 back where live it's four o'clock. I'm Jay Fiedel. This is Think Tech. More specifically, this is Global Connections. We're going global today with Jay Friedheim. We're going to talk about the fallout of the grounding in Suez of a ship called the Ever Given. It's the largest container ship in the world. It's a quarter mile long and for about 10 days it was stuck in the Suez Canal and there is fallout. So the first thing Jay, you know about Admiralty and Maritime Law? What happened? I went to school at Tulane. It's the world's leading Admiralty and Maritime Law School. So the kids that I went to school with and the ones that came after me wrote the contract for passage through the canal, wrote the contracts about shipping. Here's what we know. There's a ship called the Ever Given, but that isn't just enough. You need to understand that the vessel is actually owned by a company called Sosikesen Kasai, which is really a Japanese holding company and it's leased. So the ship owner leases it to the Evergreen Maritime Corporation, the actual Taiwanese, which is a Taiwanese based conglomerate. The crew was hired by Bernhard Schutte-Mitt Ship Management, which is a German company. So the people that work there this was an American ship and it was a Jones Act question, then they would only be allowed or they would be allowed to sue their ship. They're the person that hired them, which is a German company. Now here's what's really exciting at the moment and that's that Egypt filed a lawsuit in this little bitty town along the Suez Canal. After that the company filed a lawsuit called The Limitation of Liability and they did it in a British court. So the way the limitation of liability works is the place that was filed first gets to control the case and then there's something that's called a concourses, which means everybody has to come to that little court to decide the matters. So the biggest initial dispute is, is Egypt going to honor the British's claim that even though their suit was filed later and have the Egyptian rights decided in Britain and I would just say the likelihood that the Egyptian nation has any concern for the interests of Britain, which seized control. The history of this is fascinating. There was an invasion by Britain, France, and Israel in which they tried to come and take back the canal after Nasser nationalized it for very good reasons. There's fascinating history related to the canal. Let me back up a little bit and just confirm that the ship, it takes about a day or rather 12 to 14 hours for a ship to navigate the canal. The ship got stuck. I want to ask you what happened there. And as a result, some 360 ships were stuck behind that ship. They couldn't go through the canal. And that time is huge money. The claim that the Egyptian government is asserting is $900 million. They have not said exactly what that's about. We should talk about that. And we should talk about how this is all going to shake out and how it affects global maritime traffic. So the first question is what happened? What happened is the ship, the largest ship, can possibly go through the canal. It is exactly the number of feet of the maximum ship allowed. What happens to be so wide that where it got stuck, it barely fits through the middle. Now the sides of the canal at this point are sheer sand walls. And so as it bumps into it, the sand falls down and it traps the ship. There's other things that were going on at the moment that it got stuck. There was a sandstorm and it was big winds. And so the sandstorm is blowing hard wind and this ship, which has thousands, 20,000 containers on it, stacked 13 high above the deck, completely full below. All these containers act like a sail. So the ship is going through there. The sandstorm is blowing and the vessel turns. It doesn't have to turn much and it's stuck. And that's a problem because to unstick it is really difficult. And we're talking about the absolutely most remote place, like Hawaii is the most remote island group in the world. Well, the most remote place you could get to by water in the middle of a desert is this spot in the Suez Canal, you know, which connects the Red Sea to the Mediterranean and the whole history of why that's important. This is the same sea that God split so the Yids could walk through with Moses. I mean, there's a whole lot of history tied up to this spot. Okay, and so how did they get it out? I remember reading that with three things they tried. One is they try to take the sand out from under the ship and other is they try to use tugs to pull the ship off the sandbar. And the third one, the third one, I can't remember what the third one was. Which they ultimately did, which is that they raised the water under the ship. But what's important is that there is a salvor that came into play and so they tried to use material to remove sand from the sides of the boat. But you couldn't remove sand from under the boat. They tried things like getting rid of the ballast. Ballast is weight that you put on a ship to cause it to go down in the water. So they were pumping out the ballast to try to float the ship. And then they, what ultimately got them out of it is the water power of the canal was used to push the vessel while the salvers were pulling the vessel. Now the company, the salver is a tugboat, the salver is a company that his job is to get it out of there. Now it could be, you know, we've gone over the laws of salvage or ancient maritime laws, the traditional remedies, they're all around the world and the company has a right to hire a salver and they hired Smith, which are the big boys. These are the guys that removed the post-Decordia disaster in 2012 and then the Baltic ace car carrier that sunk in 2015 right at the entrance of the port of Rotterdam. So these guys come in when the troubles are really big. And you know, so here's what actually happened at the very end. They needed two much bigger tugboats. And there were no tugboats this side at the time because it's the middle of nowhere. And so they were rushing these