China’s Investment in Suez Canal at Risk Due to Attacks on Red Sea

China called for an end to attacks on civilian ships in the Red Sea, which have greatly escalated the conflict between “Hamas” and Israel, and posed a significant threat to Beijing’s commercial interests along the Suez Canal.

Reuters reported that the Yemeni Houthi militias are challenging the ability of the world’s largest trading nation to defend billions of dollars of strategic investments in Egypt.

Since President Abdel Fattah El-Sisi came to power in 2014, China has increased its investment and trade activities along the Egyptian Suez Canal, through which a large amount of goods from the Asian giant flow westward.

Investment and trade

Beijing encouraged state-owned companies to invest billions of dollars in the logistics, transportation, and energy sectors in Egypt, according to data from the American Enterprise Institute, and provided loans worth $3.1 billion, according to the World Bank.

In the months leading up to the October 7th attack by “Hamas” on Israel alone, companies from China and Hong Kong pledged at least $20 billion in various projects along the strategic waterway in Egypt.

Reuters reported that the attacks that obstruct commercial shipping in the Red Sea and the Suez Canal could discourage Chinese investors who have allocated large sums of money to develop the waterway to benefit from their safe passage.

The state-owned giant shipping company, “Costco”, which joined on January 7th, invested a billion dollars in March last year in the infrastructure of ports in Egypt, according to the American Projects Institute. This investment came as part of the company’s collaboration with “Maersk”, “Hapag Lloyd”, “Evergreen”, and other major shipping lines to suspend services to Israel.

The company “Costco” joined “CK Hutchison Holdings”, a prominent Hong Kong-based conglomerate. This company had announced in March plans to allocate an additional $700 million for the development of a new container terminal in Ain Sokhna Port on the Red Sea and in “B100”, a new container terminal in Alexandria Port on the Mediterranean Sea.

In the same month, and at the exhibition to showcase China’s broader business interests in Egypt as a bridge between Asian markets, the Mediterranean Sea, and European markets, “Xinxing Ductile Iron Pipes” company has developed well-known plans to invest two billion dollars in iron and steel factories, including in Ain Sokhna.

In October, the Egyptian Suez Canal Economic Zone signed a deal worth $6.75 billion with the state-owned company “China Energy” to develop green ammonia and green hydrogen projects in the Suez Industrial Area, in addition to an $8 billion agreement with the United Energy Group listed in Hong Kong to establish a potassium chloride production site.

In addition to the main “Belt and Road” initiative launched by President Xi Jinping, which includes Egypt, Yemen, and Iran as members, China consistently affirms that it will not interfere in the internal affairs of other sovereign states, prompting analysts to question how to respond when problems arise among members of the “Belt and Road” initiative.

The dilemma arises specifically when this issue primarily works to undermine the stated goal of the “One Belt, One Road” initiative, which is to connect Asia with Europe by creating a series of investment and trade corridors that stretch across the continent.

US officials believe that China plays a key role in restraining Iran and have pressured Beijing to use its influence over Tehran to help prevent the spread of the conflict between “Hamas” and Israel. When “Kosko” was still visiting Israeli ports, despite its competitors redirecting their trips from Asia to Europe via the Cape of Good Hope in South Africa, some analysts wondered whether Chinese influence over Iran played a role or not. Iranian oil comprises about 10 percent of China’s crude imports.

Bloomberg reported on Thursday that at least five ships are passing through the Red Sea, indicating “all Chinese crew” or words to that effect in a space on a telecommunications network that usually contains the ship’s destination to try to avoid attack.