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Turzi, Mariano LATIN AMERICAN SILK ROAD: CHINA AND THE NICARAGUA CANAL Revista de Relaciones Internacionales, Estrategia y Seguridad, vol. 12, núm. 2, julio- diciembre, 2017, pp. 163-178 Universidad Militar Nueva Granada Bogotá, Colombia

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LATIN AMERICAN SILK ROAD: CHINA AND THE NICARAGUA CANAL*

Mariano Turzi**

Abstract

The building of the Panama Canal by the US in 1914 proved definitively the ascent of the US to regional hegemony. Shortly after, World War I would lead the US to global primacy. The canal was much more than the construction of a shipping route between the Atlantic and Pacific oceans; it meant that America was a power capable of and willing to reshaping the Western Hemi- sphere in its way to becoming a world power.

A century later –in 2014- China announced it would begin a similar enterprise in Nicaragua. What are the geopolitical implications for Latin America? Is this signaling a more assertive Chinese foreign policy seeking – by ambition or by necessity– to challenge the US in the Western Hemisphere? Is this geographic reshaping also politically reflecting the emergence of a world power?

Keywords: Latin America, China, United States, geopolitics, Panama.

28 de noviembre de 2016 28 de noviembre Artículo surgido de los estudios del Centro de Investigación de la Uni- versidad Torcuato Di Tella, en el Programa de Estudios de Asia Pacífico. ** Ph.D. International Studies, SAIS, Johns Hopkins University. Profesor Asistente, Universidad Torcuato Di Tella.

26 de septiembre de 2016 Recibido: 26 de septiembre de 2016 Evaluado: 27 de octubre Aceptado: latinoamericana: China de la seda M. (2017). La ruta Referencia: Turzi, y el Canal de Nicaragua. Revista Relaciones Internacionales, Estrategia y Seguridad , 12 (2), 163-178. DOI: http://dx.doi.org/10.18359/ries.2308 Artículo de Reflexión Correo electronico: [email protected] 164 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD

LA RUTA DE LA SEDA LATINOAMERICANA: CHINA Y EL CANAL DE NICARAGUA

Resumen

La construcción del Canal de Panamá por los Estados Unidos en 1914 demostró de- finitivamente el ascenso de los EE.UU. a la hegemonía regional. Poco después, la Pri- mera Guerra Mundial conduciría a los Estados Unidos a la primacía mundial. El canal era mucho más que la construcción de una ruta marítima entre los océanos Atlántico y Pacífico; significaba que Estados Unidos era un poder capaz y dispuesto a reformar el hemisferio occidental en su camino para convertirse en una potencia mundial.

Un siglo más tarde –en 2014– China anunció que comenzaría una empresa similar en Nicaragua. ¿Cuáles son las implicaciones geopolíticas para América Latina? ¿Está señalando una política exterior china más asertiva que busca –por ambición o por necesidad– desafiar a EEUU en el hemisferio occidental? ¿Es esta remodelación geográfica también refleja políticamente la aparición de una potencia mundial?

Palabras clave: América Latina, China, Estados Unidos, geopolítica, Panamá.

A ROTA DA SEDA LATINOAMERICANA: A CHINA E O CANAL DA NICARÁGUA

Resumo

A construção do Canal do Panamá pelos Estados Unidos em 1914 provou defi- nitivamente a ascensão dos EUA à hegemonia regional. Pouco depois, a Primeira Guerra Mundial levaria os EUA à primazia global. O canal era muito mais do que a construção de uma rota marítima entre os oceanos Atlântico e Pacífico, signi- ficava que a América era um poder capaz e disposto a remodelar o Hemisfério Ocidental em seu caminho para se tornar uma potência mundial.

Um século mais tarde –em 2014– a China anunciou que começaria uma empresa similar na Nicarágua. Quais são as implicações geopolíticas para a América Latina? Será que isso sinaliza uma política externa chinesa mais assertiva buscan- do –por ambição ou por necessidade– desafiar os EUA no Hemisfério Ociden- tal? Essa reformulação geográfica também reflete politicamente a emergência de uma potência mundial?

Palavras-chave: América Latina, China, Estados Unidos, geopolítica, Panamá.

