The Suez debacle | Xinjiang and the future

🚢 *Googles can ship captains drink on the job?*

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It's a rare event when the funniest story of the week is also a serious geopolitical issue. But the boat that spawned a thousand memes is just that, so we feel obliged to both present you our favourite joke, and analyse what it means for the world (the boat getting stuck, not the joke).

First, the joke:

We want to live in a world where someone does that just for the high-fives from their mates, but also in one where essential goods are delivered on time. So conflicted.

This week:

  1. 🚢 The Suez Crisis 2.0: Ever Given and the Global Supply Chain

  2. 🕌 Xinjiang part two: the ultimate wedge issue

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🚢 The Suez Crisis 2.0: the Ever Given

By Helen

If you’re a ship, you’d probably want to... steer clear... of publicity. Apart from Boaty McBoatface, nearly every ship that’s had its name in the spotlight has been on the rocks, literally. What about the famous ships of Golden Age of Exploration, who went out to colonis.... nevermind. The Titanic, the Exxon Valdez… I could go on.

The Ever Given is no exception. Breached between the banks of the Suez Canal for the past week, the 400m-long behemoth (about the height of the Empire State Building) blocked a crucial shipping route linking Asia and Europe, and cost the world economy an estimated US$59 billion.

Though official sources say it’s now been freed (by the tides), Ever Given will be immortalised as the ship that gave us quality memes (and a copycat truck blockade) while short-circuiting the global supply chain.

The Suez Canal

The Ever Given had been enroute from China to Europe when it got bogged. A relatively simple journey, it planned to traverse the Suez Canal, a 193km artificial waterway in Egypt that carries about 12% of global trade.

The Suez Canal is important because it’s the most direct shipping route between Asia and Europe. Linking the Red and Mediterranean seas, it allows ships from Asia to reach Europe without circumnavigating Africa. This not only saves both dollars and time, but also protects ships from tempestuous weather and pesky pirates.

How to block a major shipping artery in three simple steps

Admittedly, my eyes glazed over while reading about the ‘bank effect’ and the hydrodynamics behind how the Ever Given got itself into this pickle. But I’ll do my best to explain.

  1. As it entered the Suez Canal on 23 March, the Ever Given faced a dust storm and high winds. The stacked containers on its deck acted like sails, which foiled the ship’s attempts to steady itself in the narrow canal.

  2. The ship tried to course-correct but ended up basically pulling a sick Tokyo Drift. Except there was nowhere to drift but diagonally into the canal’s sandbanks at a good clip.

  3. The result was the maritime version of the carnage caused by an over-ambitious driver who, upon embarking on a 5-point turn in a narrow alley, realises their mistake 3 turns in.

While this incident pales in comparison to the Suez Canal’s previous blockages, it’s arguably been the costliest to the global economy. It left a backlog of 300+ other ships stuck behind Ever Given carrying commodities like oil, natural gas, retail goods and livestock. Many ships simply cut their losses and sailed for Africa.

Zoom out: a few takeaways

While we’ve all had our laughs at this, there are also some serious geopolitical takeaways to consider:

  1. The global supply chain is volatile and under a lot of pressure as we go nuts on Amazon (some of us aided by free government cash). Demand for retail goods has increased exponentially during the pandemic but supply is struggling to keep up with our insatiable ‘one-click’ consumer needs. If you're thinking about how important global shipping is, something has gone wrong.

  2. Have we reached high tide on excessive globalisation? Events like this push companies to think hard about ‘reshoring’ supply chains. The ripple effects after the blockage will play out for weeks, particularly in manufacturing which relies on ‘just in time’ supply techniques to limit warehousing costs and boost profits.

  3. Might climate change make these problems more frequent? As temperatures rise, conditions become more extreme, and ships carry increasingly heavier loads, it will become harder to predict and control the water levels of key shipping arteries. For example, drought conditions in Central America in 2016 prevented larger ships from travelling through the Panama Canal.

  4. Shipping chokepoints around the world will continue to be hot spots. 55% of crucial goods such as food and fuel passes through a shipping chokepoint. These include the Bab al-Mandeb and Strait of Hormuz (both on the Horn of Africa), and the Malacca Strait (southeast Asia), which carries over 40% of global trade.

  5. Might countries build more strategic mega-projects to ease global trade? China's love of mega infrastructure might prompt officials to restart currently abandoned plans to build 'the Nicaragua Canal' which aimed to connect the Atlantic and Pacific Oceans. This would help diversify shipping routes and allow China to control a slice of global trade.


🕌 Xinjiang: the ultimate wedge issue

Part two
By John

Part one of our Xinjiang series provided context about what’s actually going on. Since then, China has sanctioned UK and EU officials in response to US, UK, EU, and Canadian sanctions on Chinese officials. It’s real mature stuff.

The international response

How the world has reacted:

Two things stand out:

  • ☪ the support for China from Islamic countries who have loudly decried abuses against Muslims elsewhere

  • 🤫 the silence from countries like Brazil, the Philippines, India and South Korea. These countries have all criticised China for less, so we can assume China is exercising some considerable leverage to keep them quiet.

But Turkey’s response might be the most noteworthy. There are close ethnic and cultural ties between Uighurs and Turks, and many exiled Uighurs currently live in Turkey.

In 2009, and again in 2019, the Turkish government openly condemned the Xinjiang situation as ‘a genocide’. Instead of sanctioning Turkish officials, Beijing has made concerted diplomatic efforts to encourage Turkey to, if not support China on Xinjiang, stay quiet about it. It’s largely working, which is why they’re considered neutral.

