From cheap start, like Alaska, to Panama's takeover: The Canal's story

Review

The history of the Panama Canal is marked by turbulence and controversy. Originally acquired with the promise of providing “free water,” similar to Alaska, the canal was later handed over to Panama in exchange for various agreements. The canal's construction cost tens of thousands of lives, yet its strategic importance has made it vital to the global economy. Today, it remains one of the most crucial waterways on Earth. Recently, political tensions surrounding the canal have come to the forefront, with rhetoric suggesting a possible return of the canal to U.S. control and even the potential use of military force if necessary. These threats have reignited discussions about the canal, which has played a significant role in world history for over a century. Behind these events is a New York businessman poised to take office as President of the United States.

This is not the only pressure that Donald Trump has applied on countries in the region in recent months. Over the past two months, he has clashed with several North American nations, including Canada and Mexico, as well as with Greenland, the world's largest island. Among his territorial ambitions, both Greenland and the Panama Canal have become focal points of growing concern.

Recent developments in Greenland have captured global attention. Trump’s son visited the island, sharing images of the local population’s reaction to the latest events—particularly those who either support or are not opposed to Trump's imperialist stance. Reports suggest that the president-elect’s team has communicated the seriousness of Trump’s intentions to Danish officials, who govern Greenland. This suggests that Trump's interest in the “ice-covered” island may go beyond mere rhetoric.

However, our focus today is on why Trump is so fixated on the Panama Canal, which, until the final years of the 20th century, was virtually considered U.S. property. Today, its status has changed significantly. Why is Trump so determined to maintain control or influence over this vital waterway? In the following, we will delve into the canal’s history, its current strategic importance, the political processes that shaped its development—including Panama's emergence as an independent state due to the canal—and the current geopolitical realities surrounding it.

 "Dust-covered" project

In the 16th century, much of South and Central America fell under the control of Spain, one of the largest and most powerful colonial powers of the time. During this period, the Ottomans had absolute control over the Mediterranean Sea, restricting the use of these waters by European kingdoms. For European powers, finding an alternative waterway became a pressing necessity, particularly to maintain trade relations with the East. Early efforts focused on developing a route that would allow ships sailing from the Atlantic Ocean to reach the Indian Ocean.

Portugal, another major colonial power, was eager to carry out this mission. To facilitate trade, the Portuguese recognized the need to pass around the southernmost tip of Africa. In fact, the Portuguese had already reached this point, which they originally called the "Cape of Storms." However, the Portuguese king, hopeful that this route would lead to the Indian Ocean, renamed it the “Cape of Good Hope.” In 1497, Vasco da Gama successfully navigated this route, reaching the Indian Ocean by rounding the southern tip of Africa. Upon his return to Portugal two years later, European traders began using this sea route to access India. Da Gama's journey marked the discovery of a vital waterway that connected Europe to India and had significant economic implications for the European powers.

Васко да Гама очган Европадан Ҳиндистонга денгиз орқали сузиб бориш йўли

However, this was not the final solution to Europe’s quest for trade routes. The Spanish, too, embarked on their own search for a new route. This effort would eventually give rise to the concept of the Panama Canal. In 1513, Spanish explorer Vasco Núñez de Balboa discovered the narrowness of the Isthmus of Panama, which links North and South America. This discovery sparked the idea of constructing a waterway connecting the Atlantic and Pacific Oceans. Yet, despite this promising revelation, the project did not progress beyond theoretical discussions. After several decades of unfruitful research, Charles V, who was both the Holy Roman Emperor and King of Spain, consulted with experts about the feasibility of building a canal. The researchers, however, concluded that the project was not viable, and the idea was abandoned—thus closing the door on the Panama Canal for several centuries.

Магелланнинг дунё бўйлаб саёҳати

In the meantime, another Portuguese navigator, Ferdinand Magellan, sought to overcome the failure of the Panama Canal project by charting a different, albeit longer, route. In 1519, he sailed past the southern tip of South America, entering what he named the "Pacific" Ocean, due to its calm waters. However, Magellan’s expedition, which lasted three years and resulted in heavy losses, had little economic or political impact. The long and inconvenient route he traveled did not attract other nations, and it was not until later that Magellan’s journey gained scientific significance. His voyage contributed to the development of maps, introduced areas such as the Strait of Magellan and the Pacific Ocean to the world, and provided further proof that the Earth was round. Yet, the question of establishing a viable trade route remained unresolved, paving the way for the eventual revival of the Panama Canal project in the future.