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Introduction second canal in Central America. The third section explores a geopolitical In 1914, the Panama Canal opened reading of the canal, illuminating as- its locks. In 2014, the Chinese com- pects that are not obvious or apparent pany HK Nicaraguan Canal Develop- when considering only the economic ment Investment Co Limited (HKND) point of view. The last section explo- announced that the construction of res the geoeconomic and geopolitical another canal across Nicaragua would reshaping of Latin America along an begin on December 22nd. It was much Atlantic and Pacific axis. As the rising more than the construction of a new US in 1904 reshaped the region along shipping route between the Atlantic the North-South divide, so is China and Pacific oceans. It was a signal of exerting a gravitational pull towards the emergence of a country with the the Pacific not just for countries in the capacity and the will to reshape geo- region but for the Latin American re- graphic realities according to political gion as a whole. necessity. The Panama Canal not only expanded international trade, it con- solidated regional hegemony in the History repeating? Western Hemisphere in America’s as- cending road to global primacy. Can In 1880, a private French company led the historical contrasts and parallels by Ferdinand de Lesseps -the builder between the Panama and Nicaragua of the Suez Canal in Egypt- began ex- canal building enterprises offer signi- cavating. American interest in a canal ficant and useful comparison for the dated at least as far back as 1850, when current state of international affairs? the United States and Great Britain ne- Is the Nicaragua canal’s geographic gotiated the Clayton-Bulwer Treaty to reshaping also politically reflecting the rein in rivalry over a proposed canal emergence of a new world power? Is through Nicaragua. The Hay-Paunce- it signaling a more assertive Chinese fote Treaty of 1901 abrogated Clayton- foreign policy seeking –by ambition Bulwer and licensed the US to build or by necessity– to challenge the US and manage its own canal. A canal in in the Western Hemisphere? Will the- Panama would have economic and re be geopolitical implications for US- military advantages for the US, but it Latin America relations? would also present potential vulnera- bilities if it were not under American The essay proposes four sections in or- control. De Lesseps project threatened der to answer this question. The first American dominance of the Western one is historical, explaining why the Hemisphere. President Hays reassured comparison on causes and effects of Congress that the “policy of this coun- the Panama and Nicaragua canals is try is a canal under American control.” sound and relevant. The second ex- Although de Lesseps was not acting plores the economic logic of building a on behalf of the French government,

Mariano Turzi 166 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD many in Washington saw such foreign conversations with the Chinese on involvement as contrary to the Monroe Latin America? Nobody asks me that doctrine. After a scandalous bankrupt- question anymore. It’s now very ob- cy, the Compagnie Nouvelle du Canal vious why we have those conversa- de Panama was liquidated and taken tions”. Nevertheless, at present, there over by the United States. What began is no evidence to think that China is as a profit-seeking private enterprise or would be able or willing to exert ended as a governmental project pus- such level of control over any country hed forward by strategic geopolitical in the Western Hemisphere. This kind considerations? If HKND’s efforts in Ni- of diplomatic heavy handedness has caragua fail in a similar fashion, what not even been observable in its imme- –if any- will be the involvement of the diate sphere of influence. Moreover, Chinese government? Beijing is concerned that becoming a dominant player in Central American In 1902, the United States reached an affairs could galvanize anti-Chinese agreement to buy rights to the French interests in the United States to the canal property and equipment. A ne- detriment of the US-China bilateral gotiation then began for a treaty with relation. It seems unlikely Beijing will Colombia, for at the time Panama was jeopardize the bilateral relation with a province of Colombia. When the the US to gain a pyrrhic influence in Colombian Congress grew unforthco- Central America. It has been a corners- ming, the US government and Pana- tone of Chinese engagement with La- manian business interests collaborated tin America to demand the switching on a revolt. President Theodore Roo- of diplomatic recognition from Taipei sevelt dispatched warships to Panama to Beijing. Non-recognition of the City (on the Pacific) and Colón (on the Taiwanese government is a precondi- Atlantic) in support of Panamanian in- tion for conducting formal diplomatic dependence, achieved in November relations with the People’s Republic of 1903. The Hay-Bunau-Varilla Treaty China. It is also an implicit promise of of 1903 bequeathed the United States access to a wide portfolio of material rights to a Canal Zone in perpetuity. benefits. Of the seven Central Ameri- After one hundred years since cons- can countries, six –Belize, El Salvador, truction completion, the geopolitics of Guatemala, Honduras, Nicaragua, and the Western Hemisphere have been Panama- recognize Taiwan. Chinese significantly transformed. Then Assis- proposed canal participation has come tant Secretary of State for the Western in the way of private companies see- Hemisphere Affairs State Roberta Jaco- king profits rather than the Chinese bson openly recognized this increasing government pursuing influence. This is change of balance of power within especially true in the case of the Ni- Latin America in 2014: “Frankly, 10 caragua canal. Of the $124.5 billion years ago when they began, people China has loaned to 14 Latin Ameri- would ask me, why are you having can and Caribbean countries between

