The Suez Canal Authority will slash transit fees for large oil tankers traveling between northern Europe and southeast Asia by 48% as it looks to maintain the canal’s status as a critical shipping route, Al Mal reports. The authority began implementing the decision earlier this month and the discounts will run until 31 May next year, according to the report.

What are the Suez Canal’s main competitors?

#1 The Israel-UAE connection: Former authority head Mahfouz Taha made a point of saying that the decision is unrelated to the proposed oil pipeline between Israel and the UAE that came following the normalization agreement between the two countries this year. Taha said that the discounts are simply a case of the authority making the route more competitive and that the decision wasn’t taken with the pipeline in mind. Nevertheless, the project is expected to be a major conduit between Europe and Asia, and could substantially eat into the government’s revenues as Europe and the Middle East become less dependent on the canal for energy supplies.

The project might have US backing: The US is pushing for new transit routes for Middle Eastern oil and gas to reduce reliance on the Strait of Hormuz off the coast of Iran, US Energy Secretary Dan Brouillette told CNBC. Brouillette, who admittedly will be replaced by a Biden pick in a little over four weeks, floated moving hydrocarbons to Israel but didn’t cut Egypt out of the plan entirely. “If we can move natural gas to the coast of Egypt or the coast of Israel, then we’re moving it through the Mediterranean rather than going through some of the other chokepoints that we’re all accustomed to,” Brouillette said, hinting that Egypt could serve as an important gateway for natgas exports westward.

#2 Russia: Moscow is in the process of mainstreaming its Arctic shipping route, and is trying to persuade commercial shipping lines to use its waters as an alternative to the Suez Canal. The good news is it doesn’t expect to attract year-round business until the end of the current decade, but could offer to cover the extra ins. costs for shippers. The bad news: The route is some 3k nautical miles shorter than the Suez route, and while it isn’t yet traversable all year round, we wouldn’t be surprised if climate change helps Moscow speed up its plans.

Suez revenues have held up remarkably well this year: Authority boss Osama Rabie said earlier this month that the canal’s revenues YTD are currently at USD 5.72 bn, up 8% y-o-y. Canal revenues were relatively unchanged in FY2019-2020, despite falling towards the end of the year due to the pandemic. Revenues for the year came in at USD 5.72 bn, down only slightly from USD 5.75 bn the previous year, and dipping 9.6% y-o-y in May due to the covid-induced slowdown in global trade.