Skip to comments.China's Beachhead at Panama Canal
Posted on 11/02/2005 1:27:48 PM PST by Mr. Mojo
At the Panama Canal's only Pacific port a dozen huge construction cranes work massive new containerized-cargo facilities behind mounds of sand and concrete. Workmen clad in orange uniforms emblazoned with "Panama Ports Company" - the innocuous English-language name in a near century-old bastion of U.S. maritime might - operate the cranes and earthmovers alongside what once was the U.S. military's Southern Command headquarters known as SOUTHCOM. But the construction crews don't work for the Americans anymore. The Panama Ports Company is controlled by Communist China.
As U.S. forces pull out of Panama under the Carter-Torrijos treaties of 1977, Beijing's agents are moving in. And the Clinton administration is looking the other way, scrapping a 1995 plan to explore a continued U.S. military presence.
By all indications, China and its People's Liberation Army, or PLA, are building a beachhead to control the Panama Canal. Under the terms of a controversial lease, Panama gave Hong Kong-based Hutchison Whampoa Ltd. the right to build new port facilities in Balboa, the canal's only Pacific port, and a major Atlantic port in Cristobal, and to run them up to the next half-century. As Beijing increased its economic muscle in the country, Panama's politicians gave Hutchison Whampoa the right to control anchorages on both ends of the canal, to hire new pilots to guide ships through the waterway, to block all passage that interferes with the company's business, to take control of key public roads near the canal and to have right of first refusal for control of some former U.S. military bases.
"By most accounts, an unfair and corrupt contractual bidding process, which was protested by the U.S. ambassador to Panama, enabled the Chinese Hutchison Whampoa company to outmaneuver American and Japanese companies for the long-term lease on the canal ports," according to Al Santoli, an aide to Republican Rep. Dana Rohrabacher of California. Santoli has traveled the perimeter of the Pacific monitoring Chinese maritime encroachments from the Philippines to Panama.
U.S. Ambassador to Panama William Hughes nearly was declared persona non grata for protesting the Hutchison deal when it was exposed three years ago, a U.S. official tells Insight. President Clinton responded by appointing Robert Pastor, an architect of the 1977 canal giveaway and an advocate for left-wing revolutionary causes, to replace Hughes. Senate Foreign Relations Committee Chairman Jesse Helms of North Carolina, one of the few lawmakers watching the Panama powder keg, blocked the nomination.
The Chinese company has exclusive rights to the ports on both ends of the canal. Ironically, in 1996 Panama asked a Seattle-based company to withdraw its successful bid for Cristobal on the grounds that the U.S. firm would have a monopoly, in light of its existing business in Balboa. The following year, Panama awarded both Cristobal and Balboa to Hutchison Whampoa. Between the ports lies the shortest land route for containerized cargo to be sent between the Atlantic and the Pacific from and to ships too large to cross the canal.
Beijing is in Panama for the long haul. Hutchison Whampoa has the right to extend its leases until the year 2047 or to transfer them to a third party. Already a Chinese corporation called Great Wall Panama has secured a lease as long as 60 years for an export zone on the bank of the canal on the Atlantic side.
"I have a sense that the U.S. is edgy about Hutchison Whampoa," former Panamanian vice president Guillermo "Billy" Ford tells Insight. But Washington has done little to pressure the corrupt government of President Ernesto Perez Balladares to reopen the bidding. Last year, Balladares hired Clinton strategist James Carville as his personal consultant in a bid to keep power beyond his constitutional term, which expires this month. Balladares says he will step down, but he has packed the new Canal Commission with his pro-Beijing cronies.
Hutchison Whampoa is more than a Hong Kong shipping giant. Company chairman Li Kashing is an important cog in the economic machinery of the Chinese Communist Party and the PLA. Li is a board member of the Chinese government's main investment arm, the China International Trust and Investment Corp., or CITIC, run by official PLA arms marketeer and smuggler Wang Jun.
According to Santoli, Li "has invested more than a billion dollars in China and owns most of the dock space in Hong Kong." Additionally, "Li has served as a middle man for PLA business dealings with the West," financing some of the controversial Hughes Electronics Corp.-Loral Space & Communications deals found to have been conduits for weapons technology to Beijing. He also has been a powerful ally of the Mochtar Riady financial empire of Indonesia - the Lippo Group family that according to sworn testimony paid off Clinton's friends and political allies on behalf of Chinese military intelligence.