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2005 and 20151, Nicaragua has not tructure. A third cluster of arguments received a single disbursement. warn that domestic political and en- vironmental opposition could derail construction. Addressing these con- Economics & geoeconomics cerns, former Sandinista guerrilla lea- der Eden Comandante Zero Pastora is Economic arguments surrounding the now in charge of dredging operations Nicaragua Canal stress several ele- along the San Juan River for the canal. ments pointing to the unfeasibility of He has publicly attested to the credi- the project, pointing that due diligen- bility of the project, when he referred ce has yet to determine if this is not a to the head of HKND -Wang Jing- as fraudulent deal with a front company “a man who knows what he’s doing. to get a concession and then resell the The opposition didn’t want to believe rights. For example, the initial works it, and they even talked about el chi- will be the development of a new no as if he were a phantom. But now commercial port at Brito and a free they know it’s true”. Wang lost more trade zone with an airport around the than 80% of his fortune in the Chinese city of Rivas. It takes almost a day to stock market crisis of 2015. Financial make the 48-mile trip along the Pana- problems, along with ongoing envi- ma Canal. The 172.7 mile route of the ronmental and engineering reviews, Nicaragua Canal would require that were causing severe delays. Indeed, ships either lay up at night, or naviga- as of October 2016 there was no evi- te in the dark, making it much more dence of actual construction despite costly and difficult. But even if the government´s insistence to the con- canal itself is not built, those projects trary. With regards to opposition, the alone could deliver enough economic Pew Global Attitudes Project 2014 benefits for HKND. Other arguments shows 58% of Nicaraguans hold posi- against the canal point to the lack of tive views of China, while only 19% technical expertise by HKND for a pro- have negative ones. And 74% believe ject of such magnitude. In this sense, it that China´s growing economy is a is suggestive that China Railway Road good thing for the country, while only lacks hydrological experience to dig 13% rate it as a bad thing. a canal possessed by other Chinese companies with established presence Another set of economic arguments in Latin America (China Harbour, Si- raise an eyebrow over the comparati- noHydro, China Water and Electric) ve and competitive advantages of mul- CRR does have experience in cons- tiple canals in Central America. These tructing ports and highway infras- arguments point out to time differen-

1 China-Latin America Finance Database, Inter American Dialogue, available at http://www. thedialogue.org/map_list/, accessed Dec. 2016.

Mariano Turzi 168 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD tials and cost advantages of Panama a political enterprise than a business over its alternatives. The current Pa- opportunity. nama Canal limits transit to vessels with nominal carrying capacity of up The roots of China’s economic trans- to 5,000 twenty-foot equivalent unit formation result from industrialization (TEU), carrying up to 62,000 metric and urbanization processes happening tons of bulk cargo at a 40-foot draft. at 100 times the scale and at ten times So it is unable to accommodate ves- the speed of the first country to indus- sels in the Post-Panamax size range, trialize, the United Kingdom. It is also which can reach (or exceed) 1,200 occurring in against the backdrop of a feet in length, 160 feet wide, and 50 highly integrated, interconnected glo- feet in draft. After expansion, Panama balized world. The growth in seaborne now accommodates vessels with no- trade could provide a compelling logic minal capacity of up to 13,000 TEUs, for a second canal: according to the carrying up to 140,000 metric tons of WTO, the dollar value of global trade bulk cargo at a 50-foot draft. But even is projected to continue to grow at a the expanded Panama Canal cannot rate of 9% to 2020, and the growth handle the largest Post-New Pana- of maritime trade by volume by 3-4% max (16,000 TEUs) or Triple E (18,000 through 2020. To sustain this process, TEUs) vessels, which account for over China needs bulk cargo –freight that 10% of global container shipping ca- is not packaged such as oil, minerals, pacity2. Scale efficiencies of the mega- and grains– from abroad. This has in freighters will be reduced by longer turn expanded China’s maritime inter- transit times and higher fuel costs ests and stakes in international mariti- in the Asia-US East Coast route. For me waterways. The wide span already the Shanghai-Baltimore trip, a Cen- reflects its position as the world’s lar- tral American route is around 2,500 gest exporter and second-largest im- miles shorter than through Suez and porter. Bulk kind of cargo requires the 3700-4600 miles shorter than around use of specialized ships and specia- Cape of Good Hope. Panama and lized transshipment points. Because Nicaragua are geographically close this kind of cargo is prone to econo- enough to make price and safety the mies of scale, vertical integration crea- main factors in taking a commercial tes efficiencies opportunities. Hence, decision. With actual cost of the Ni- Chinese shipping firms are responding caragua project around $100 billion, by seeking presence in a select group fees would have to more than double of ports that can be able to cater to the Panama’s to be economically compe- new more fuel-efficient generation of titive. As such, the canal seems more mega-vessels.

2 As of 2016, the average size of units in the global commercial fleet was 3,832 TEU, and the average size of those on order was even larger at 8,030 TEU.