giant tugs to get in there because all the little tugs weren't enough to move this thing sufficiently. So they just weren't around. The physics of what happened is it's a 430-yard long vessel. They had eight tugboats pushing and pulling and there were ships everywhere. There were ships in front, there were ships on both sides. The way it works is that ships can go in both directions through the canal at the same time. But there are these wide spots in the canal in which you move ships over to one side or the other. You let ships pass. All right. And so they were digged, they were dredging sand, but it only had a very minor impact. We tried the ballast water to stabilize the ship. And then there was what they called plan B while this was all happening. And they were going to try to inject water under the vessel so that they could blast sand out to try to get it happen. Since it was dislodged, it got anchored at the Great Bitter Lake, which is at the midpoint in the canal. There's 25 crew members on board, which is very interesting because they're all Indian nationals and they're stuck on board. There's a court in the town of Ismalia, which is on the west bank of of the canal, and it's Egypt. And they issued arrest orders. So under Egypt's maritime laws, they allowed a precautionary seizure, meaning they knew there was this debt. The debt had been incurred. And so they were allowed to seize the vessel. Okay, so now stop there and tell me what that $900 million is about. Okay, well, there's three major issues there. It's the total compensation that they could figure out right now. And I guarantee you that's going up. But right now, you've got the loss of revenue for ships that would ordinarily run through the canal. That's number one. Then there's damage to the waterway. And number three, there's the equipment labor that were deployed to deal with this. And now you've got this conflict going on. Egypt's saying, I mean, really, 900 million, let's round it to a billion. The insurance company can come in and put up a two like in America, you get like a double or triple amount, the $3 billion handed over or in the form of a letter of undertaking, they could get the vessel out. And maybe the Egyptian would be reasonable and allow it to be decided in Britain provided they've got their billion, $2 billion, $3 billion there held by their courts, but they don't want to do that. Okay, wait, so just to square away on this. This is the law of salvage. Anybody that helped this ship get unstuck and the canal for the damage to the canal. And I suppose other shippers who were delayed, 367 ships were delayed, cost them money. Gee whiz, there's a bunch of claims. And I guess all of those claims are included in this 900 million or billion dollar affair. In the initial thumbnail estimate, but you have, it's they're not all self, there is cargo interest, 20,000 containers that have an individual contract with the shipper that I told you about that glimpse the vessel. And there's a contract between those container owners and the vessel. All right. And what that was important is it brings in another ancient law called general average. And that means that not only is the ship responsible, but every piece of cargo may have to contribute to it. So now you got a conflict between all the shippers and the vessel interest and the Egyptian government. There were 422 vessels were building up after the grounded or they're ready to go through. And just to show you how good this canal has been since they improved it in 2015, just before that, you could only get 46 or 47 ships. Now you can get 97 ships through. They cleared the backlog in three to four days. Now that's not the whole story because there's something called supply line economics and supply line economics means that once you knock the supply line that those those things that were needed somewhere aren't going to get there in time. And so all the people that needed it there can't do the things that they need. Like I think there's somebody did an analysis of the apple iPhone and just one little part the processor has materials from 46 nations that all have to be shipped by vessels from one place to another. And at the end of the day you got this little processor and then that little processor goes into an iPhone and then it's shipped somewhere else. So this all depends on moving stuff around. And right now we've got these really, really difficult supply line problems that could undermine the economy of the entire world because this impact I mean it's an enormous amount of shipping went through this little space. Okay so now we're talking about a lot of legal issues, a lot of claims by a lot of people. I mean everybody on the stage and the Shakespearean stage has a claim. I guess there's an insurance company that's going to have to deal with this. There's the owners, there's the lessees, certainly there's the crew, there's the Suez Canal authority, there's the Egyptian government. It goes on and on. Anybody had any contact with this ship or this incident has got to have a claim or be claimed against. So then you have an arrest okay and I'm hoping that you can explain to the people what it is an arrest. It's an admiralty concept and it sounds like an arrest stops the ship and the owners of the ship have to, well the arresting parties I should say they have to take care of the ship well the ship 400 yards long that's pretty expensive to take care of a ship like that isn't it and the ship isn't in the canal right now it's outside the canal. No, no it's over in a area the Bitter Lake which is in the canal it's stuck in the middle it is not going anywhere the ship has been detained it is seized and Osama Ravi was a really good spokesman for the SCA which is the Suez Canal authority and he says look agree to the compensation and we'll let the boat go out right and that's you know that's them being very reasonable and so that's the putting up of the money to do this. So how is this going to get organized because this is a major affair I mean I presume that