The Panama Canal has emerged as the latest maritime flashpoint, with the United States and China in recent weeks at loggerheads over control over one of the world’s most important shipping lanes.
Earlier this week, Washington and its allies in the region accused China of seizing and detaining a Panama-linked vessel, calling China’s actions a “blatant attempt to politicize maritime trade.”
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China strongly denied the allegations Wednesday, calling them “hypocritical” and accusing the United States of politicizing global commerce and undermining its sovereignty.
Analysts have warned that even a temporary disruption to the canal could cause “major disruption to global trade.” “This could lead to temporary supply bottlenecks, stock market volatility and upward pressure on inflation, which in the long run could visibly depress global GDP,” Ferdinand Rauch, an economics professor at the University of St. Gallen in Switzerland, told Al Jazeera.
The latest standoff comes as tensions between the United States and Iran continue to escalate over the Strait of Hormuz, another vital waterway that has been effectively closed for weeks since the start of the U.S. and Israeli attacks on Iran, during which time there have been multiple attacks and seizures of ships.
Taken together, these frictions point to broader changes in international shipping, indicating that major powers are increasingly willing to challenge control of the world’s shipping lanes, and raising questions about whether the long-standing international laws governing the world’s oceans are beginning to dismantle.
So what is the recent dispute over the Panama Canal all about, and what does it mean for the future of maritime law and security?
What’s happening at the Panama Canal?
In a joint statement with Bolivia, Costa Rica, Guyana, Paraguay and Trinidad and Tobago on Tuesday, the United States condemned “targeted economic pressure by China” and actions “impacting Panamanian-flagged vessels.”
The countries accused China of seizing Panamanian-flagged vessels in their ports, calling the actions “a blatant attempt to politicize maritime trade and violate the sovereignty of countries in the hemisphere.”
The two leaders called Panama “a pillar of our maritime trading system” and must remain “free from undue external pressure,” warning that “any attempt to undermine Panama’s sovereignty is a threat to us all” and pledging to keep the Americas “a zone of freedom, security and prosperity.”
China appears to deny having seized the Panamanian-flagged vessel. Chinese Foreign Ministry spokesperson Lin Jian addressed the crisis on Wednesday, saying the US accusations are “totally baseless and distort reality.”
“Who occupied the Panama Canal for so long, invaded Panama with military forces, and arbitrarily trampled on its sovereignty and dignity? Who wants the Panama Canal and tries to turn this international waterway, which was supposed to be a permanently neutral country, into its own territory, ignoring the sovereignty of regional countries? The answer is self-evident,” Ken said at a press conference. “It was the United States that politicized the port issue and turned it into a security issue.”
On Wednesday, Panama’s President José Raul Mulino appeared to try to ease tensions, saying in a statement that he welcomed the “unity of friendly nations” regarding Panamanian-flagged ships anchored in Chinese ports.
“We don’t want to be drawn into controversy because we value respectful relations with all countries,” he said.
What caused this crisis?
In January, Panama’s Supreme Court revoked the long-held interest held by Hong Kong-related companies in operating the ports of Balboa and Cristobal.
The decision comes as the United States continues to pressure Panama to curb Chinese influence around the canal.
US President Donald Trump has repeatedly suggested since the start of his second term that the US might take control of the Panama Canal, while accusing China without evidence of controlling the strategic waterway, which accounts for about 6% of global trade.
China slammed the Panama court’s ruling, saying Panama had “willingly surrendered” to hegemony. In the weeks since, Beijing has been accused by the U.S. government of seizing or delaying dozens of Panamanian-flagged ships.
Since last month’s court ruling, there has been a “surge in seizures” of Panamanian-flagged ships that “far exceed historical norms,” the Federal Maritime Commission said.
US Secretary of State Marco Rubio described China’s alleged actions as “bullying” and said it raised “grave concerns” about the use of economic leverage to undermine Panama’s “sovereignty.” The Chinese government denies the charges, calling them “baseless.”
