EGYPT LOOKS AT DEALS TO LURE SUEZ TRAFFIC.

Byline: Douglas Jehl The New York Times

It is one of the world's great short cuts, linking the Red Sea and the Mediterranean through a passage that since its opening in 1869 has cut millions of miles from shipping journeys between East and West.

Conceived in Pharaonic times, the Suez Canal may have been built by a French entrepreneur, but it remains a source of Egyptian pride - and a handsome source of profit since its nationalization in 1956 by President Gamal Abdel Nasser.

As its price for sparing vessels the long trip around the Cape of Good Hope, Egypt has long exacted hefty tolls - enough last year alone to enrich its treasury by nearly $2 billion. But in recent years, fewer and fewer ships have been willing to pay its price - and more are choosing the old-fashioned route.

There are many reasons for the plunge in traffic, with fewer ships having passed through the canal in 1996 than at any time in the last two decades. But here on the banks of the canal, among palm trees and colonial-era villas, the Suez Canal Authority thinks it can recoup by borrowing from the spirit of the bazaar.

``We're ready to deal,'' declared Amin Zein, chief of planning for the authority, which after years of sluggishness is slashing prices, dangling discounts and bargaining with zeal to drive home the message that shorter is still better.

Egyptians' getaway

Set in an oasis of palms and other greenery on the shore of what was once a natural lake, Ismailia has become a favorite getaway for residents of Cairo, who come to savor its clean air and views across the turquoise water of heavily laden ships parading against a backdrop of white sand.

But it retains the spirit of the bygone era when the Suez Canal Company remained in European hands. A sign outside a beachfront club set aside for senior employees and their families sternly warns that visitors may not wear galabias, the traditional rural Egyptian dress.

By the simple arithmetic that has applied since the canal was built, the sea journey, for example between the Saudi oil port of Ras Tanura and Rotterdam, in the Netherlands, is almost twice as long around the Cape as it is through the short cut, which saves vast quantities of fuel and many days at sea.

Even a ship setting out from Sydney, almost as far south as the Cape, shortens its journey to Rotterdam considerably if it passes through the canal, which cuts for more than 100 miles across lakes and land connecting the rest of Egypt to the Sinai Peninsula.

The trouble is that the canal, just 58 feet deep, is too shallow to accommodate the enormous supertankers that now carry most of the world's oil. On their routes from Persian Gulf ports to Europe and the United States, most of them take the long way around the Cape.

Others transfer their cargo to the Suez-Mediterranean pipeline, which cuts across Egypt, as an alternative to the canal, but the revenues must be shared with the other Arab oil-producing countries that are its joint owners.

Toll too expensive

Even some vessels small enough to pass through the canal have been deterred by tolls that can soar to more than $500,000 for a round-trip journey, leading tankers to turn to the Sumed pipeline, which opened in 1975, and causing some ships to send their cargo over the land route across Israel from the port of Eilat.

Between its best year in 1982 and its new low last year, the number of vessels passing through the canal dropped from about 22,500 to fewer than 15,000. At about 40 ships a day, the canal is now operating at just 53 percent capacity.

The traffic in oil heading northward through the canal from the Persian Gulf countries has dropped at an even steeper rate, down 35 percent since 1991 alone. Last year, shipping experts say, only about 35 million tons of oil was shipped through the canal, compared with the more than 100 million tons each that was shipped around the Cape of Good Hope and through the Sumed pipeline.

Over the same period, the tariffs imposed by the canal have also been increased sharply, so overall revenue did not begin to decline until last year - good news for the Egyptian government, which depends on the canal as an important source of foreign currency that lags behind only tourism and the remittances sent home by workers abroad.

Offer to haggle

But an announcement last November by Ahmed Fadal, the chairman of the Suez Canal Authority, signaled an important change in course. By offering steep discounts and a flexible new price-setting policy, including special offers to companies that commit themselves to using the canal for large volumes of cargo, Fadal set in motion an approach that has turned the once-sleepy headquarters in Ismailia into a setting for haggling.

``The current administration has taken on a sense of urgency in telling the world that the Suez Canal is still living,'' said Chris Horrocks, secretary general of the International Chamber of Shipping, a London-based organization that represents shipowners around the world.

Rather than rely on the old rigid structure, Mohammed al-Ghamri, director of research for the Suez Canal Authority, said negotiators now tend to work case by case, factoring in intangibles like weather in an attempt to set a price that a customer will conclude is cheaper than going around the Cape.

``If they don't agree, you end up with nothing,'' Ghamri said.

The Egyptian authorities have also vowed to deepen the canal, to a depth of 72 feet.So far, at least, the authorities say they are not convinced that the $1.5 billion cost of a hurry-up dredging project would be cost-effective. They have chosen instead to do the dredging bit by bit, as part of the canal's regular maintenance, even though the process would not be completed under that approach until 2010.

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Map

Map: SUEZ CANAL

N.Y. Times News Service