27 March, 2021 Update: Iran-China, Myanmar, Suez Canal

It’s becoming an active weekend around the world with hotspots flaring and some geopolitical and economic situations requiring close attention. We’ll start off in Tehran, then move on to Myanmar and wrap up in the Suez Canal.

Iran and China officially signed the long-anticipated 25-year strategic cooperation agreement on Saturday. The Comprehensive Strategic Partnership, or CSP as it is referred to, has been discussed for years and speculation has been rampant. The agreement is centered on economic activity, according to a wide variety of third-party sources and analysts. However, there’s reason to suspect that military and intelligence cooperation also makes up a sizeable portion of the agreement. Neither country has revealed any concrete details on the agreement, leaving the terms a mystery to practically everyone outside of government circles in Tehran and Beijing. The confidentiality surrounding the CSP will no doubt only fuel further conjecture. Yet the one fact that cannot be disputed is that the CSP will bring a new era of increased Chinese influence in the Persian Gulf region. As well as perhaps emboldening Iran at a time when its relationship with the United States continues to decline.

Saturday has been a bloody day in Myanmar. Troops and police have reportedly killed 114 protesters around the country as government suppression of the protests has escalated to a new level. The heavy hand comes on Armed Forces Day, an annual holiday celebrated in Myanmar. Apparently, the military’s preoccupation with the protests in the cities has motivated the Karen National Union (No Joke, the Karens have organized 😊) to seize a military base in the Kayin state. The KNU has rejected the 1 February military coup. “Their bullying and killing of unarmed civilians across Myanmar is against our revolutionary force’s beliefs. We cannot accept inhumane acts, not only in Kayin state, but also in other areas,” Saw Htoo Ka Shaw, a KNU official said in a statement earlier today.

The MV Ever Given remains aground in the Suez Canal. Efforts continue to get the large container ship dislodged from its present position. On Friday evening, Egyptian officials expressed some hope after the ship’s rudder was freed. However, concern is growing over the economic fallout if the Ever Given remains unmoved for an extended period of time. Shipping analysts already estimate that the gridlock of container ships and oil tankers at either end of the canal has held up $10 billion in trade daily. It will simply be a matter of time before this situation has long term effects on economies and markets across the world. There is no firm timetable on when the Suez will be reopened to traffic. The one certainty hanging over the situation is that with the majority of global retail trade moving via sea, the effects will also soon be felt by shoppers in practically every country.

Trouble In The Suez

Suez Canal officials claim that low visibility caused by a sandstorm and 40 knot wind are to blame for a massive container ship running aground and blocking traffic in the East-West trade route. MV Ever Given remains grounded as eight Egyptian tug boats continue the effort to dislodge her and unblock that section of the Suez Canal. Meanwhile, merchant vessels and oil tankers are gathering at either end of the canal, waiting patiently for traffic to be permitted through. The incident in the canal has directly affected oil prices, causing 6% rise. Also, this situation will potentially affect oil markets through the coming weeks. In fact, there are growing concerns it will indirectly lead to an average price of $4.00 per gallon of gas in the United States.

Even more significant, the world is seeing first-hand just how vulnerable maritime chokepoints like the Suez are to disruption, whether accidental or otherwise. A significant amount of the world’s commerce passes through the Suez each year. It did not take very long for a disruption in the Suez to cause a chain reaction and ripple effect through world markets. Global supply chains remain susceptible to external events, especially in this later stage of the COVID-19 pandemic. From the Suez Canal to Malacca Strait, the world’s trade routes are dependent on the safe and expeditious transiting of chokepoints and canals. As the past 24 hours have shown, it takes little to render a chokepoint or canal inoperative.

Today has been another travel day for the most part, so I will probably provide more thoughts on this topic tomorrow, as well as an update on the situation in the canal.