Two contradictory statements last week became the culmination of the ongoing struggle between the United States and a small country over the Panama Canal.
The U.S. State Department said the Government of Panama has agreed to no longer charge U.S. government vessels for passage through the Panama Canal, and this will allow the U.S. government to save millions of dollars per year. However, the Panamanian authorities soon denied this report. The Canal's management agency told Reuters that no changes had been made.
These two contradictory statements became the culmination of the struggle that unfolded between the United States and the small nation of Panama. The Panama Canal is an 81.6 km long artery, one of the most important transportation routes in the region, connecting the Gulf of Panama of the Pacific Ocean with the Caribbean Sea and the Atlantic Ocean. A significant share of Panama's revenue is made up of freight charges.
Channel ownership as "pure colonialism"
The situation in which the United States retains control of the Panama Canal "looks like pure colonialism." These words were uttered in May 1975 by one of the outstanding American diplomats, Henry Kissinger. "Internationally, failure to conclude a treaty is going to get us into a cause celebre, with harassment, demonstrations, bombing of embassies," warned Kissinger, who served as Secretary of State to then-President Gerald Ford.
These statements by Kissinger, which have recently become public, sound quite relevant today. However, then President Ford did not listen to them: the agreement on the transfer of the canal to Panama was signed by Democrat Jimmy Carter, who replaced Republican Ford. According to the agreement, in 1999, the United States transferred the canal to Panama.
US President Trump has repeatedly made it clear that he was unhappy with the decision at that time, recalling that it was the United States that was engaged in the construction of the canal after concluding an agreement with Panama in 1903. During the construction, which took place from 1904 to 1913, more than 56,000 people worked on the construction of the canal, several thousand died. After the construction was completed, the canal, which cost the United States $375 million, was considered a great engineering miracle and symbolized America's transformation into a world power.
Trump scares Panama
Recalling that the canal was part of the former American greatness, Trump also recently stated that the United States carries out 72% of all cargo transportation through the canal. However, this is not entirely true, notes in an interview with Finam.ru Ph.D. in Economic Sciences, leading researcher at IMEMO RAS Alexander Polivach. "The bulk of global trade is carried out by shipping companies from China, Greece, South Korea, Japan and Denmark. Accordingly, China, Korea, and Japan are the main users of the Panama Canal, as their ships carry cargo to and from U.S. ports."
"In Trump's statement that the United States has a lot to do with the use of the canal, it is true that most of the cargo flow through the canal goes either to or from US ports. But these cargoes are mostly export goods to the United States from these countries. So, last year 11,240 ships passed through the canal, of which only 465 flew the American flag (including warships), which accounted for only 0.8% of the total cargo tonnage that passed through the canal," the expert says.
However, US pressure on a small Latin American country with a population of just over 4.5 million people has already produced results. Panamanian President Jose Raul Mulino has said that the country will refuse to participate in China's Belt and Road economic project. This happened immediately after US Secretary of State Marco Rubio visited Panama during a tour of Latin America.
Even before the return of the canal to Panama, which happened in 2000, the Government of that country held an international tender for the 25-year management of container ports located on both sides of the canal – Cristobal on the Caribbean coast and Balboa on the Pacific coast.
The winner was the company of the famous businessman Li Ka Shing from Hong Kong. In 2021, Panama, after conducting an audit of the management of these ports, confirmed the automatic extension of the contract for the next 25 years. Only now it is the business of the new Hong Kong holding company CK Hutchison Holdings, formed in 2015 with the participation of the same Li Ka Shing, recalls Polivach from IMEMO RAS. In addition, the expert said, there is also a container terminal on the Caribbean coast next to the canal, owned by the well-known Taiwanese company Evergreen.
"We need to separate the Panama Canal, which is managed by Panama, from the rest of the Panamanian economy. Port management has nothing to do with the canal, and 25 years ago the canal was narrower than it is now, and there may have been some economic sense in managing ports by transporting containers along the canal overland and then loading them onto large vessels that did not pass through the canal at that time. Now the canal has been expanded and, although ports are still important for the Panamanian economy, their importance for transit is small," says Polivach.
No road, no belt
Speaking about the Belt and Road project, a transport and logistics project of China, Polivach noted that Panama is the first country in Latin America to join the partnership in 2018. Although China is building the infrastructure to promote its project, Panama has so far received little from its participation, Polivach says. For example, there was a project to build a deep-water port on the Caribbean coast near the entrance to the canal, but in 2024 the Panamanian government revoked the rights to the project from a Chinese company because it considered that it had invested less money and attracted fewer local workers than required by the terms of the contract.
Another major project was connected with this, which was also suspended.: construction of a gas-fired power plant in the canal area, as fuel was supposed to be supplied to it from the LNG terminal in the cancelled project. Another major project, the construction of the 4th Canal Bridge, is currently 5 years behind schedule, but the Panamanian government still expects it to be completed in August 2028. In fact, of the notable projects financed by Chinese loans, only the large Amador convention center has been built on the Pacific side of the canal, the expert says. "The words about the Chinese management of the channel are a complete fabrication," concludes Polivach.
Polivach notes that it is not yet clear what exactly the United States wants from Panama. He adds that the channel has a neutral status, and all ships from all countries must pass through it unhindered. "The United States also adhered to this rule when it owned the channel. To forbid someone to pass through the channel is a violation of international conventions, that is, it is illegal, no matter who controls it. But since the United States today has force above the law, in principle, they can do the same, even without owning the channel, but simply use their military fleet to detain ships going to the channel. But it would be equally illegal."