these what did you say 20,000 containers are still on that ship they didn't leave town yet. Oh yeah just to give you an I'm sorry I'm trying to all that supply line economics analysis you were talking about is still in play and there's still losses going on at the far end of that trip and then of course the lawyers the lawyers are coming from she must be every country in the world because so many people are involved to try to you know assert their claims or defend their claims with this ship this is this is going to be this is very meaningful for the economy of Egypt I think. And for the economy of the maritime lawyers around the world because every one of them is going there's a conflict so you can only represent one of these parties just to give you an idea of what 20,020 foot containers means if you put a 20 foot container on a truck it becomes 40 feet long if you had 60 in between each truck it would stretch from Washington DC to Trenton New Jersey we're talking like 175 miles of ships cargo if it was all taken off in that way and you know one of the ideas was when it really looked like a jam they were getting ready to take the cargo off the ship in the middle of the desert think about that what are you going to do with 20,000 containers and you need helicopters out there to move them one at a time and gigantic craneships this thing could have been there you know for a year without any problem and it would stop this waterway from functioning this is a huge problem and this isn't the only place that you have those kinds of passageways you know there's the Straits of Hormuz there's the Maluccan Straits there's the Panama Canal and we are really really vulnerable to this kind of shipping and like you said all those things needed to get somewhere where there's companies waiting for those parts to do the next thing right now we're panicking about we don't have enough computer trip chips to build cars so those computer chips which are not you know being made by people that are real happy with us because of the way we've acted in the last five years and so they're not we're not so we're no longer the high prestige nation it used to be back five years ago and up until actually almost right now that if you were an American ship you got to get in head of the line in going through the canal and that's because we've been shoveling Egypt a billion or two billion dollars a year in discretionary spendings we call it protection and that's buying this American favoritism which is really the cost of American prestige that has eroded enormously recently and there's all these other players coming into play okay and so you know did you know that at one point after Nassar nationalized the canal the United States came up with a plan in the mid fifties to blow up about 400 nuclear bombs in the Sinai and blast another canal almost right next to it you know fifty hundred miles up the desert and then we would have our own canal there and you know we didn't go that route but we've known about this problem for a long time and this issue goes back to Nico a a pharaoh who used 150,000 people to dig the canal the first time in recorded history according to Herodontus who is one of the Greek historians that documented this stuff and a lot of people since then had ideas hey let's build a canal through here you know including the Ottomans the Venetian traders the Egyptians themselves and finally Napoleon Napoleon wanted to build a canal but his surveyors went there and they determined that one side of the canal was 40 feet higher than the other side of the canal that was a mistake this is actually a level waterway but Napoleon didn't do it because he was afraid that if he succeeded the waters would rush in and flood the entire Nile delta now that was a miscalculation and then we get our our homie you know Adolf Hitler decided he wanted the canal so he and Mussolini and his crowd could be the ones that controlled it and so he invaded North Africa the British went in there and fought them it was really about the canal at that time a couple a couple of things that as you mentioned in passing and that is that this canal has no locks there were no locks in the Suez canal the level of the of the Indian Ocean and the level of the Mediterranean are the same and so the ships just just passed through without without interruption by by the locks the other thing is that you can talk about the history of the canal as a primitive canal way back when but in fact the current canal was built a longer time ago than you would might have think it was it was started in like 1859 or thereabouts actually I think it's 42 but it's 152 year old history of the canal which then got expanded in between the years of 2014 and 2015 which doubled the number of ships that could go by from 47 to 97 and the total cost of that upgrade was eight billion dollars in today's money I mean we got people all over the place that got eight billion dollars to do it well we only have a few minutes left and I want to focus on the international implications and there are two questions I'd like you to address Jay one is is this going to change the way the Suez canal works that the canal work properly does abnormality law as it applies to this this incident work properly these are going to change for the Suez canal the Panama canal to streamline to use that term to streamline things because after all we find now that we're dependent on these canals for global trade they're really important are they functioning properly actually yes and the law is working beautifully and there will probably be minor tweaks to already existing contracts but the contract that each vessel signs that's going to cost them about seven hundred thousand dollars to go through there has been really ironed out and there may be glitches that we learn about to modify and improve it the maritime law works wonderfully with great precision and we are going to run around and we're going to bang swords on shields and at the end of the day we're going to sit down with a bunch of mediators