WASHINGTON — A top Senate Republican accused Panama Tuesday of violating the treaty giving the Central American nation control over the vital Panama Canal shipping lane — saying the country had waved through illicit transfers of crude oil by Iran and exposed itself to dangerous Chinese influence.
“Even as it takes advantage of the global maritime system, Panama has emerged as a bad actor,” charged Senate Commerce, Science and Technology Chairman Ted Cruz (R-Texas).
“Panama has for years flagged dozens of vessels in the Iranian ghost fleet, which brought Iran tens of billions of dollars in oil profits to fund terror across the world. And Chinese companies have won contracts, often without fair competition, as [Beijing’s] infamous Belt and Road Initiative has come to Panama.
“China often engages in debt-trap diplomacy to enable economic and political coercion in Panama,” Cruz went on. “It also seems to have exploited simple corruption.”
Cruz also explained that Panama’s “high fees for canal transit disproportionately affect Americans, because US cargo accounts for nearly three-quarters of Canal transits,” while US Navy vessels “pay additional fees that apply only to warships.”
“Canal profits regularly exceed $3 billion. This money comes from both American taxpayers and consumers in the form of higher costs for goods,” he said. “Panama’s government relies on these these exploitative fees — nearly one-tenth of its budget is paid for with canal profit.”
Announcing his interest in taking back the canal earlier this month, President Trump warned of Beijing steadily increasing its influence over the waterway.
“China is operating the Panama Canal,” he claimed in his inauguration speech Jan. 20. “We didn’t give it to China, we gave it to Panama, and we’re taking it back.”
Tuesday’s hearing kicked off formal efforts to investigate whether Panama is in violation of the 1977 Panama Canal Treaty and Neutrality Treaty, which could allow the US to retake the canal zone by force.
The treaty held that the US would cede control over the canal — which it had since it began to build the access way in 1904 — to Panama by the year 2000, with the guarantee that it would “remain open, neutral, secure, and accessible.”
Testifying before the committee, Federal Maritime Commission Chairman Louis Sola said more than 75% of the canal’s traffic is “bound for our ports,” calling access to the canal “essential to maintaining US competitiveness in the global economy.”
Now, the committee is exploring whether Panama has kept to that commitment — especially now that Beijing’s influence poses the “danger of China exploiting or blocking passage through the canal,” Cruz said.
“Chinese companies are right now building a bridge across the canal at a slow pace so as to take nearly a decade, and Chinese companies control container ports at either end,” he said. “The partially completed bridge gives China the ability to block the canal without warning, and the ports give China ready observation posts to take to time that action.
“This situation, I believe, poses acute risks to US national security,” added the Texan, noting that the Chinese Communist Party has taken “a militaristic interest in the canal” to support its “global economic contest against the United States.”
Panama has denied being under China’s influence, with President José Raúl Mulino telling The Associated Press last week that “there is no presence of any nation in the world that interferes with our administration.”
But Sola testified that “Chinese companies have increased their presence and influence throughout Panama” for the past decade, with the isthmus becoming a part of Beijing’s predatory Belt and Road Initiative — and even ending its diplomatic relations with Taiwan.
“Chinese companies have been able to pursue billions of dollars and development contracts in Panama, many of which were projects directly on or adjacent to the Panama Canal,” he said. “Many were no-bid contracts, labor laws were waived, and the Panama and Panamanian people are still waiting to see how they’ve been benefited.
“It is all more concerning that many of these companies are state-owned and in some cases even designated as linked to the People’s Liberation Army,” Sola added.
George Mason University Law professor Eugene Kontorovich testified about the legality of Panama’s adherence to the treaty, explaining that “the essential features of this regime of neutrality is that the canal must be open to all nations for transit” and that “only Panama shall operate the canal.”
“If Panama signed a treaty with the People’s Republic of China whereby the latter would operate the canal on Panama’s behalf, this would be a clear violation,” he said. “But what if Panama contracted for port operations with a Chinese state firm, or even a private firm influenced or controlled in part by the Chinese government?”
Kontorovich argued that while China may not have a formal arrangement with Panama, Chinese shipping companies involved in the process “need not be owned by the government to be in part controled by the government.”