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The World Shipping Council estima- shipping routes are thus covered: Asia- tes that seven of the top ten world North America, Asia-North Europe, container ports are located in Chi- Asia-Mediterranean, North Europe- na: Shanghai, Hong Kong, Shenzhen North America, and Asia-Middle East. Ningbo-Zhoushan, Guangzhou, Qing- Ships, ports, and routes all constitute dao, and Tianjin. China controls a fifth part of a corporate competition for in- of the world’s container fleet mainly fluence with geopolitical components. through giant state-owned lines. Of A Central American passageway could the top ten biggest freight shipping become of vital strategic importance in companies in the world, China Ship- this dynamic. ping Container Lines (CSCL), and Shanghai-based China Ocean Ship- ping (COSCO) occupy the ninth and Geopolitics fifth positions, respectively. Shipping has been trending towards consolida- But an alternative waterway to the tion, since it has become increasingly Panama Canal would carry strategic challenging for lone operators to survi- economic and military value. In the ve. The CSCL-COSCO alliance answers current world, these locations and faci- a 2013 move by the world’s three bilities could have dual civil and military ggest container shipping operators: use. Control of this geographic featu- Denmark’s Maersk Line, France’s CMA re would allow Chinese shipping safe CGM, and Switzerland’s Mediterra- passage, but also for commercial use nean Shipping Co (MSC). By weight, and for military power projection. If 41% of ships built in 2012 were made the Nicaragua alternative were ponde- in China. In 2013, ports and termi- red by Beijing assisted by such geopo- nals with a disclosed mainland Chi- litical considerations, then it would nese stake connects the world’s main reveal Beijing’s intention to exert di- trade routes from East to West from rect or indirect territorial control due Singapore, Kyaukoyu (Myanmar), to a fundamental strategic mistrust re- Chittagong (Bangladesh), Hambantota, garding access and governance of the and Colombo in Sri Lanka on the Bay Panama Canal. of Bengal. The line continues with the Pakistani ports of Gwadar and Karachi Besides the Nicaraguan project, on the Arabian Sea, ending in Djibouti Guatemala’s privately-held Inter- on the Gulf of Aden. Sailing up the Red Oceanic Corridor Board announced Sea and through Suez into the Medite- that it would start construction of an rranean, where COSCO Pacific is buil- interoceanic channel to be completed ding a dock at Piraeus (Greece) able by 2019. Both Honduras and Colom- to handle mega-ships to cover Euro- bia are negotiating with China the buil- pe to Antwerp/Zeebrugge in Belgium, ding of dry canals. The Honduran –in in order to cover the shipping route the Gulf of Fonseca– will be built by to North America. The top five trade China Harbour Engineering Company,

Mariano Turzi 170 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD while the Colombian –between Ba- and truck logistics across the US. Even hía Solano on the Pacific and Acandi before expansion, the Panama Canal in the Caribbean– by China Railroad had shortened maritime distances bet- Engineering Company. Even Mexico ween American East and West coasts is considering reactivating the old ca- by a factor of 8,000 miles. According nal through the Tehuantepec isthmus. to a November 2013 DoT report, top Due to their physical characteristics, ports in the US include: California (Los some of these alternatives would ne- Angeles & Long Beach), New Jersey cessitate a transshipment point in the (Newark), Georgia (Savannah), Texas Caribbean or the Cuban port of Ma- (Houston), Virginia (Norfolk), South Ca- riel, West of Havana. Brazil and Cuba rolina (Charleston), Washington (Seat- agreed in 2009 to develop Mariel, lle, Tacoma), Maryland (Baltimore), through a partnership between the and Florida (Miami, Jacksonville, Port Brazilian construction giant Grupo Everglades). The new geoeconomics Odebrecht and a state-owned Cuban of canal expansion and competition in company, operated by PSA Interna- Central America will have an impact tional of Singapore. Mariel´s role as on grain exports from the U.S. Midwest major transshipment role is blocked states of the Grain Belt and open up by the American trade embargo, sin- new opportunities for exports derived ce ships which have been to Cuba from the shale revolution. are barred for six months from Ame- rican ports. However, it is clear Bra- But economic benefits have a different zilian companies are acknowledging logic than power gains. At present, the- the geographic position of Mariel will re is no proven connection between give them an advantage to supply the HKND’s private initiative and any kind American market in a post-embargo of governmental strategic imperative scenario. When Havana becomes a in a Central America Canal, as was the player in the world economy, this stra- case with the US Department of War tegic advantage will alter the geoeco- directing the excavation in the Panama nomics of the Caribbean Basin, what Canal. President of the Inter-American would demand a geopolitical rethink Dialogue Michael Shifter stated in of the regional balance of power. Such early 2014 in his Congressional hea- geoeconomic readjustments will have ring testimony, “extra-hemispheric ac- an impact on the political economy tors involvement is bound to increase structures of American states and cities in the coming years, but there is little with the busiest ports in the country indication they can pose a serious dan- due to the increased traffic between ger or threat to US interests”. Yet, there East Coast /Gulf ports and Asia. West seems to be growing evidence pointing Coast ports could be also affected, for in the direction of this being a syner- the new canals may open up oppor- gistic project with a deliberate turn to tunities for seaborne goods movement sea power by the Chinese government competing in price and time with rail that would go beyond expanding na-

