China Slams Panama Ports Verdict, Hutchison Starts New Case

The fight for control of the world’s most strategic trading ports has ramped up following a court verdict in Panama last week that scrapped long-term concessions for two ports run by a Chinese company.

China voiced its displeasure with the decision on Tuesday, warning that the small Central American nation would pay “heavy prices” for the ruling.

Beijing’s Hong Kong and Macau Office said the Panama Supreme Court’s ruling — hailed in Washington as a “win for America” — was “shameful and pathetic.”

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Panama’s Supreme Court annulled a long-term contract that Panama Ports Company (PPC), a subsidiary of Hong Kong conglomerate CK Hutchison, had to operate the Balboa and Cristobal ports, which are on either side of the strategic waterway.

It said PPC violated the country’s constitution by giving it exclusive privileges and tax exemptions.

The fight for the two Panama ports is just the first round of a bigger battle spurred by parent company Hutchison’s plan, revealed in March last year, to sell 43 of its ports in 23 countries to a consortium led by BlackRock and the Mediterranean Shipping Company (MSC), run by Italian billionaire Gianluigi Aponte.

Beijing’s ‘wolf warriors’ were outraged, condemning the $23 billion sale plan as “a betrayal of the Chinese people.”

And they are still showing their fangs, so it was perhaps little surprise to see that CK Hutchison moved today (Feb 4) to start international arbitration proceedings to challenge the outcome.

However, analysts have said arbitration hearings could drag on for years and may yield little, given the intense rivalry between China, the US and other Western nations.

US President Donald Trump has insisted that the United States must have control of the Panama Canal, given that America funded and constructed the waterway between 1904 and 1914 before returning it to local authorities in 1999.

US officials reminded their counterparts in Panama last year that this is an issue of national security, as 40% of US container traffic still goes through the canal.

Ports sale may be split into smaller parts

Communist Party bosses in Beijing intervened forcefully in July last year when they said that Chinese shipping giant COSCO must be part of the deal.

And by the end of the year, they were saying COSCO must have a majority stake in the consortium — a demand that BlackRock and MSC opposed.

But sources have told major news outlets recently that Hutchison, controlled by Hong Kong billionaire Li Ka-shing, plus BlackRock, MSC and Beijing are still open to a rejig of the original takeover.

Hutchison has significant ports in China, but they are not part of the deal. However, the 41 other ports included in the proposed takeover include ports in Mexico, the Bahamas, plus Barcelona in Spain, and Rotterdam in the Netherlands.

“One option in the latest discussions is that the parties consider breaking up the portfolio and have the three bidders hold stakes in different ports,” said a source with knowledge of the matter told Reuters.

“Sources have said it could take at least two years to clear all regulatory hurdles in view of the challenges, such as securing approval from anti-competition regulators in nearly 50 jurisdictions.”

JP Morgan and Citibank have reportedly said it could be easier to resolve the sales of the Hutchison ports with Panama out of the equation.

Message to other ‘rivals’

Beijing has spoken out loudly this week, because it wants the “heavy prices” message to be heard by other countries looking to oust Chinese companies from local ports.

In Australia, for example, Prime Minister Anthony Albanese has vowed to retake control of operations at the port in Darwin, in the country’s far north, which were sold to a company owned by a Chinese billionaire in 2015, when Canberra believed Beijing was a far more friendly regional power.

But its aggressive push into the South China Sea, its trade war with Australia in the early 2020s, and decision to stage a live-fire drill in the Tasman Strait prior to the federal election last year, have clearly shattered any delusions about China under Xi Jinping.

The Albanese government is now looking to sell dozens of unused land holdings owned by the Department of Defence to help fund spending on bases in the north and west, plus infrastructure to support submarines it is purchasing under the AUKUS programme.