-Caveat Lector-
Insight
August 16, 1999
China's Beachhead at Panama Canal
By J. Michael Waller
Reporting from Balboa, Insight uncovers
China's most recent political and
economic maneuverings to obtain
effective control of the Panama Canal as
the U.S. leaves.
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
Ka-shing 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."
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Kaddish, Kaddish, Kaddish, YHVH, TZEVAOT
FROM THE DESK OF: <[EMAIL PROTECTED]>
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~~~~~~~~ <[EMAIL PROTECTED]>
The Best Way To Destroy Enemies Is To Change Them To Friends
Shalom, A Salaam Aleikum, and to all, A Good Day.
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