Makeshift Canal

In the 19th century, the need for a waterway connecting the Atlantic and Pacific Oceans remained pressing. Economic powerhouses were eager to establish a shorter route that would save time and money for companies engaged in trade. France, the former colonial power of North America, took on this ambitious task. In 1881, French diplomat and entrepreneur Ferdinand de Lesseps initiated the construction of a canal across Panama. However, the project soon descended into failure. Thousands of workers hired to build the canal perished due to poor planning, engineering flaws, and tropical diseases.

The core issue was that Lesseps had visited the canal site several times, but only during the dry season, which lasts only four months each year. His workers were completely unprepared for the intense rainy season, and they lacked clear guidance on how to cope with such harsh conditions. As a result, thousands of workers died in the dense jungle, falling victim to poisonous snakes, insects, spiders, as well as diseases like yellow fever and malaria. Despite its strategic importance, the Panama Canal, while shorter than the Suez Canal, proved to be a far more challenging construction project due to the region's hostile natural environment. By 1884, over 200 workers were dying each month from the dangerous conditions. The project had become a waste of time and resources. 

Even renowned engineer Gustave Eiffel, creator of the Eiffel Tower, was brought in to address the engineering failures, but this effort also proved unsuccessful. By 1889, the Panama Canal project, under de Lesseps’ leadership, officially collapsed.

The failure of this endeavor cost France a staggering $260 million, leading to a massive scandal. De Lesseps, along with Eiffel and other project leaders, was accused of embezzling funds allocated for the canal's construction. Lesseps and his son were convicted and sentenced to five years in prison, though the verdict was later overturned. Ferdinand de Lesseps passed away in 1894, and that same year, his bankrupt business assets were transferred to a newly formed French company tasked with continuing the work. However, this new venture also failed to make progress and abandoned the project shortly thereafter. This marked not just the failure of one company, but the complete abandonment of France’s national ambition to construct the Panama Canal.

The Panama Canal, sold like Alaska

While France struggled to build a canal through Panama, the United States began considering its own approach to connecting the Atlantic and Pacific Oceans. U.S. officials, motivated by both economic and military interests, initially aimed to construct the Trans-American Waterway through Panama’s neighboring country, Nicaragua. However, after France abandoned its failed attempt to complete the Panama Canal, the United States shifted focus to the unfinished project.

This marked the beginning of a second “Alaska” scenario in history. The sale of the incomplete Panama Canal project to the United States bore striking similarities to the sale of Alaska by the Russian Empire a few years earlier. In both cases, an empire with diminished resources sold valuable land or assets to the rising power of the United States, hoping to gain foreign policy support and normalize relations. In 1867, the Russian Empire, facing financial strain and geopolitical challenges, sold 1.5 million square kilometers of land in Alaska to the U.S. for just $7 million. This transaction, brokered by Russian Ambassador Eduard Stekl, was seen as a strategic move by Emperor Alexander II to solidify ties with the United States.

Similarly, the French sought to offload their unfinished canal project to the United States. Like the Russian Empire, the French government hired a lobbyist—Philippe-Jean Bunau-Varilla, an engineer involved in the earlier failed attempt under Ferdinand de Lesseps—to promote the sale. Bunau-Varilla spent years convincing U.S. lawmakers to abandon the idea of building a canal through Nicaragua, arguing that the area’s dangerous volcanoes made it an impractical location. His efforts paid off when, in 1902, Congress approved the purchase of French assets in Panama. However, there was one significant obstacle: Panama, which had gained independence from Spain in 1821, had become part of Colombia. The Colombian government refused to ratify the treaty allowing the construction of the canal. The United States, however, was determined to proceed. The White House, recognizing the canal’s immense economic and military importance, made a bold decision to secure its construction—one that would ultimately reshape the political landscape of the region.

"Independent" Panama, created under the pretext of the Canal

In response to Colombia’s refusal, the United States decided to finance Panamanian separatists seeking independence. Within a year, U.S. support for Panamanian rebels led to the overthrow of Colombian rule over Panama. By November 1903, Panama declared its “independence” with the backing of the United States. A puppet government was quickly installed, and Panama was effectively under U.S. control. The United States now had a free hand to pursue its interests without opposition. Following Panama’s declaration of independence, the U.S. signed a treaty that granted it control over 1,300 square kilometers of land for the canal’s construction. This land would become a U.S. protectorate in perpetuity. With this agreement in place, the United States resumed the work on the Panama Canal, which had been halted for nearly two decades.

