The Capital Chasing the Digital Infrastructure Asset Class

To the telecoms world, geopolitics mean issues and restrictions that can cause headaches and sleepless nights. While much attention is paid to untrustworthy equipment vendors and suspicious cable projects, little is reported about beneficial geopolitical developments facilitating new routes that will improve performance and increase route diversity on a global scale. To this day, every submarine cable between Asia and Europe and the east coast of Africa and Europe lands in Egypt to cross 400 km of land that separates the Red Sea from the Mediterranean. What the Suez canal is for the maritime industry, it is the same for Telecom Egypt’s fiber network between the country‘s two coasts—the only shortcut for circumnavigating the entire African continent. It is not just the cost, but also the fear from political destabilization and ongoing reliability issues, that have been demanding an alternative for a long time. Repeated outages caused by intentional and accidental damages to cables on shore and in Egypt’s territorial waters have had a severe impact—not only on carriers, but the wider economy of the affected nations.

The widely circulated photo of three the divers who allegedly tried to cut SEA-ME-WE-4 off Alexandria in March 2013 has been symbolizing the risk of sabotage by bad actors. Every subsequent incident, including that in January 2016, when Seacom suffered a three-hour outage after both trans-Egyptian routes were simultaneously damaged by what was claimed to be civil construction works, caused speculation and let concerns grow.

Attempts to create new routes from the Arabian Peninsula into Europe–whether through Iraq, Syria or Iran—have all failed due to the same issues as in Egypt: instability, unreliability, cost and not least geopolitical implications.

However, thanks to thawing relations between Israel and the Gulf States, an alternative to the trans-Egyptian crossing becomes more likely by the day. Driven by shifting geopolitics in the Middle East, the formerly unthinkable rapprochement between Israel and Saudi Arabia might soon facilitate a new terrestrial route between the Indian Ocean and the Mediterranean via Saudi Arabia, Jordan and Israel. Not only would this introduce competition in what has so far been an Egyptian monopoly and lead to lower costs, but it will also offer a lower geopolitical risk profile and allow reducing the exposure to external aggression in the shallow waters of the Red Sea.

Christian Frhr. von der Ropp

Attracted by the Middle East’s economic strength and cheap energy, the cloud service providers could be a major driver behind the Saudi-Israeli route that would of course also support wider cross-region connectivity between data centers around the globe.

While the Saudi-Israeli crossing will support new major subsea routes between Europe and Asia a few thousand kilometres to the North, the opposite is about to happen in the Caucasus: a short submarine cable will create a new Eurasian terrestrial route— supposedly the shortest between China and Europe.

This story is part of a paid subscription. Please subscribe for immediate access.

Subscribe Now Already have Subscription? Login