LA RUTA DE LA SEDA LATINOAMERICANA: CHINA Y EL CANAL DE NICARAGUA REVISTA - Bogotá (Colombia) Vol. 12 N.° 2 - Julio-diciembre 171 val capabilities. In geopolitical terms, Mahan also argued that power to pro- sea power means the ability to safe- tect merchant fleets had been a deter- guard maritime access (control) and –if mining factor in world history. China necessary– to disrupt the access of ri- today cannot claim global sea power vals (denial). The father of sea-power status in Mahan’s sense of the term. theory, Alfred Thayer Mahan, held However, its rising economic importan- that any contender for hegemony ne- ce and growing political clout in a con- eds overseas access to raw materials text of globalization are undergirded by and markets to expand its production the expansion of sea-borne commerce in order to marshal national power. and sea-based resource extraction. A maritime grand strategy would de- After the fall of the Soviet Union, the mand access of gateways or vital sea Bush and Clinton administrations be- passages (Gibraltar, Suez, Panama). As- lieved the world would come together serting some level of control over the- under a globalized order. Indeed, since se vital waterways is critical to secure the end of the Cold War in the 1990s, economic and military advantages and US foreign policy has advanced uncha- at the same time to prevent adversarial llenged the globalization of capitalism, interference by denying the ability to anchoring a global commercial and fi- endanger those advantages. However, nancial infrastructure in the WTO and in it is not entirely clear that a Mahan- the IMF. The security precondition that inspired naval strategy for China would made it possible was the commanding assign strategic priority to the control geopolitical position of the US Navy pa- of a Central American canal. This was trolling sea lanes, providing at once re- a key element in the US power con- lative peace and survival of the systems centration capabilities between two that govern international trade and ca- oceans. The equivalent for China pital flows. China has taken maximum would be isthmus formed by the Malay advantage of the system to benefit its Peninsula and the Sumatra archipelago own interests, but did not participate in the South China Sea rather than any in setting the rules of the international second canal in Central America. Wri- economic order. After the 2009 finan- ting about the isthmus, Mahan himself cial crisis, China decided to engage glo- recognized the US interest to be “both balization on its own term. The growing commercial and political, that of other dependence on sea lanes led in 2004 states almost wholly commercial”. to the expansion of the People’s Libe- When Vice-President Joseph Biden ration Army (PLA) naval capabilities, toured the Panama Canal expansion, both to protect the country’s access in November 2013, he refrained from to resources and markets and to deny any public mention of a competing ca- opponents the ability to endanger that nal. As the Nicaragua canal is officially access. The 2004 “new historic mis- a private project, the US government sions” of the PLA set forth by Hu Jintao cannot be perceived as provoking a affirmed that China’s global economic public controversy with China. interests had created global political in-

Mariano Turzi 172 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD terests. Beijing thus officially recognized (“unpeaceful”) rise. The use of force its national interests extended beyond for redistribution of power is ruled out its borders and charged the PLA –and as a rational option. In this sense, 2014 its Navy- to base its strategy on those ex- is not analogous to 1914. The structure panding interests, not just geography. In of the current liberal institutional, eco- October 2011, the Chinese Navy’s hos- nomically interconnected world order pital ship, the Peace Ark, visited Cuba, means rising powers make both abso- Jamaica, Trinidad and Tobago, and Cos- lute and relative gains in both material ta Rica under the banner “Harmonious capabilities and status. The inverse is Mission 2011” to provide medical ser- also true for declining powers. Howe- vices to local populations. It constituted ver, these changes take place without China’s first operational naval mission precipitating major hostilities because to the Caribbean Sea. The route chosen there is a two-way process in which was through the Panama Canal. In No- the rising power accommodates itself vember 2013, Chinese naval taskforce, to the rules and structures while es- which is composed of the guided mis- tablished great powers accommodate sile destroyer “Lanzhou”, the guided changes in rules and structures to ad- missile frigate “Liuzhou”, and the com- just to the new power realities. Is the prehensive supply ship “Poyang Lake” Nicaragua canal signaling that China visited Valparaiso in Chile, Rio de Janei- will challenge the US in the Western ro in Brazil, and Buenos Aires Argentina Hemisphere? The US government po- successively. The PLA Navy taskforce sition for the last two decades was ba- carried out the first joint military exer- sed on the assumption that conflict can cise with the Brazilian Navy and paid be avoided by integrating China into the first visit to Argentina. This time, the the framework of international insti- road for the 28,000 sea mile voyage tutions created by the West. Theore- was through the Strait of Magellan. tically, this position is best articulated by liberal internationalist John Ikenbe- The geopolitical key question is rry: “the United States cannot thwart whether China is rising peacefully China’s rise, but it can help ensure that within a US-led order or if it is biding its China’s power is exercised within the time until it has more power, if globa- rules and institutions that the United lization is an enough powerful force to States and its partners have crafted decisively shift interests and intentions over the last century, rules and institu- towards the first option. The issue lies tions that can protect the interests of in the balance between the realist idea all states in the more crowded world that raison d’etat –the pursuit of the of the future”. In policy terms, during national interest- will guide action and the Bush administration Deputy Assis- raison de système, the liberal belief that tant Secretary of State for East Asia and it pays to make the system work. Glo- Pacific Affairs, Thomas J. Christensen balization as interdependence acts as a had written (2008) he: “would sum preventive structure against belligerent up Bush’s strategy toward China as a