and we're going to try to figure out how to skin this cat the canal works great he is a wonderful source of pride for the Egyptian people dignity pride sovereignty which really matters and it's a source of of foreign currency and revenues for Egypt and it's a really a big deal and how did it get solved I mean it's the intervention of the almighty this king tide which only comes about once a year in this time because of the position of the moon raise the canal water I mean it's like the parting of the sea it floated the boat and that's what got it moved and unclogged this well I knew there was something biblical about this yeah I'm always trying to rattle that there you go again okay another question last question really the impact of this kind of incident on global trade you mentioned you know the economic supply line analysis and all that but just suppose we lost one or both of these major canals and these cargo ships would have to navigate to the south of Africa or and or to the south of America yeah it's the Cape of Good Hope and that's why the canal got built because the British seized the area of South Africa created a garrison there and every ship that went by whether it was a whaler whether it was a foreign nation going to attack somebody or whether it was trade were vulnerable to the British there so the French got together with the Egyptians that said hey let's build you a canal and the French paid for it and the statute of liberty that we like to make believe was built for America it was built to be at the Mediterranean side of the canal and they decided not to and the statute of liberty was to show that the light of France and the western world was bringing trade to Asia and that's where the Statue of Liberty comes it was an afterthought because they had this old piece of crap and it couldn't figure out what and we decided that's what America is bring us your poor bring us your everything and I don't downplay the reality of that sentiment but the idea to say that she was built for us she was built to sit in front of the canal as a guiding light to show the Chinese the Indians all of what you know eastern Asia that we were bringing enlightenment to their shores in the form of trade yep yep okay so so this is very important both canals are really really important and you know if you don't have those canals you have to you have to go thousands of miles out of your way and and spend a lot of money time staffing bunker fuel what have you to get there it changes the trade paradigm in the whole world if that happens so my question to you is these must be strategically important they have been strategically important in the past so if I were a terrorist for example I might try to leverage the importance of these canals because if I could stop trade through there or threaten to stop trade through there I'd be I'd be making a big statement um and do you think that is possible has it happened oh yeah and here's what that says state here is what is at stake 12 percent of the total global trade passes through the Suez canal 30 percent of all the shipping containers in volume pass through there on a daily basis and according to Bloomberg 10 percent of the world's oil trade and eight percent of the national gas trade is passing there it connects the Red Sea to the Mediterranean it's the ultimate shortcut from Europe to East Asia from Rotterdam to China and the other way around is the Cape of Good Hope and that costs at least 12 or 14 more days depending on your engines and it exposes you to the pirates of Somalia and all kinds of other people who can grab yourself so it's exposure to security risk and pirates yep you get it it's a big deal and the Egyptians want it they're not giving it back you know and to build it these guys built it with shovels there was as of there was a hundred thousand people virtually enslaved to dig if they were paid nominal money and each you know you get it blood sweat and tears you know where that comes from it comes from Winston Churchill who at during the war but this is one of those blood sweat and tears and that's why the Egyptians were indignant about it and supposedly the Egyptians auctioned it off back to the British and to the French and when there was a problem you know they seized it as a military control because back in 1940 we understood how strategically important it was well this certainly focuses world attention on it and on Egypt for that matter and on all the mechanics you have described and the legal issues you have described I can see all these young young law students changing their their focus to Admiralty now well it's hard to get paid I help people my job is I like to help people that load and unload ships I learned this stuff because I was blessed to get to go to this college law school the Tulane which I said is a phenomenally you know important maritime law school it's the leading one in the world and we learned this as I've bread and butter but I don't actually get to do it so much there was once I had to do a general average case in which there was a ship coming into the Honolulu Harbor the Coast Guard which you know about said nope you can't come in here because it's leaking ammonia into the hole and so all of the the cargo in the hole like very expensive chocolate got poisoned with pneumonia which is not poisonous it just couldn't taste good and so all the cargo interests had to contribute because the one thing leaked and that was a very complicated case when you're talking about very complicated issues and involving physics involving chemistry involving the fundamental industrial processes by which the world trades and people you know they go to the store they buy what they need they don't realize that it's a combination of components from everywhere many of which have gone through one or the other of these canals well thank you for helping us understand it Jay it's really a contribution to the public conversation we should all know and understand what's going on really appreciate your expertise and time thanks so much