- The Washington Times - Thursday, January 13, 2000

A Pentagon intelligence report calls Chinese influence over the Panama Canal a potential threat to U.S. national security.
The released portions of the three-page report contradict claims by administration officials that the presence of the People’s Republic of China near the strategic waterway poses no threat to U.S. national security interests.
“Hutchison [Whampoa Ltd.’s] containerized shipping facilities in the Panama Canal, as well as the Bahamas, could provide a conduit for illegal shipments of technology or prohibited items from the West to the PRC, or facilitate the movement of arms and other prohibited items into the Americas,” according to a declassified report by the U.S. Southern Command’s Joint Intelligence Center.
“Any potential threat posed by the presence of a pro-Chinese corporate entity in the Panama Canal zone is indirect,” the report states.
President Clinton said in November that the Chinese pose no threat to the canal and are “bending over backwards to make sure that they run it in a competent and able and fair manner.”
A White House spokesman said later the president had misspoken when he said China will operate the strategic waterway.
The Pentagon had also previously said it had no fear of the ports being run by a subsidiary of a Hong Kong-based company with extensive Beijing ties.
“We do not see the Chinese-owned port facilities as a military or a national-security threat,” Pentagon spokesman Kenneth Bacon said in August.
However, the Pentagon intelligence report states that the economic power conferred by the Hutchison Whampoa ports at either end of the Panama Canal and in the Bahamas would give China leverage over Panama, which has diplomatic ties with rival Taiwan.
“For example, Hutchison Whampoa could threaten to shift some business from Panama to its Free Trade Zone in the Bahamas, thus giving the company additional leverage over the Panamanian government,” the report said.
The Oct. 26 report is an “Intelligence Assessment” of China’s interests and activities in Panama. The document, stamped “secret,” was censored to prevent disclosure of intelligence activities or military operations.
The Washington public interest group Judicial Watch made the report public after it was obtained under the Freedom of Information Act.
The Clinton administration has dismissed those concerns and said the United States reserves the right under the Panama Canal Treaty to retake the canal by military force if necessary.
The report, heavily censored, makes no mention of the strategic importance of the canal to U.S. military operations in the event the Pentagon is called on to defend Taiwan from a Chinese attack.
Long-term military operations to resupply U.S. forces in the Pacific in such a conflict make the access to the canal “crucial” to military planning, one Pentagon official said.
Last week, Hong Kong’s Cheng Ming newspaper quoted Chinese Defense Minister Chi Haotian as saying war with the United States is inevitable.
“Seen from the changes in the world situation and the United States’ hegemonic strategy for creating monopolarity, war is inevitable,” Mr. Chi told a military conference in early December.
“We cannot avoid it,” he was quoted in the newspaper as saying. “The issue is that the Chinese armed forces must control the initiative in this war… . We must be prepared to fight for one year, two years, three years or even longer.”
Release of the intelligence report is likely to renew the debate over threats to the canal, which reverted to Panamanian government control Dec. 31. The U.S. military gave up several strategic military bases in the turnover.
According to the intelligence report, the two ports near entrances at each end of the Panama Canal were leased for 25 years by the Panama Ports Co., a Hutchison Whampoa subsidiary. The company also has the option to renew the leases for a second 25 years.
The People’s Republic of China has “no direct ownership” of the companies involved in running the Pacific port of Balboa and the Atlantic port of Cristobal, the report said. It also states that neither Hutchison nor Panama Ports are directly involved in day-to-day operations of the canal “at this time.”
According to the report, the Panama Ports Co.’s contract includes tugboat operations, ship repair and pilot services within the ports.
“It is unlikely that [Panama Ports Co.] officials or employees would overtly sabotage or damage the canal on orders from Beijing, as it would be contrary to their own financial interests and would undoubtedly elicit an immediate response from the U.S. and the international community,” the report said.
However, Hutchison’s owner, Hong Kong tycoon Li Ka-Shing, “has extensive business ties in Beijing and has compelling financial reasons to maintain a good relationship with China’s leadership,” the report said.
The declassified report suggested that China’s economic inroads into Panama threaten Taiwan’s international standing.
“Economic influence equals political leverage and in some Latin American countries PRC and Taiwan competition for influence is running head to head,” the report said. “Currently, 16 of the 30 countries worldwide which diplomatically recognize Taiwan are located in Latin America.”
During a Senate hearing in October on Chinese activities in Panama, several administration witnesses testified that Chinese control of the Panamanian ports is not a problem. They also said they did not know if Beijing uses commercial entities to advance its military interests.
Marine Corps Gen. Charles E. Wilhelm, the commander in chief of the U.S. Southern Command, however, told the Senate Armed Services Committee hearing he believes China does use businesses for military purposes.
Gen. Wilhelm said there is “no evidence” the canal has been targeted by terrorists or foreign governments, although it is viewed as a potential target.
Gen. Wilhelm, perhaps echoing the classified assessment, stated that China’s goals in Panama are “less a local threat to the canal and more a regional threat posed by expanding Chinese influence throughout Latin America.”
Other experts see increased Chinese commercial activities in this hemisphere as providing Beijing with a potential base for anti-U.S. subversion during a future conflict with the United States.

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