LA RUTA DE LA SEDA LATINOAMERICANA: CHINA Y EL CANAL DE NICARAGUA REVISTA - Bogotá (Colombia) Vol. 12 N.° 2 - Julio-diciembre 173 long-term effort to shape the choices Mexico to Asia via Central America the leadership in Beijing makes about would save about 5,300 nautical mi- how to use China’s increasing regio- les each way, around 11 days. More nal and global influence”. In his No- competitive transportation could re- vember 2014 speech to the APEC CEO duce Asian gas prices by 10-15%, in Summit, then US President Obama a region where 2013 prices were 45% was categorical: “The United States and 400% higher than Europe and welcomes the rise of a prosperous, North America. This has the potential peaceful, and stable China. In fact, to drastically change the balance of over recent decades the United Sta- power in Asia. Specifically, for key US tes has worked to help integrate China allies in the region and critical actors in into the global economy -not only be- Washington’s strategy towards a rising cause it’s in China’s best interest, but China: Japan, India, and South Korea. because it’s in America’s best interest Asia was responsible for up to 72% of and the world’s best interest. We want spot LNG in 2012. Japan, Korea, and China to do well”3. However, an op- India alone accounted for 61%. posite, more realist-inspired position starts from the assumption that conflict The International Energy Agency’s between the United States and China World Energy Outlook 2013 estimates is inevitable and that the United States LNG demand will increase by almost should be prepared to react. half to 2035 and sees Japan’s LNG consumption grow by 30-40% to 2020. Tokyo is the main global LNG impor- A new gateway to the pacific…? ter, alone responsible for one sixth of global demand. Increased supply and Compounding the geopolitical effect ease of access will mean the US will of the technological revolution leading have the economic and geostrategic the United States to become an energy capabilities to reinforce Japan’s energy superpower with the logistical capaci- security. A long-term, abundant, and ty to ship oil and especially liquefied reliable LNG supply from the US could natural gas (LNG) in shorter, cheaper, divert Tokyo away from increasing its more direct ways will shift global ener- dependence on the Middle East and gy supplies. Until 2015 only 8% of the Russia. There are very large natural world’s LNG fleet could fit through the gas supplies being produced now from Panama Canal. Post-expansion, the the Russian island of Sakhalin expor- percentage will be more than 90%. ted to Asia. It might even contribute to Compared to the Suez Canal rou- relieve some of the pressure to adopt te, vessels travelling from the Gulf of an aggressive stance in disputes with

3 Available at https://obamawhitehouse.archives.gov/the-press-office/2014/11/10/remarks- president-obama-apec-ceo-summit, accessed Dec 2016.

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China over the energy-rich East and ding to supply disruption would wreak South China Seas such as the ongoing havoc in importing countries. This territorial dispute with China over the would send shockwaves across Asia in- Chunxiao/Shirakaba gas field. Energy creased export supply and would provi- insecurity is of secondary importance de credible signals to strategic allies and in this argument, but it has become a economic partners of the United States’ catalyst for Chinese-Japanese rivalry commitment both to a stable Asia and and sovereignty issues. With regards to free trade. Since export and import to India, consumption is expected to decisions are made by corporate actors grow at 2% annual rate to 2040. Delhi led by profit motives rather than gover- faces severe supply constraints, due to nments guided by security concerns. obstacles on the construction of three In this sense, the ongoing Trans-Pacific pipelines that would provide India Partnership Agreement (TPP) negotia- with natural gas from Iran, Turkmenis- tions could be the institutional under- tan and Myanmar. By providing India pinning to align private sector incentives with an LNG alternative route to energy to state interests. As U.S. foreign policy security, the US would also disentangle pivots to Asia, a new Canal in Central Delhi from the geopolitical intricacies America would become the economic of depending on higher-risk providers. asset and strategic lynchpin for the U.S This is also the case for South Korea, to provide increased energy security which does not have international gas and pricing relief to LNG importers in pipeline connections and can therefo- the Asia Pacific region. re only import gas via LNG tankers.

