China's increasing influence over the Panama Canal is not only bolstering its commercial interests but also aiding America's adversaries in evading sanctions, according to court documents obtained by the Daily Caller News Foundation.
This development has raised concerns among U.S. officials, who view the waterway as a critical national security asset.
Since former President Jimmy Carter sold the shipping lane to Panama for $1 in 1977, China has significantly expanded its presence in the Panama Canal. As reported by Conservative Daily News, China is funding multi-billion dollar infrastructure projects in the surrounding countryside and acquiring ports to solidify its foothold. This expansion has proven beneficial to American adversaries, such as Iran.
Court documents from Panama reveal how Iran seems to have used proxy firms based in Hong Kong, China, to register ships in the Panama Canal and attempted to profit from chartering its vessels. Dr. Umud Shokri, a senior visiting fellow at George Mason University with expertise in foreign policy, expressed concern over China's growing influence in the region. He said, "Given the presence of Chinese companies in port operations and infrastructure near the canal, U.S. officials worry that Beijing may seek commercial or strategic leverage in the region."
The documents focus on cases involving three Hong Kong-based shipping companies Grace Shipping, Expander Shipping, and Grandest Shipping all accused of being subsidiaries of the state-owned Islamic Republic of Iran Shipping Lines (IRISL), a Tehran-based company owned by the Iranian government. The IRISL was sanctioned under the first Trump administration, with the State Department describing the company as the "preferred shipping line for Iranian proliferators and procurement agents."
Iran has been operating covertly in the Panama Canal for years, using "flags of convenience" to register their vessels under Panamanian colors, thereby concealing their port of origin. This practice has been particularly prevalent among Iranian-backed companies, which have been forced to sell their ships outright to avoid penalties following the imposition of sanctions by President Donald Trump in 2018.
However, these companies now deny their association with IRISL and have yet to disclose the third parties to whom they were sold. The only individuals who have appeared as witnesses in the case for the companies are Iranians related to IRISL, according to court documents.
China's presence in the Panama Canal has facilitated Iran's business operations in the Western Hemisphere, much to the concern of U.S. officials. Rebeccah L. Heinrichs, senior fellow and Director of the Keystone Defense Initiative at the Hudson Institute, stated, "China has become unabashed in its unwillingness to comply with U.S. efforts to stop Iranian illicit behavior, and has, in fact, enabled it."
Iran has long sought to evade Western sanctions, particularly in its oil trade. The Iranian government operates so-called "shadow fleets" that primarily export to Beijing, creating an entire shadow market for Iranian oil with the assistance of China and Russia.
China's Landbridge Group acquired Panama's largest Atlantic port, Margarita Island, for $900 million in 2016, as part of Beijing's "Belt and Road" initiative (BRI), a global infrastructure project that has already made its way into numerous developing nations. Critics have accused the BRI of giving China undue leverage over target countries through "debt-trap diplomacy."
Despite criticism from U.S. officials and congressmen, such as Republican Texas Sen. Ted Cruz and Republican Utah Sen. John Curtis, the Panama Canal Authority has vehemently denied allegations of not doing enough to enforce sanctions, especially against China. They have insisted that they are "not a haven for sanctions evasion."
However, the growing Chinese influence over the Panama Canal remains a significant concern for U.S. national security. Heinrichs emphasized, "All of this is primarily about control of sea lanes. So it's critically important, and I credit the Trump administration for recognizing that and for understanding it, that you cannot let the Chinese take over the Panama Canal."
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