Hutchison Whampoa's port subsidiary, Hutchison International Terminals, or HIT, which in turn runs the Panama Ports Co., does substantial business with the PLA-owned China Ocean Shipping Company, or COSCO, which has been seeking to take over former naval facilities in Southern California. Some of Hutchison's board members consult to COSCO. China Resources Enterprise, or CRE, the commercial arm of Beijing's Ministry of Trade and Economic Cooperation, owns 10 percent of the Panama Ports Co. The Senate Governmental Affairs Committee has identified CRE as a vehicle for "espionage - economic, political and military - for China."
U.S. officials have been slow to realize the importance of Hutchison Whampoa and its global maritime network in Beijing's strategic planning. "Hutchison is trying to build a commercial empire in the Americas," a senior U.S. official in Panama tells Insight. "If you asked me three years ago, I'd say Hutchison Whampoa was just a business concern. Logic would tell you that the PRC has more opportunity to influence Hutchison Whampoa than before."
As Santoli sees it, China appears to be positioning itself commercially and militarily along key naval choke points as they build their navy, the way the Soviets tried to do in the 1980s.
These choke points include bases in Burma to access the Indian Ocean; Hong Kong to project power into the South China Sea; the Straits of Malacca, where the PRC is expanding ties with Cambodia and building a naval facility on the Philippines-claimed Spratley Islands; the central Pacific, with a major land satellite-tracking station on Tarawa; the coast of Hawaii, with a major ocean-mining tract; the Caribbean, with new influence in the Bahamas and a growing security and intelligence relationship with Cuba; and, most important, the Panama Canal.
"If Red China gets control of the canal, it will get control of the government," says Panama City Deputy Mayor Augusto Diaz. "The Panama Canal is essential to China. ... If they control the Panama Canal, they control at least one-third of world shipping."
Though the 1977 Carter-Torrijos treaty gives the United States the right to defend the Panama Canal militarily, the Clinton administration is allowing circumstances to develop in which U.S. defense of the waterway could become impossible without confronting the Chinese Communists. Panama has no standing army of its own and has been powerless to repulse Colombian guerrillas from its territory. All U.S. military facilities in the country will have been abandoned by December - and a new Panamanian law gives Hutchison Whampoa "first option" to take over the former U.S. Naval Station Rodman and other sites, as well as an operating area at the former U.S. Albrook Air Force Station. "If they get their hands on Rodman, they'll have a lot on the Pacific side," notes local journalist Tomas Cabal. "Rodman is there at the first set of locks."
Panamanian law now gives the Chinese company the right to pilot all vessels transiting the canal. Retired admiral Thomas H. Moorer, former chairman of the Joint Chiefs of Staff, warned the Senate last year that U.S. Navy ships soon would be at the mercy of Chinese-controlled pilots. A U.S. government source tells Insight that U.S. nuclear submarines occasionally transit the canal. By treaty, U.S. naval vessels have first priority for passage, but since the new Panamanian law gives Hutchison Whampoa the right to deny passage to any ship interfering with its business, the U.S. warships could become subject to Red Chinese authority.
"My specific concern is that this company is controlled by the Communist Chinese," Moorer told the Senate Foreign Relations Committee in no uncertain terms. "They have virtually accomplished, without a single shot being fired, a stronghold on the Panama Canal."
And with U.S. forces out of the picture, security of the waterway and even the government is in question. Officials note a 25 percent leap in emigration from Communist China during the last few years, and illegal immigrants from China are commonplace. Says Diaz, "There are many Chinese in this country with cedulas [national-identity papers] saying they are Panama-born, but they don't even speak Spanish."
"Illegal immigration is a PLA operation, giving the permits to get the people out of China," says Cabal, an expert on corruption and crime. The immigration director under the previous Panamanian government let them in under suspicious circumstances. Panamanian journals reported that a racket was run through the Panama consulate in Hong Kong, which issued the visas. The consul and his wife had a travel agency that allegedly brought 15,000 Chinese to Panama, where crooked immigration officials issued them false papers. Intelligence sources say many of these illegal immigrants were bound for the United States.
Beijing uses large-scale emigration to base future intelligence assets abroad to recruit agents from ethnic Chinese communities, Insight has learned. And Panama is a key target. "One of the primary factors accounting for the success of Chinese intelligence is the exploitation of ... the vast emigration of Chinese to communities worldwide," according to Stanislav Lunev, a former Soviet military-intelligence colonel who operated in Beijing before defecting to the United States in 1992.
According to Lunev, "The Chinese intention to develop oceangoing capabilities for its navy is well-known. But the Chinese navy does not yet have such worldwide capabilities at a time when it needs to have information about the perimeter of the Pacific region. This is the reason that Chinese entrepreneurs are actively in the market for abandoned port facilities in strategic locations." Lunev specifically cites the Panama Canal.