Since early 2015, the trend has been …Or a gateway into the Atlantic supported by the return to liquefaction terminal sanctioning and the diversifi- The geographical severing of the Ame- cation of energy matrices fostered by ricas was a clear sign that the US was cleaner energy alternatives. The advent being able and willing to exert a com- of fracking in the US and refinery capa- manding position in the Western He- city expansion elsewhere has supported misphere through political power and rapid fleet growth: LPG carrier fleet ca- technical prowess. If the isthmus was pacity has grown by 32% and LNG ca- in the 20th century America´s gateway rrier fleet capacity by 12%. US supply to the Pacific, it could become in the would have a built-in predictability 21st century the geopolitical equivalent from unexpected production or ship- for China into the Western Hemisphe- ping disruption. Qatar is the top glo- re. Much more than an impressive bal LNG exporter, representing roughly feat of engineering, the Panama Canal one-third of the global LNG market. ushered in the transformation of the Therefore, acts of terrorism, political American continent. Is the Chinese an instability, diplomatic sanctions or mili- equivalent attempt? Is it proof of waning tary action in the Strait of Hormuz lea- U.S. influence in the region? The US go-

LA RUTA DE LA SEDA LATINOAMERICANA: CHINA Y EL CANAL DE NICARAGUA REVISTA - Bogotá (Colombia) Vol. 12 N.° 2 - Julio-diciembre 175 vernment maintained a clear position the Chinese government know that if on the issue since 2005 when Depu- the canal “goes ahead, it will have to be ty Assistant Secretary of the Bureau of with an American-Chinese agreement” Western Hemisphere Charles S. Shapi- ro testified before Congress: “we sup- Bi-oceanic canal developments in port China’s engagement in the region Central America must be understood in ways that create prosperity and pro- as part of a broader transformation oc- mote transparency, good governance, curring in Latin America. The entire re- and respect for human rights”. In Nov- gional infrastructure network is being ember 2013, Assistant Secretary of Sta- increasingly re-directed towards the te for the Western Hemisphere Affairs emerging economic center of gravity Roberta Jacobson held in China the in the world. Led by China, the Asia sixth China–U.S. Consultation Meeting Pacific region is creating a “pull force” on Latin America Affairs, a mechanism for countries in all the Western He- for consultation on regional issues that misphere that reinforces a pattern of stems from the framework of Strategic international political economy based and Economic Dialogue between the on commodity exports. Latin America two countries. In March 2014, she rati- is impelled to link with Asia in time- fied the position of the US government: lier and less expensive ways. This is “The only thing that is very important leading to an across the board infras- is that all of us, whether companies or tructure overhaul of the entire regional governments of China or South Ame- transportation and connection system, rica or North America or Europe, play including highways, railways, and wa- by the same rules and that there is terways. Because of the critical role of transparency in these exchanges and shipping, ports, and canals –whether trade between countries, and that the the upgrading of the existing Panama people, the people can see what the Canal or the projection of potential benefits are, what are the terms of tra- new ones– become an element in this de. If we are playing with international process of transformation. The myriad rules, and if the agreements between of new infrastructure projects reveals countries or companies comply with an economic imperative on the part work standards, of labor or environ- of Latin America to connect to the Pa- ment that are the laws of the country, cific. While developments answer to then there is no problem with the pre- changing geoeconomic realities, what sence; and it would really be a positive -if any- will be the geopolitical con- thing for the region”. The acknowled- sequences of this structural shift? An gement of power asymmetries seems to example of this was first brought to the be evident on the Latin American and attention of senior US government offi- Chinese sides: Nicaraguan president´s cials with the January 1997 award to brother and former Defense Minister the Chinese firm Hutchison-Whampoa Humberto Ortega has been on the re- of a 25-year renewable concession to cord stating that both the president and operate container shipping terminals

