The Tamesis
China has stepped up inspections of ships registered in Panama after Panama canceled a port contract held by a Chinese operator.
Panama announced last month that its Supreme Court had Cancellation of long-term contract won by CK HutchisonIt is a port giant owned by Hong Kong billionaire Li Ka-shing.
this Federal Maritime Commission Nearly 70 Panamanian-registered ships were seized in China this month and are subject to “enhanced inspections,” it said on Thursday. The inspections were carried out under an informal order and appeared to be intended to “punish Panama” by transferring control of two ports to companies with more friendly relations with the United States.
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In a statement released on Thursday, the European Commission said it was “closely monitoring developments at the Panama Canal terminals and how China’s retaliatory actions against Panama may affect global shipping”.
On January 30, Panama’s Supreme Court rejected the legal framework of a 1997 concession that allowed CK Hutchison subsidiary Panama Ports to expand its rights to operate the Balboa and Cristobal port terminals on both the Pacific and Atlantic sides of the Panama Canal.
The ruling angered Beijing, which condemned it as a “malicious act”.
Soon after, CK Hutchison, which has operated Panama’s ports for nearly 30 years, filed an international arbitration lawsuit challenging the move and seeking at least US$2 billion in damages. Reuters said.
On February 23, Panama appointed Maersk’s APM Terminals and Mediterranean Shipping Company (MSC) subsidiaries as interim port operators for a period of 18 months.
This move follows The United States puts pressure on its neighbors Due to the canal’s strategic importance to U.S. trade, it counters China’s influence on the canal.
“China targets Panamanian-flagged ships”
insurance giant Lloyds Bank In February, Chinese authorities began “collecting detailed data on shipping links between China and Panamanian registries, including the number of Panamanian-flagged vessels calling at Chinese ports, the size of the Panamanian-flagged fleet owned by Chinese entities, and annual fees paid to the Panamanian government.”
More than 4,600 Panamanian-flagged ships will call at Chinese ports in 2025, according to Lloyd’s List intelligence data.
Officials from China’s Ministry of Transport and the National Development and Reform Commission also summoned representatives from Maersk and MSC to discuss “international shipping business practices” after Maersk and MSC took over the ports of Balboa and Cristobal.
On March 18, Lloyd’s warned that this could have a “significant impact on global shipping” as China is now targeting these ships and suggested that their owners may choose to register their ships elsewhere.
“Panama has the largest ship registry in the world, and an extended or expanded inspection campaign could disrupt supply chains and increase costs for shipowners around the world,” Lloyd’s said.
“This situation highlights how port state control mechanisms ostensibly designed for maritime security have become tools of geopolitical leverage in an era of heightened great power competition.”
Trade uncertainty rises
Lloyd’s said Beijing’s “retaliatory measures against Panamanian-flagged vessels” could affect vessel operations and trade flows, noting that it “adds further uncertainty to an industry already adapting to Panamanian flag interference.” Strait of Hormuz closed” and” Tariff-related trade pattern shifts“.
The report said that Liberia will replace Panama as the world’s largest ship registry in 2023, and “any continued actions by China against the flag may further accelerate this trend.”
The dispute casts a shadow over CK Hutchison’s $23 billion plan. Selling over 40 of its ports A consortium led by BlackRock and MSC.
U.S. Maritime Commissioner Laura DiBella said China’s actions “could have significant commercial and strategic consequences for the U.S. shipping industry,” given that Panamanian-flagged ships account for a significant share of U.S. container trade.
But she said they have the authority to investigate whether foreign governments’ rules or practices harm U.S. trade.
Legal experts say Hutchison Whampoa’s legal battle to seek compensation through the International Chamber of Commerce could take years. But Panama’s president promised to “resolutely” defend the country’s interests.
Meanwhile, China has reportedly instructed state-owned enterprises to halt new investments in Panama and is said to be slowing customs clearance of the country’s agricultural products.
“The U.S.’s repeated irresponsible remarks can only expose its intention to forcibly control the canal,” Chinese Foreign Ministry spokesman Lin Jian said when asked about the U.S. statement at a press conference on Friday.
Analysts said the issue is likely to be discussed by senior officials from both sides before Trump’s visit to China in May because it is already a key point of friction.
