THE SUEZ CANAL AND ITS FUTURE
By SIR ARNOLD
WILSON, M.P.
THE Canals of Suez and Panama are classic examples of engineering works that have altered the course of history as well as of trade. The Panama Canal is owned by the United States Government, which built and ad- ministers it as a State enterprise. To do so, Theodore Roosevelt detached Panama from Colombia by methods which United States citizens will do well to remember, and others to forget. But for the Suez Canal Egypt might still be part of Turkey ; Palmerston's reluctance, and that of the Sublime Porte, to accept de Lesseps' plans for a canal arose from the conviction that it would be fatal to Turkish sovereignty on the southern shore of the Mediter- ranean. These are matters of history, but they serve to throw light on the determination of the Egyptian Government to become, when the concession expires in 1968, owners of the Canal, and meanwhile to refuse any renewal or exten- sion of the Canal Company's mandate.
Not even international politics gave de Lesseps so much worry as finance. But for Said Pasha's noble purchase of shares to the value of sixty million francs, the company could not have gone to allotment. De Lesseps offered to sell the Canal to the Maritime Powers in 1871. His offer was coldly received, though Lord Derby favoured transfer of the undertaking to an International Commission, to be managed as a Public Utility in the public interest, but the Sublime Porte refused, preferring that Britain herself should own it. De Lesseps came to London 4o make a bargain on these lines : Mr. Gladstone would not discuss the matter.
Then the tide turned. Said Pasha and his successor, Ismail Pasha, had squandered nearly Doo,000,000 in thirteen years ; the Suez Canal shares were the only saleable assets. Disraeli bought them, to Gladstone's dismay. " Is our real hold over the Suez Canal in war-time any other than our maritime superiority in the Mediterranean ? " he wrote to Granville. " Would Egypt make any real addition to it ? If not, then the holding of it would be a new military responsibility, a burden, and an evil."
Neither he nor Disraeli realised for some time after the purchase that in buying 46 per cent. of the shares Britain did not get a proportionate, or any measure of, control, for, under the Articles of Association (still in force) no share- holder could have more than ten votes. He secured the appointment of three directors, out of 32, to whom, twelve years later, seven more unofficial nominees of British trade were added, but they exercised little influence.
The years passed ; the Canal prospered : it was widened and deepened and furnished with every modern aid to safety and speed. To counter an agitation against the high level of dues, de Lesseps proposed that any surplus revenue after paying 25 per cent. to the shareholders should be devoted to reducing dues ; the proposal was coldly received. (They now yield an average of 5o per cent.) Shipowners protested that the public interest should be considered. The directors replied that they were not a philanthropic body : their duty to the shareholders required them to charge what the traffic would bear, even if some shipping was diverted to the Cape route. In the 'eighties, British shipping totalled 75 per cent. of all tonnage passing through the Canal : today it is 46 per cent., Italy being second with 17 per cent. and Germany third with 9 per cent., followed by Holland 7 per cent. and France 5 per cent. Italy and Germany are unrepresented on the Board : that is a small matter, though an otiose directorship on a company whose statutes require it to divide 2 per cent. of its profits among 32 directors is not to be despised. For the past few years they have drawn (exclusive oT their expenses) between L3,000 and L4,000 a year each. Ten are British, one is Dutch ; Egypt has one, and will be entitled to ten directorships as vacancies arise. The rest are French.
Italy's recent demands, so far as they can be deduced from public statements, are of three kinds—commercial, political, and strategic. On commercial grounds she desires a reduc- tion of dues. But for the need for high dividends dues could be halved and the Canal could still pay 6 per cent. or more. But a forced reduction of dividends would be unjust to French shareholders, and particularly to recent buyers. It has been suggested that a proportion of the British shareholding should be transferred to Italy. That would not help matters, for the shares carry practically no voting power.
On political grounds Italy desires overt and practical recog- nition of the International Convention of 1888, which pro- vided that the Canal should be open to the ships of all nations, including ships of war, at all times and in any circumstances and should be under the protection of all Europe—a thesis energetically maintained by Lord Derby in 1877 when he warned Russia that neither Turkey nor Russia would be allowed to blockade or invest the Canal. This differs little from the principle laid down by Mr. Gladstone in the House of Commons on July 23rd, 1883 : " We will not be parties to employing influences which may attach to our temporary and exceptional position in Egypt, for the purpose of securing any abatement of any right lawfully enjoyed . . . We cannot undertake to do any act inconsistent with the acknowledgement that the Canal has been made for the benefit of all nations at large, and that the rights connected with it are of common Euro- pean interest."
The strategic desiderata of Italy follow upon her political attitude. She may be presumed to require some guarantee that in no circumstances will the Canal be closed against her, otherwise than by a blockade outside the three-mile limit, to which all belligerents may properly have recourse.
The Canal has not, at present, a status of neutrality ; it can only acquire it by an international agreement. It was not neutralised, but rather universalised, by the Convention of 1888, which made it a free corridor for belligerents. The point of view of Italy can best be understood by putting our- selves in her territorial position, and by bearing in mind the insistence of some M.P.'s in this country in 1935 that Britain should use her position in Egypt to force the Egyptian Govern- ment to require the Canal Company (a French concern domi- ciled in Paris) to close the Canal to Italian ships.
On what lines can a lasting settlement be sought ? Not in seeking to maintain the present situation, nor in a petty redis- tribution of directorships and shares. The Government of Egypt hold in their hands the key to a just solution. They can, if the French and British Governments agree, terminate the present concession, which has thirty years to run, buy out the present shareholders, and manage the Canal them- selves as a State-owned public work, built largely by Egyptian capital and Egyptian labour. They would doubtless retain the existing staff, whose efficiency is gratefully recognised by the shipping world, and would doubtless accept an inter- national advisory board of management with considerable executive powers on which the principal users of the Canal would be proportionately represented.
They would be well advised, as a Mediterranean Power with a great future before them, to undertake to run the Canal as a Public Utility with the smallest margin of profit. Zaghlul Pasha, indeed, when Minister of Justice, said in the General Assembly on March t6th, 19io, that when the Canal reverted to her Egypt would probably be forced to make the passage of the Canal free and to forgo any direct profit from owner- ship. That was the policy adopted in the case of the Panama Canal by the United States of America, and it has been amply rewarded.
Such a policy will entail a financial loss to someone repre- sented roughly by the difference between the present value of the shares and their par value, less the reserves of the Company which are very extensive, and less the sum payable by the Egyptian Government to the Company under Article ro in respect of materiel et objets mobiliers. The total sum to be made good might be as much as Li5 million—but this is a mere guess. It would be a cheap contribution to international justice. The time has passed when a commercial company, however efficient, can sit astride an international highway and levy tolls, regardless of the commercial consequences and of the political repercussions of its action.
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