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Will the Egypt Uprising Force the Suez to Close?

NEW YORK ( TheStreet) -- As the Egyptian uprising grew more violent and chaotic over the last two days, the risks posed to the Suez Canal increased, according to some people involved in the shipping and petroleum industries.

On Friday, though, as street violence eased (Wednesday and Thursday were characterized by clashes between protestors and supposed supporters of the Mubarak regime) and protests in Cairo grew calmer, fears of a Suez disruption again appeared to fade.

Earlier this week, the Egyptian military sent soldiers to protect the pipeline that runs the length of the canal -- called the SuMed pipeline -- and a U.S. military leader suggested that the Pentagon would consider sending troops to the Sinai Peninsula to protect the canal from any disruption prompted by rioting.

Speaking at a conference in London on Tuesday, the chief of U.S. Central Command, Gen. James Mattis, said that if the Suez were to be closed, "We would have to deal with it diplomatically, economically, militarily, whatever, but that to me is hypothetical and I would defer to the political leaders."

So far, the vital waterway and its infrastructure continue to operate without much incident. Officials with the Suez Canal Authority -- whose Web site continues to have problems -- confirmed as much to news media on Friday.

The Authority is a government-controlled entity that represents Egypt's third-largest source of foreign currency. In December 2010 alone, the canal brought in $423 million in revenue, according to the Canal Authority.

Some observers say that it's unlikely that even a new leadership in Egypt would want to turn off that cash-flow spigot. Indeed, Mattis is among them. In London he said, "When you look at the fiscal impact of that on whoever is in a position of authority in Egypt, I just can't imagine the motive to shut that down."

Others can. Certain groups might, after all, have an interest in causing an economic shock by sabotaging the canal or the pipeline.

At least some interruption to canal traffic or pipeline flow appeared likely -- if not inevitable -- at the beginning of the week. That's because the many protests and riots taking place across the country looked sure to prevent at least some workers from getting to their jobs. Some industry observers, for instance, were hearing that fewer tug captains were at the canal.
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