The U.S. allocated $375 million for the canal’s construction. Of that amount, $40 million went toward purchasing the French assets, helping to recoup some of the $260 million France had spent on its failed attempt. Additionally, Panama received $10 million, and the new nation was promised an annual rent from the canal’s future revenue. Construction of the canal took 10 years, and in 1914, the Panama Canal was officially completed and opened for operation. This 80-kilometer waterway fundamentally transformed global trade, providing a crucial shortcut for shipping between the Atlantic and Pacific Oceans and solidifying the United States' economic and strategic dominance in the region.

The Panama Canal saved ships from navigating the perilous southern tip of South America, particularly the dangerous Cape Horn route. However, the construction and eventual commissioning of the canal, first under French leadership and later by the United States, came at a significant human cost. From the start of construction under Ferdinand de Lesseps, through the French bankruptcy, approximately 20,000 workers lost their lives due to harsh working conditions, diseases, and accidents. After the project was sold to the United States, efforts were made to reduce these risks. The Americans learned from France’s mistakes, improving medical care, sanitation, and controlling the spread of diseases like malaria by eliminating mosquito breeding grounds. Despite these improvements, the United States still experienced 5,600 deaths over the course of the next 10 years. In total, the Panama Canal claimed the lives of more than 25,000 people.

The Canal is taken from the United States

A treaty signed in the early 1900s granted the United States control over the canal and the surrounding land in perpetuity. However, as time passed, tensions between Panama and the U.S. began to mount. It was inevitable that Panamanians would grow dissatisfied with another nation permanently controlling a significant portion of their land and receiving only a small share of the canal’s revenue. 

Over time, small disputes between the two countries escalated into a large-scale uprising. In 1964, when Panamanians attempted to fly the Panamanian flag alongside the U.S. flag on canal territory, the U.S. government blocked their efforts, sparking widespread protests and a violent revolt. The conflict led to a temporary rupture in diplomatic relations between the United States and Panama. 

In 1977, President Jimmy Carter chose to seek a resolution. He signed an agreement with Panama that outlined a plan for the eventual return of control over the canal. The agreement stipulated that 60 percent of the canal’s territory would be returned to Panama by 1979. Following this, the process of fully transferring the canal to Panama began. For the first ten years, the Panama Canal Commission, which oversaw the canal’s operation, was led by the United States. However, in the following decade, Panamanian leadership took over the commission, with local residents gradually assuming control of the canal’s operations. By 1996, 90 percent of the canal’s staff were Panamanian. The transition period was smooth, and by 1999, exactly 30 years after the initial transfer of 60 percent of the canal’s land, the Panama Canal was fully returned to Panama’s control.

The Canal's current potential and Trump's aggression

Today, the Panama Canal is not only an essential economic asset but also a powerful political tool in the hands of leaders like Donald Trump, who are known for their aggressive tactics. The canal’s strategic significance is immense. On average, up to 13,000 to 14,000 ships pass through the waterway each year, with transit times ranging from 8 to 10 hours. The primary users of the canal include countries such as the United States, China, Chile, Japan, Colombia, and South Korea.

For Trump, control over the canal offers a potent lever to implement his favored method of economic coercion: increasing tariffs. Since his election, Trump has frequently used the threat of tariff hikes as a form of negotiation or intimidation. It is possible that he views the Panama Canal as another avenue through which to target Chinese shipping, for example, by dramatically increasing transit fees. Ships passing through the canal pay a fee based on their size and cargo, with larger vessels being charged as much as $450,000 per transit. The Panama Canal generates an annual revenue of approximately $5 billion, which is about half of what the Suez Canal earns. While the Suez Canal benefits from its location between three continents and at a key juncture on the Eurasian landmass, the Panama Canal’s revenue is remarkable given its more isolated position in the Pacific. This success is the result of extensive modernization efforts, particularly the expansion project that began in 2007 and was completed in 2016. The expansion doubled the canal’s capacity to accommodate larger cargo ships, making it even more vital to global trade. Given these factors, the Panama Canal could appear highly attractive to Trump, especially as he embarks on his second term with a combative approach toward trade and territorial control. His rhetoric, which includes the possibility of using military force to seize the canal, has raised concerns globally. This aggressive stance underscores the strategic value the canal holds in the broader geopolitical landscape.


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