China halts infrastructure agreements with Panama after court ruling against CK Hutchison, escalating tensions amid U.S. diplomatic pressure.
Hutchison Port Crisis Escalates Global Tensions
According to a report by Bloomberg, the Chinese government has instructed a halt to agreements related to infrastructure projects in Panama as retaliation for the Panama Supreme Court's decision to suspend the port operating contracts of Hong Kong-based CK Hutchison. This development coincided with Hutchison initiating arbitration proceedings against the Panamanian government due to the aforementioned decision.
"Unconstitutional" Ruling from the Panama Supreme Court
Last week, the Panama Supreme Court ruled that the contracts allowing CK Hutchison to operate two container ports near the Panama Canal were "unconstitutional." The decision directly impacted the company's planned large-scale sale process for its global portfolio, which includes these ports.
Hutchison appealed the court ruling, accusing Panamanian authorities of disregarding official correspondence and defenses made with the company during the trial process. A statement from the company emphasized that operational control over the terminals continues for now despite the legal process.
Arbitration Process Initiated
Following the court ruling, CK Hutchison initiated arbitration proceedings against the Panamanian government in Hong Kong. According to legal analysts, this process could take years to conclude. If Hutchison wins the case, it is stated that the process will likely result in Panama having to pay compensation.
Discussions on U.S. Pressure and Chinese Influence
The ruling against Hutchison by the Panamanian court came after nearly a year of diplomatic pressure from the Trump administration regarding China's influence around the Panama Canal. The White House had accused China of "effectively managing" the Panama Canal without providing concrete evidence to the public, and at one point, suggested that the canal could be "reclaimed" from Panama's control.
U.S. Secretary of State Marco Rubio recently described China's presence around the canal as "unacceptable" during his visit to Panama. Rubio stated that the U.S. might take unspecified measures to "protect its rights" stemming from agreements that regulated the transfer of control of the canal from the U.S. to Panama in 1999.
$23 Billion Port Sale Plan
CK Hutchison's global port portfolio sale plan, valued at approximately $23 billion, envisioned transferring the operating rights of the two ports in Panama to American investment giant BlackRock. This move was considered a strategic gain from Washington's perspective.
If the plan is completed, the remaining part of the portfolio was aimed to be sold to Terminal Investment Limited (TIL), owned by the Aponte family, which is a significant player in global maritime transportation.
Strong Reaction and Threats from Beijing
In this environment of intensified U.S. pressure, the Chinese government accused the Panama Supreme Court of making a ruling against Hutchison and "submitting to hegemonic powers." The Hong Kong Affairs Office in Beijing described the ruling as "completely ridiculous" and warned that if it is not reversed, Panama would "pay a heavy price both politically and economically."
Economic Sanctions Come into Effect
According to Bloomberg and Reuters, the initial steps of this threat have already been taken. The Chinese government has instructed state companies to halt all discussions regarding new infrastructure projects in Panama. Given China's significant role in Panama's construction sector, this decision is seen as a serious economic pressure factor.
Additionally, it has been reported that Chinese customs officials have begun to impose additional inspections on agricultural product exports from Panama. Other possible measures include redirecting cargoes heading to China to alternative ports, which could lead to a loss of revenue for Panama's ports.
Emphasis on "Judicial Independence" from Panama
Despite all these pressures, the Panamanian government does not appear to be backing down. President Jose Raul Mulino stated in a press conference on Wednesday that the government respects the independence of the judiciary, affirming that Panama is a "country of laws" and that they have no intention of invalidating court decisions.
Source: SeaNews Türkiye
