Hormuz effect? How US, China are ramping up tensions over the Panama Canal

“Who occupied the Panama Canal for a long time, invaded Panama with its military, and arbitrarily trampled on its sovereignty and dignity? Who covets the Panama Canal, seeks to turn this international waterway – meant to remain permanently neutral – into its own territory, and disregards the sovereignty of regional countries? The answer is self-evident,” Jian told a news conference. “The one who has politicised and securitised the issue of ports is the United States.”

On Wednesday, Panamanian President Jose Raul Mulino said in a statement that he welcomed the “solidarity of friendly countries” regarding the Panamanian-flagged ships held in Chinese ports, while appearing to try to ease tensions.

“We do not wish to engage in controversy, as we value respectful relations with all nations,” he said.

What led to this crisis?

In January, Panama’s Supreme Court scrapped a longstanding concession held by a Hong Kong-linked company to operate the Balboa and Cristobal ports.

That decision came amid sustained US pressure on Panama to curb Chinese influence around the canal.

US President Donald Trump has suggested multiple times since his second term began that the US could take control of the Panama Canal, while accusing China, without evidence, of managing the strategic waterway, which accounts for about six percent of global trade.

China slammed the Panama court’s ruling, saying that Panama had “willingly succumbed” to hegemonic power. In the weeks since, Beijing has been accused by Washington of detaining or delaying dozens of Panama-flagged ships.

According to the US Federal Maritime Commission, there has been “a surge in detentions” of Panama‑flagged vessels, “far exceeding historical norms” since the court’s ruling, it said last month.

US Secretary of State Marco Rubio described China’s alleged actions as “bullying”, saying they raised “serious concerns” about using economic leverage to undermine Panama’s “sovereignty”. Beijing has denied the charges, calling them “groundless”.

What other maritime crises are happening now?

What makes the Panama Canal dispute more heightened is the fact that it is unfolding alongside a wider erosion of maritime norms, most notably in the Strait of Hormuz.

The tensions there have caused major disruption to global energy markets since the US and Israel started bombing Iran on February 28. Tehran responded by effectively closing the strait, through which one-fifth of the world’s oil and liquefied natural gas (LNG) supplies are shipped during peacetime, causing oil prices to soar. Later, Iran began charging tolls for passage through – a move until now unheard of for a strait.

Despite a fragile ceasefire, Washington, in an attempt to pressure Iran, has imposed a naval blockade targeting Iranian shipping and ports.

Currently, some 2,000 vessels are stranded at either end of the strait, while others have been rerouted, come under fire or even been seized in the strait and the open sea. Last week, Iran captured two foreign container ships attempting to traverse the Hormuz strait, while firing at a third one.

Two days earlier, the US military seized the Iranian container ship Touska close to the Gulf, claiming it was attempting to cross the Arabian Sea through the Strait of Hormuz and was heading towards the Iranian port of Bandar Abbas.

Is all this the ‘new normal’ for global shipping?

Abdul Khalique, a professor at Liverpool John Moores University in the UK, said “rising geopolitical rivalry” is increasingly “spilling into maritime chokepoints, from the Panama Canal to the Strait of Hormuz”.

“While not yet a permanent ‘new normal’, the pattern of coercive signalling, accusations, and counter-accusations suggests higher baseline risk, politicised shipping lanes, and more frequent disruptions to commercial flows and insurance markets globally,” Khalique told Al Jazeera.

James Kraska, Charles H Stockton Chair of International Law at the US Naval War College, told Al Jazeera, however, that the ongoing maritime crisis between the US and Iran, is unlikely to become a permanent feature of global shipping.

“My personal view is that the straits will be open through some sort of negotiated agreement between Iran and the United States,” Kraska said. “And so I believe and hope that this does not become a new normal in the Strait of Hormuz.”

Kraska said strong international opposition to the unilateral closure of major sea lanes will be a key factor driving a resolution, “regardless of the tension or conflict between the United States and Iran”.

This will come because of the spike in global energy costs, which [has] “galvanised attention toward this issue”, Kraska said.

Other waterways such as the Panama Canal, he said, operate under “completely different legal regimes” from straits, and are already allowed to charge fees for “services provided to maintain the infrastructure”.

It will be notable to see whether other coastal states try to copy Iran by extracting payments for passage through natural straits, Kraska said, adding that some commentators point to Denmark in the Baltic Sea as a hypothetical example.

“Here again, I am optimistic,” he said.  “I believe that states understand their position in the world… in terms of legitimacy …. is going to be enhanced by adhering to the rule of law and the law of the sea rather than trying to impose unilateral gatekeeping”.

Khalique, however, said there are signs that governments and firms are “already adapting pragmatically: diversifying supply chains, revising risk premiums, increasing naval coordination, and investing in alternative routes”.

“While not formally labelled a ‘new normal’ operational behaviour increasingly reflects expectations of sustained geopolitical volatility in maritime trade,” he said.

UPF Barcelona School of Management professor Stephan Maurer said the consequences of disruption to or even closure of the Panama Canal for global trade “could be very grave, depending on the degree of disruption”.

“Most of the trade flows going through the canal are between the US East Coast and Asia, but South American intercoastal trade, trade between the US East and the West of South America, and between Europe and the West Coast of South America would also be affected,” he told Al Jazeera.

“Trade would adapt, but for these trade routes, alternatives would greatly increase distances to be covered (eg, going around the southern tip of South America),” Maurer added, noting that while South American countries would be most impacted, the US and Canada would also be “severely affected”.