

And across the globe, countries with emerging economies are reneging on contracts or defaulting on debt obligations with foreign creditors with troubling frequency. Moody’s reports that between 1998 and 2015, at least 16 sovereign bond issuers defaulted, with Greece, Ecuador, Jamaica, Belize and Argentina defaulting twice during that same time period alone.

In March, Ecuador conceded that it wouldn’t be able to make a $200M payment on three of its sovereign bonds—a development which is likely to become more commonplace as the COVID-19 pandemic ravages economies in the developing world.

But the situation in Egypt stands out because the number of contract violations and disputes in North Africa’s biggest economy has been discernibly higher than in other countries. In turn, it needs to remedy this situation quickly.

The importance of foreign investment to rebuild from this pandemic is going to be great in Egypt, particularly at a time when international banks have indicated that they may increase the interest rate to reflect the higher risk of default without an effective remedy to recover damages.

But the prospect of such investment is put at risk as a result of the country’s troubling lack of transparency with foreign investors, cavalier attitude towards contracts and apparent disregard for the rule of law.

 

 

 

 

 

 

 

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