Geoeconomics of trade: Djibouti, the Suez Canal, and the business logic of geography

New Straits Times

5 hours ago

Introduction: When the Map Shapes the Mandate
In global affairs, maps do more than illustrate borders—they reveal strategic imperatives. A country's geography is not simply its physical terrain; it is the architecture of its constraints, its possibilities, and its vulnerabilities. While resources, institutions, and leadership matter, geography imposes structural conditions that no policymaker can escape. The truism "Geography is destiny" is not deterministic—but it is profoundly instructive.
Geography Is Destiny: From Slogans to Strategy
The phrase, often attributed to Napoleon and echoed by thinkers from Halford Mackinder to Robert Kaplan, encapsulates how natural features—mountains, rivers, chokepoints, deserts—can shape a nation's developmental path and geopolitical weight. Geography defines what a country must defend, who it must trade with, and how it might project power. In essence, geography offers both opportunity and entrapment.
Two case studies—Djibouti and the Suez Canal—offer sharp illustrations of this truth. They are not economic superpowers in themselves, but they sit astride arteries through which the lifeblood of global trade flows. Their strategic value is not what they produce, but where they are.
Djibouti: Geography as Leverage
Djibouti, a small nation on the Horn of Africa, lacks arable land, natural resources, and a large domestic market. And yet, it punches far above its weight on the global stage. Why? Because it commands the Bab el-Mandeb Strait—a chokepoint that connects the Red Sea to the Gulf of Aden, through which roughly 10 per cent of global seaborne trade passes. More importantly, it serves as the maritime gateway between Europe and Asia, particularly for oil shipments and container cargo.
This geographical positioning has transformed Djibouti into a global military hub, hosting bases for the U.S., France, China, and others. Each is vying for influence over this narrow corridor. Djibouti has used this to extract rents, attract foreign investment, and enhance its geopolitical relevance. It is geography turned into strategy.
The Suez Canal: Control the Chokepoint, Shape the Century
The Suez Canal is another potent example. Artificial, yes—but geopolitical in the extreme. Completed in 1869, the canal sliced through Egypt to link the Mediterranean and Red Seas, radically reducing travel time between Europe and Asia.
Control over Suez has repeatedly shifted the global power balance:
• In 1956, Egypt's nationalization of the canal by President Nasser triggered the Suez Crisis, a turning point in the decline of British and French imperial influence.
• In 2021, the blockage of the canal by the Ever Given container ship—a black swan logistical event—froze $9 billion worth of trade per day, underscoring the fragility and significance of chokepoints in the modern economy.
The Suez Canal does not merely move ships. It moves empires, markets, and military doctrines.
Geopolitics: When Geography Meets Power
Geopolitics is the study of how geography informs the behavior of states. It explains why Russia fears encirclement, why the U.S. prioritizes naval supremacy, and why China builds artificial islands in the South China Sea. Geography, in this context, is the stage upon which states act, and geopolitics is the script they follow in pursuit of survival, status, and security.
Djibouti and Suez are prime examples of how static features—location, proximity, terrain—can make a place valuable, vulnerable, or volatile.
Black Swan Events, Geopolitics & Geoeconomics: Fragility in the Fault Lines
Black swan events—rare, unpredictable shocks—often expose the latent geopolitical and geoeconomic dependencies created by geography. The Ever Given was one such event. So was the COVID-19 pandemic, which revealed just how vulnerable the world's supply chains are to localized disruptions.
The Suez Canal and the Bab el-Mandeb Strait are not just maritime shortcuts. They are single points of failure. A naval standoff, a pirate attack, a natural disaster—any one of these could ricochet across global markets in hours. Thus, geographic chokepoints become economic pressure points.
In an age of interconnected commerce, geopolitics and geoeconomics have merged. Who controls the strait can influence shipping rates, insurance premiums,and commodity prices. The geography is permanent—but the shocks are episodic, and they test a state's resilience.
Geostrategy and Geoeconomics: From Presence to Power Projection
Geostrategy is how a nation translates its geography into power—militarily, diplomatically, and economically. It is not enough to possess a strategic location; one must know how to leverage it.
• Djibouti has pursued a rentier geostrategy—offering land and logistics for global powers while investing in port infrastructure.
• Egypt, under successive regimes, has used the Suez Canal as a fiscal lifeline, generating billions in toll revenue, while aligning itself with the interests of major powers to maintain canal security.
Geoeconomics complements this by turning geography into a commercial and strategic asset. Both Djibouti and Egypt seek to monetize their location—through logistics, trade facilitation, and foreign investment. But this comes with dependency risks: the same foreign presence that brings stability can also invite entanglement.
Today, the geoeconomic toolkit includes not only toll revenue or basing rights, but also:
• Foreign debt diplomacy (as seen in Chinese Belt and Road projects),
• Competing logistics corridors (like the India–Middle East–Europe Economic Corridor vs. China's BRI),
• And regional port competition (e.g., between Port Sudan, Berbera, and Djibouti itself).
These instruments allow states to amplify the value of geography into policy leverage and economic influence—turning location into strategy, and infrastructure into influence.
History and Geography: A Feedback Loop in Geopolitics
History is not just context—it is an amplifier. Past events shape the strategic imagination of nations. Egypt's experience with colonial exploitation, followed by the nationalization of the Suez Canal, still informs its statecraft. Djibouti's colonial legacy and post-independence struggle for relevance explain its current foreign base diplomacy. Historical memory guides current alliances, threat perceptions, and even public sentiment. In geopolitics, the past doesn't just echo—it instructs.
Conclusion: The Compass and the Clock
To understand a nation's place in the world, you must look at both the compass and the clock—its geography and its history. Geography imposes structure; history provides narrative. Together, they shape geopolitics, condition geostrategy, and expose the world to black swan risks with outsize consequences.
Djibouti and the Suez Canal are reminders that small places can have oversized impacts—not because of what they are, but because of where they are.
Geography is not just destiny. It is design—and in the hands of those who understand it, it becomes destiny by design.
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Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Petronas, international relations analyst and a senior consultant with Global Asia Consulting. The views in this OpEd piece are entirely his own.