Amidst Trump's plans for Greenland and Canada, the Panama Canal issues have not been associated with the Arctic. Nevertheless, the recent exit of the country from the Belt and Road Initiative might further increase the demand for the Northern Sea Route.
China's initiative spans both land and maritime corridors; however, the initial version of the Belt and Road relied mainly on the Suez Canal, which has faced issues with Houthi attacks. The Panama Canal was introduced on 'a new map' in 2017, with the Latin American country being the first to join the Belt and Road.
The Panama Canal is one of the key 'chokepoints' of the Chinese Belt and Road Initiative for expansion. While the public image of such chokepoints is often shaped by incidents like the recent Suez blockage, the primary concern for both the U.S. and China is security.
If one country decides to block the passage, virtually all trade could come to a halt. According to some estimations, the U.S. container traffic through the Panama Canal equals circa 40 per cent.
China's cooperation with Panama is believed to be part of the so-called 'debt trap' strategy introduced through its Belt and Road Initiative. There are also some concerns pointing to the influential Hong Kong terminal operator CK Hutchison Holdings working in Panama. According to The Guardian, two Chinese firms are currently building bridges over the canal as well.
The U.S. aims to control the canal, and Panama would have limited means to respond if the U.S. decides to take action. "We’re going to address that topic… The president has been quite clear that he wants to administer the canal again. Obviously, the Panamanians are not big fans of that idea. That message has been made very clear," said the U.S. Secretary of State Marco Rubio.
Interestingly, the U.S., represented by Marco Rubio, 'welcomes Panama's move', although this makes sense only from a short-term perspective. This decision will likely push China to increase its presence in alternative routes, and there are not many choices available. The Suez Canal continues to lose popularity due to security concerns related to Houthi attacks, while the bypass through the Cape of Good Hope is viable but significantly more time-consuming.
In 2021, the Arctic Institute article referred to the NSR as the 'Arctic challenge to Panama Canal shipping' and noted that "just as the Panama Canal earns record revenues year after year, so too is the Arctic Ocean seeing record rates of melting ice." Although this comparison is not new in today's debate, it still holds some relevance. However, the situation regarding Panama has certainly changed. If the political climate improves the NSR—or rather the Big NSR stretching from the Baltics to Sakhalin—could become one of the main connectors between Europe and Asia. This would provide a concise investment plan for China, which already has experience trading with Russia through the Ice Silk Road.
The Editorial Board of the Arctic Century
Also read the publication:
Warming in International Relations in the Arctic