Beijing has been building an overt intelligence presence in Panama as well. Insight has learned that a Chinese intelligence officer with a staff of 14 operates as his country's unofficial "ambassador" from the 23rd floor of the Global Bank Building on 50th Street in Panama City.
Meanwhile, curiously, Panama is one of the last countries in the world that still recognizes the Republic of China on Taiwan as the legitimate government of China. That may change. Beijing now has no shortage of levers to bring Panama into line. In addition to the money it is suspected of slipping to Panamanian politicians, China wields greater economic leverage. Mainland Chinese financial institutions have extended nine-figure development loans to Panama. A PRC bank recently bought Marine Midland, which owns part of Panama's debt. In Cristobal, Marine Midland shares a building with the Panama Ports Co. The Chinese also bought into a consortium led by a U.S. railroad company to restore Panama's interoceanic rail links.
Panama's close historical ties with Hong Kong, the British colony that London handed over to the Communists in 1997, are another pressure point. Three thousand of the 14,000 Panama-flagged ships worldwide are based in Hong Kong. Those ship registries are a major source of income for the Panamanian government.
The PRC now is the largest goods provider into Panama's Free Zone, at $2 billion a year, dwarfing Taiwan's $500 million. It is the largest user of the canal after the United States and Japan, with more than 200 COSCO ships alone transiting the waterway annually. Even Taiwanese shipping companies such as Evergreen, which runs a large containerized cargo facility at the the former U.S. military base of Fort Gulick on the Atlantic side, could find it has to bow to Beijing's pressure due to their large investments on Mainland China.
A year ago, a high-level Communist commercial delegation visited Panama, in its words, to "strengthen relations and promote new joint-investment projects." Last March, a 16-member delegation of the Chinese Communist Party's rubber-stamp "parliament" traveled to Panama. A member of Panama's ruling PRD party said diplomatic relations with Beijing "should not be very far off." Polls show that three-fourths of Panamanians want the United States to stay in their country, but the Clinton administration is committed to a total, unconditional pullout by year's end. The White House declined to discuss keeping a U.S. military presence under circumstances permitted by the Carter-Torrijos treaty. In his Senate testimony, Moorer warned: "We have dropped the ball on the [former] Canal Zone, and the game is almost over." Few lawmakers even listened to the former chairman of the Joint Chiefs of Staff.
"China is very clear and focused that they want a choke point," says a prominent former Panamanian diplomat who was part of the negotiations with the United States in the 1970s. "Your government has been so shortsighted that it hasn't paid attention. It's as simple as that."
Thanks, Peanut Brain.
China has absolutely zero power projection ability outside of Asia. If we wanted to take the canal by force, we could do it in a matter of hours.
What a paranoid article. When was that written, 5 years ago?
Chinese, illegal aliens at the time, helped build the first Transcontinental Railroad. Since the purpose of the Railroad was to open a trade route to China, it seems to have worked out. The Canal and New Orleans came to dominate trade. Air freight is coming along now, so that the canal isn't much of a choke point.
Looks like 1998-9. And this was under Clinton so the paranoia is very understandable.
We could take it but then we would have a wrcked canal. Which is still loads better than letting the Chinese having it available in a war.
Another Carter idiocy that will bite us.
Thank you Jimmy Carter!!! Anyone want to elect another Communist for President -- vote third party -- it could happen and the next one may just give away the whole USA to the commies.
Power projection ability begins with thermonuclear weapons, undoubtedly on-site and armed in Panama.
That's right... if we go to war over Taiwan they block us at the Panama and we have to go around... or ship everything to the West Coast then they gain the upper hand...
Well, think again. As recently as 2003, the Communist front company Hutchison Wampoa hired none other than Richard Perle -- who was chairman of the Pentagon's Defense Policy Board at the time -- to lobby the U.S. Department of Defense for a DOD waiver when the company was trying to purchase the trans-Pacific fiber-optic assets of Global Crossing.
Call me cynical, but stories like this are why I'll never trust anyone in government.
Again, special thanks go out to another democrat for screwing our national security, Jimmy Carter, a total loser.
The Panama Canal is currently of extremely limited importance to the US Navy strategically; this isn't World War II.
Carriers are too big to pass through it anyway, and those are the key mobile assets to the US Navy.
When was that written, 5 years ago?-------Bout same time COSCO was trying for the base at Long Beach,Kalifornicate?
Issue Date: October 31, 2005
Well if we have trouble with access to the canal. I am sure we will sieze it.
Spell the name of my state correctly, a$$hat.
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