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By John Feng and Micah McCartney
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President Donald Trump may have his mind on the Middle East and a possible nuclear deal with Iran but a quiet victory in Panama—coming at China's expense—could prove to be a watershed moment for the "Donroe Doctrine" closer to home.
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Panama Ports Company, a subsidiary of Hong Kong conglomerate CK Hutchison, is suing the Panamanian government over a recent high court ruling that withdrew its rights to operate ports on either end of the Panama Canal. PPC was first granted the concessions in 1997 and its contract was extended in 2021 for 25 years.
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Why It Matters
The United States turned over the Panama Canal Zone to Panama in 1999 but has remained the canal's biggest user. About 5 percent of global trade, estimated at some $270 billion, passes through the 51-mile waterway each year. The U.S. Navy uses the canal to deploy ships between the Pacific and Atlantic oceans, most recently against Venezuela.
U.S. access to the northern port of Cristóbal and to the Balboa port in the south were never in doubt. However, the Trump administration's increased focus on security in the Western Hemisphere—sometimes referred to as the "Donroe Doctrine"—made the Panama Canal a natural target because of fears that the Chinese state could wield political and economic influence in Panama via CK Hutchison's stake in one of the country's key sources of revenue. Beijing and Panama City have both rejected such concerns.
What To Know
Panama has already found an interim operator for its ports, said Panamanian President José Raúl Mulino. A local subsidiary of the Danish logistics firm Maersk was prepared to take over to ensure minimal disruption at the terminals, Mulino said over the weekend, shortly after Panama's Supreme Court ruled that PPC's contract was unconstitutional because of financial and other irregularities.
The company rejected the verdict and accused the Panamanian government of taking systematic steps to deprive it of its operating rights before detailed judicial findings had been made public, according a press release. PPC said it was seeking "extensive damages" for the loss of future business, in a case lodged at the arbitration court of the International Chamber of Commerce in Paris.
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On Wednesday, China's Foreign Ministry spokesperson Lin Jian told reporters that the Chinese government would safeguard the rights and interests of all Chinese companies, without elaborating. CK Hutchison is based in the Chinese semi-autonomous region of Hong Kong and registered in the Cayman Islands.
Lin also referenced a strongly worded statement by China's office for Hong Kong and Macau affairs, which called Panama's court ruling a breach of trust that would undermine the country's reputation among international investors. It said PPC had invested over $1.8 billion in Panama and created thousands of jobs.
Panama's government had "succumbed to the tyranny of hegemony and willingly become its tool," the office said while hinting at pressure from Washington.
"The Panamanian authorities should recognize the situation and correct their mistake. If they persist in their own stubborn way, they will pay a heavy price politically and economically!" the statement said.
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What People Are Saying
Lin Jian, a spokesperson for China's Foreign Ministry, said at a regular press conference in Beijing on Wednesday: "The international community can clearly see who is seeking to occupy the [Panama] canal and who is undermining international law."
The U.S. State Department said in a press release on Monday, after U.S. Secretary of State Marco Rubio's meeting with Panamanian President José Raúl Mulino: "President Trump has made a preliminary determination that the current position of influence and control of the Chinese Communist Party over the Panama Canal area is a threat to the canal and represents a violation of the Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal. Secretary Rubio made clear that this status quo is unacceptable and that absent immediate changes, it would require the United States to take measures necessary to protect its rights under the Treaty."
What Happens Next
PPC's legal proceedings may complicate sensitive and ongoing negotiations over the $22.8 billion sale of CK Hutchison's global ports portfolio to a consortium led by the U.S. investment firm BlackRock, a deal that has drawn criticism from Beijing in addition to an anti-monopoly probe.
China is expected to host Trump for a state visit in April, with President Xi Jinping likely to visit the U.S. later this year.
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