Can Israel's Eilat Become an Alternative to Suez Canal?

A vessel stuck in the Suez Canal disrupted the global supply chain. Israel has long talked about offering shippers a Red Sea-Mediterranean rail link, but neither the economics nor the politics look promising

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Suez Canal (left) and Gulf of Eilat (right) as seen from space
Suez Canal (left) and Gulf of Eilat (right) as seen from spaceCredit: NASA's Johnson Space Center

Back in 2012, the cabinet voted to construct a railway line to Eilat that would provide passenger and freight service. But subsequent studies showed that the project isn’t economically feasible and it seems that it’s been shelved.

But this week, the railway started looking like a good idea. A giant cargo vessel wedged between two banks of the Suez Canal brought traffic there to a standstill for close to a week, threatening to disrupt the global supply chain.

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Suddenly, Eilat looked like a possible alternative for goods being shipped between Asia and Europe. Instead of turning left at the north end of the Red Sea to pass through the canal, oceangoing vessels could veer right up the Gulf of Eilat, unload their cargo to adjacent trains for shipment to Ashdod or Haifa ports, and then reload it onto ships bound for Europe.

Shippers would save Suez Canal fees that can come to hundreds of thousands of dollars and Israel would collect a fee for moving goods between its ports.

The problem is that it doesn’t pass the feasibility test. A 2013 study by Prof. Eran Feitelson and the late Prof. Moshe Givoni found that Eilat Port couldn’t be expanded enough to justify the cost of a railway line without creating major environmental damage. The line would also cost Israel politically.

Yoram Sebbah, president of the Israel Chamber of Shipping, rejects the idea of the railway line out of hand. Israel’s ports are already operating at capacity and can’t accept more vessels without creating long lines. Today, Eilat serves mainly as a port of entry for imported vehicles from East Asia for the Israeli market. “Eilat Port isn’t designed to provide serious services,” he told TheMarker.

“I can’t imagine goods being diverted to Eilat Port. Overland transportation would be needed to Ashdod or Haifa, and that’s very expensive. The ships passing through the Suez Canal are huge. If they do divert any activity to Eilat, it will only be in emergencies and in very small quantities,” he said.

In any event, Sebbah said, the crisis created by the Ever Given when it got stuck in the Suez Canal has underscored the need to invest in widening the canal and Egypt will follow through or risk losing a major source of income. Eilat will never be able to compete for Suez business.

In the 1950s and 60s, when Egypt closed the Suez Canal to Israeli traffic, Eilat played an important strategic role. But expanding it into a major global port doesn’t make sense.

“It’s not economically feasible – Eilat doesn’t have the room for it,” said Dr. Oded Eran, a senior researcher at Israel’s Institute for National Security Studies and a former ambassador to Jordan and the European Union. The entire shoreline between the adjacent Jordanian port of Aqaba and Taba in Egypt is just 13.5 kilometers, he noted.

“We have to decide what we prefer to do from economic and other perspectives, such as quality of environment and pollution. When you examine the alternatives, further development of the port looks less worthwhile,” Eran said. “Also, the blocking of the canal is an event that happens once in dozens of years.”

Even if Eilat Port was expanded, a railway wouldn’t be able to handle the cargo required to make it work. “If you consider the quantity of goods that were stuck in Suez over those six days and compare them to what could be moved over a long railway line between Eilat and Ashkelon-Ashdod, you’d discover that the railway would be able to handle no more than a few hundred containers – not the 20,000 that one giant cargo ship holds,” he said.

Eran also raised the political dimension of Israel’s creating competition to the Suez Canal. “The Egyptians see any alternative to the Suez Canal as damaging their national economic interests,” he said.

Despite the experts’ skepticism, Eilat has begun in a small way to act as a Suez detour, which has aroused the ire of green groups and some government ministries. Last October, the Israeli state-owned Europe Asia Pipeline Co. signed an agreement with an Israeli-Emirati company to carry oil from the Gulf by sea to Eilat. From there, it will be piped across Israel to Ashkelon and then transported by sea to Europe.

Eran said that objections from environmental organizations shouldn’t be dismissed. “If you want to turn the pipeline into a Suez Canal competitor – in other words using it to transport large amounts of oil, similar to what the canal serves – that will require us to expand the pipeline’s capacity,” he said, pointing to the environmental damage.

Nor should Israel ignore the political dimensions. “I assume that the Egyptians will see the pipeline as competition for the canal and it’s not a given that oil and gas producers in the Gulf will want to get into a dispute with Egypt over this,” warned Eran.

Maya Jacobs, CEO of the environmental group Zalul, is skeptical about Israel’s taking advantage of the Suez crisis to expand Eilat Port. She looks at the talk as an opportunity to step up opposition to the EAPC-Emirates deal.

“The Gulf of Eilat and the coral reefs there are a global asset. The city should serve as a model for environmental innovation,” Jacobs asserted. “The agreement with EAPC needs to be stopped. It’s completely illogical. Even the ministries that aren’t directly involved with it are opposed to the agreement. The Egyptians also don’t like it. If the agreement is realized, Eilat will become an oil town – they’re stealing our future.”

Yoni Sapir, chairman of another green organization called Homeland Guards, added that a pipeline would benefit Israel relatively little. “If we’re talking about revenues of $700 million to $800 million for the company, maybe 10% of that will end up as state revenues,” he said.

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