The corporate fallout

After we published last week it all kicked off.

H&M, Burberry, Adidas and Nike were found to have released and then deleted statements of concern about forced labour in Xinjiang. In response, some Chinese consumers (unofficially led by the Chinese Communist Party or ‘CCP’) boycotted these companies, leading to some virtue signalling fails from public figures, and this:

Apple also cut ties with their supplier Ofilm Group over similar concerns several weeks ago, but it barely made news. As Ben Thompson of Stratechery noted in a piece he published on Tuesday:

[Apple] is a poster child for doing business in China, it is a massive employer, and its products are very popular in China. It will likely be one of the last companies targeted by the party…

Random aside: I once had the very great privilege of escorting the Australian author Thomas Keneally around Shanghai. I’ll never forget how he howled with laughter as we passed a heaving Dunkin’ Donuts franchise, observing that Mao must be rolling in his grave at how China has perfected American consumerism.

Even if it is a genocide, what’s the point of saying so?

To answer this question, we need to understand how CCP propaganda works. I wrote separately about my experience of engaging with this propaganda over the past fortnight. tl;dr:

Propaganda seizes upon the sense of uncertainty; it coaxes you to misjudge the facts, or worse still convinces you that a matter of fact is actually a matter of opinion.

The main thrust of China’s defence to most criticism is not engage in debate about the facts, but simply to say ‘stop interfering in China’s internal affairs’:

How long until these are in every hipster dive bar in Brooklyn?

No matter how kitsch, the message is powerful. ‘Why should anyone be able to tell us how to run our country’ is something you might hear Boris Johnson, Scott Morrison, or Angela Merkel say.

And that's whole point of international criminal law; the most heinous behaviour by governments against their own people is the concern of the whole world. From the Holocaust and Srebrenica to the Khmer Rouge and Rwanda, we’ve learned that genocide can’t be only a domestic matter.

So whenever a country or a corporation calls Xinjiang a genocide, it’s not just hyperbole - it’s an implicit rejection of the CCP’s claim that wiping out an ethnic group is the sovereign right of every nation.

The narrative wind is blowing in one direction

CCP propaganda will continue to create wiggle room for governments and corporations to have their cake and eat it too. That same wiggle room over the past five years means we probably all own something made by forced labour in Xinjiang.

Whether through political expediency or newfound clarity, liberal countries seemingly care about human rights again. Xinjiang will increasingly become a geopolitical litmus test to split the world roughly in two:

  • Liberal countries will use labour standards, import bans and the growing importance of ESG to isolate and punish those who turn a blind eye to human rights abuses.

  • China will use its policy of economic self-reliance to ensure it doesn’t need foreign investment. Unlike the USSR, China will still participate in the global economy, but woe betide any government or corporation doing business with China that fails to toe the party line.

Actually, just check out these remarks from a CCP official who put it more clearly than we ever could.

And in case anyone thinks ‘oh Xinjiang will just blow over’, consider how you might respond to, say:

  • 🥇 Pressure to boycott the 2022 Beijing Winter Olympics

  • 💸 The nationalisation of a financial institution in Hong Kong

  • 🪂 The big one: military conflict in Taiwan.

Make no mistake - difficult issues like these are coming down the pike thick and fast, and they won’t stop anytime soon.

The result? Every country, every corporation, sooner or later, will have to choose where they want to do business: the ‘Chinese ecosystem’ or the ‘US/EU ecosystem’.

What can business do to adapt?

We’re not telling anyone what side to choose, only that we think eventually everyone will have to choose.

For those who choose the US/EU ecosystem, here are some suggestions for the future:

  1. Take a longer view of the world: Accepting higher labour costs and rethinking short term KPIs are hard choices in market economies. But short term thinking will risk being prosecuted in the US/EU ecosystem, or being boycotted in the Chinese one.

  2. Invest in start-ups working on these problems like: transparent supply chains, distributed manufacturing, geopolitical data and analytics platforms, and any other company trying to provide better and faster information to executives.

  3. Elevate the importance of public policy: almost every company will need to incorporate geopolitical considerations into its business strategy. The lines between public and private will get blurrier, and those who can't confidently operate in this space will be left behind. (And yes I’m aware this reads as: ‘give me a high paying executive job’ 😂).

  4. Consider corporate geopolitical values: corporations will shape our lives over the next 50 years more than governments. Leaders should consider whether silence on geopolitical issues is compatible with their broader ESG strategy.

There’s a lot to make everyone uncomfortable about this future because so much is uncertain. As a therapist might say, uncertainty is the only certainty, so just focus on what you can control.

Of course, the rubber of morality meets the road of reality when a nuclear armed superpower engages in genocide; only China can change its policies on Xinjiang. All we can really control are our principles.

We hope you enjoyed this two-part series on Xinjiang. Much of our research didn’t make into the articles. If you’d like to have a more extensive chat about anything related to Xinjiang, please get in touch!


➕ Extra intrigue


🔎 Intriguing recommendations

👩‍🦱  Helen: I attempted to tackle the stunning Rocky Mountains as a noob skier last weekend. If you love ski videos like me, let me suggest Valentin Delluc. Think parachuting into an abandoned French ski resort then Candide Thovex’ing (for those in the know) to the bottom. One or two more days on the slopes and I reckon I'll be able to imitate him... by also enjoying a cold red bull.

👴 JohnUnlike some, my still housebound existence means I entertain myself with online quizzes. Wait wait… don’t go, its a cool one - you get dropped somewhere in the US via Google street view and you have to guess whether it was Trump or Biden territory. Okay, you can go now.


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