Mariano Turzi 176 REVISTA DE RELACIONES INTERNACIONALES, ESTRATEGIA Y SEGURIDAD in Balboa (on the Pacific side) and the Chinese, the canal will be a playing Cristóbal (in the Caribbean side) of the card with which to talk to the gringos Panama Canal. Infrastructure develo- and to gain an advantage somewhere pment, soft financing, and market ac- else. But the gringos will have to be cess have historically been classic tools the gatekeepers. If not, there will be for expanding state influence. China is no canal.” not an enemy of the United States but it is a legitimate peer competitor. The Neither is there evidence that a se- critical geopolitical question is if and cond canal throughout Central Ameri- how will China leverage economic as- ca –even if control of such canal was sets into strategic advantages; how will exerted by China in the way the US it translate its new position into power, did over Panama- would be detrimen- its importance into influence. Is the tal to the national interest of the Uni- canal China’s “pivot to the Americas” ted States. In the 2005 Senate hearings or a symbol of an emerging multipolar about the Panama Canal, then Depu- structure of international relations? ty Assistant Secretary of Defense for Western Hemisphere Affairs Rogelio Pardo-Maurer declared: “China is one Conclusion of the largest users of the canal and fast-growing. So from what we can tell, So far, there is no convincing evidence it is in their interest to have a canal that the Nicaragua canal project answers works and is dependable and reliable. to calculated great power rivalries be- So to me the canal is actually a classic ginning to play out in the Western He- example of how bringing China in or misphere. But the persistent concern helping China become a responsible seems to be more a product of Ame- trading partner, a responsible mem- rican concerns than of Chinese actions ber of the world trading community, is or Latin American intentions. in our interest. It makes the canal so- mething that they have an interest in While military analysts have warned cherishing and defending. The short about China being able to create di- answer is that the most common con- versionary crises or conduct disruption cerns that I have seen out there, that operations in close proximity to the because a certain company that has United States such as trying to close Chinese investors, controls the termi- off strategic choke points such as the nal facilities of the canal, that, there- Panama Canal, Ortega´s brother told fore, we need to be concerned, that I the press (Anderson, 2014) that “for think is not a concern”4.

4 US Senate Committee on Foreign Relations, “Challenge or Opportunity? China’s Role in Latin America”, September 20, 2005, https://www.senate.gov/pagelayout/general/one_item_and_ teasers/file_not_found.htm accessed Dec. 2016.

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China is no longer rising. It is already Dalby, S. (2008). Imperialism, domi- risen; and an indicator of this critical nation, culture: The continued turning point happened in the Western relevance of critical geopolitics. Hemisphere with the project of the Ni- Geopolitics, 13(3), 413-436. caragua canal. Its rise in the US area of Frenkel, S. (1998). A hot idea? Pla- influence is already recognized by Chi- nning a nuclear canal in Panama. na, by the US, and by Latin America. Ecumene, 5(3), 303-309. Grandin, G. (2006). Empire’s work- The issue is not what kind of rise will shop: Latin America, the United it be, but what will it do with its new- States, and the rise of the new im- found risen status. The Nicaragua ca- perialism. Macmillan. nal is an indicator of Beijing’s growing Huete-Perez, J. A., Meyer, A., & Alva- interests in the Western Hemisphere, rez, P. J. (2015). Rethink the Nica- but does it indicate that China sees the ragua canal. Science, 347(6220), region –if even partly– as an arena for 355-355. strategic competition to improve its geopolitical position? Hurrell, A. (1998). Security in La- tin America. International Affairs, 74(3), 529-546. References Klare, M. (2003). The new geopolitics. Monthly Review, 55(3), 51. Anderson, J. L. (2014). The Coman- LaFeber, W. (1990). The Panama Ca- dante’s Canal. New Yorker, 50-61. nal: the crisis in historical perspec- Bailey, T. A. (1936). Interest in a Nica- tive. Oxford University Press, USA. ragua Canal, 1903-1931. The His- Mackinder, H. J. (1904). The geo- panic American Historical Review, graphical pivot of history. Royal 16(1), 2-28. Geographical Society. Child, J. (1979). Geopolitical Thinking Mahan, A. T. (2013). The influence in Latin America. Latin American of sea power upon history, 1660- Research Review, 14(2), 89-111. 1783. Read Books Ltd. Clayton, L.A. (1987) The Nicaragua Mead, W. R. (2014). The return of geo- Canal in the Nineteenth Century: politics: The revenge of the revision- Prelude to American Empire in the ist powers. Foreign Affairs, 93, 69. Caribbean. Journal of Latin Ameri- Nolte, D. (2013). The dragon in the can Studies, 19(2), pp. 323-352. backyard: US visions of China’s re- Christensen, T. (2008). Shaping the lations toward Latin America. Papel Choices of a Rising China: Recent Político, 18(2), 587-598. Lessons for the Obama Adminis- Ramírez, J. (2016). El gran Canal de Ni- tration. The Washington Quarterly, caragua: when government infras- 32(3): 89-104 tructure infringes on the land rights

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