What other ocean crises are happening right now?
Further exacerbating the Panama Canal dispute is the fact that it is unfolding in parallel with widespread erosion of maritime norms, particularly in the Strait of Hormuz.
Tensions in the region have caused major turmoil in global energy markets since the United States and Israel began bombing Iran on February 28. The Iranian government responded by effectively closing the strait, through which a fifth of the world’s oil and liquefied natural gas (LNG) supplies are transported in peacetime, causing oil prices to soar. Iran then began charging tolls for passage, an unprecedented move in the strait.
Despite the fragile ceasefire, the US government attempted to put pressure on Iran by imposing a naval blockade targeting Iranian ships and ports.
Approximately 2,000 ships are currently stranded on either side of the strait, while others have been diverted, shelled, or seized in the strait or in the open sea. Last week, Iran seized two foreign container ships attempting to transit the Strait of Hormuz and fired on a third.
Two days earlier, the U.S. military had seized the Iranian container ship Tuska near the Gulf, claiming the ship was heading for the Iranian port of Bandar Abbas after crossing the Arabian Sea through the Strait of Hormuz.
Is this the “new normal” for global transportation?
Abdul Khaliq, a professor at Britain’s Liverpool John Moores University, said “increasing geopolitical conflicts” are increasingly “spilling up to maritime chokepoints from the Panama Canal to the Strait of Hormuz”.
“Although not yet a permanent ‘new normal,’ the pattern of coercive signaling, accusations, and counter-rebuttals suggests rising baseline risks, politicization of shipping lanes, and more frequent disruptions to commercial flows and insurance markets around the world,” Khaliq told Al Jazeera.
However, James Kraska, Charles H. Stockton Dean of International Law at the US Naval War College, told Al Jazeera that the ongoing maritime crisis between the US and Iran is unlikely to become a permanent feature of the global shipping industry.
“My personal view is that the strait will be opened through some kind of negotiated agreement between Iran and the United States,” Kraska said. “So I believe and hope that this does not become the new normal in the Strait of Hormuz.”
Kraska said the international community’s strong opposition to the unilateral closure of key sea lanes will be a key factor in pushing for the resolution “regardless of tensions and conflicts between the United States and Iran.”
This is due to rising global energy costs, which has “raised the spotlight on this issue,” Kraska said.
He said other waterways, such as the Panama Canal, operate under a “completely different legal regime” than the Strait and are already allowed to charge fees for “services provided to maintain the infrastructure.”
It will be interesting to see whether other coastal states try to follow Iran’s example by extracting a price for natural passage, Kraska said, adding that some commentators have pointed to Denmark in the Baltic Sea as a hypothetical example.
“I’m optimistic here too,” he said. “I believe that countries can strengthen their position in the world…in terms of legitimacy…by adhering to the rule of law and the law of the sea, rather than imposing unilateral gatekeeping.”
But Khaliq said there were signs that governments and businesses were “already making real adaptations, including diversifying supply chains, reassessing risk premiums, strengthening naval coordination and investing in alternative routes.”
“Although not officially termed a ‘new normal,’ operational behavior increasingly reflects expectations that geopolitical instability in maritime trade will persist,” he said.
Stefan Maurer, a professor at the UPF Barcelona School of Management, said the consequences of disruption, or even closure, of the Panama Canal on global trade “could be very serious, depending on the extent of the disruption.”
“Most of the trade flows through the canal will be between the east coast of the United States and Asia, but coastal trade in South America, trade between the eastern United States and western South America, and trade between Europe and the west coast of South America will also be affected,” he told Al Jazeera.
“Trade will adapt, but for these trade routes, alternative routes involve significantly longer sailing distances (e.g. bypassing the southern tip of South America),” Maurer added, noting that while South American countries would be the most affected, the United States and Canada would also be “severely affected.”
