Nicaragua Canal Project – Iran ready to get involved


Sink or swim: Hong Kong company defies the doom-sayers on Nicaragua Canal project


Imagine a canal designed for vessels the size of Hong Kong’s skyscrapers: 276km long, 230 to 520 metres wide and 26.9 to 30.2 metres deep. This canal will be three times longer and two times deeper than the Panama Canal, which started operating back in 1914. It will include two ports, an airport, two artificial lakes, two locks, several roads, a free trade zone and tourist resorts.

It’s a mammoth project that has already made dozens of headlines and sparked several protests even before crews have started digging the waterway itself.

We are talking about the Nicaragua Canal, an infrastructure that if it goes ahead could give China a major foothold in Central America, which has long been dominated by the United States.

The Hong Kong Nicaragua Canal Development Investment Group was in 2013 awarded a 50-year concession – with the option to extend it for another 50 years – by the Nicaraguan government to build and operate the canal. It said that the project would be completed by 2019 at a cost of US$50 billion, but such a target is unlikely to be met as major construction works have not yet started.

Some experts say the project – a dream of many for centuries – will never get off the ground.

But the company’s executive vice-president, Pang Kwok Wai, who has been in charge of overall works for the canal, rejected the worst-case scenarios and guaranteed that the project was in shape to go ahead.

“Those are only speculative opinions and we disagree strongly with them,” Pang told the Sunday Morning Post, in a written interview.

“The project’s financing does not depend on the state of the stock market in China or on Wang Jing’s own financial position,” he said. “The project will be funded from the huge pool of international funding that is dedicated to this sort of infrastructure project … Funding will be a combination of equity, debt, export credit, derivatives, construction finance, project finance.”

He noted that the consultancy firm McKinsey & Company carried out a study on the project’s financial feasibility and confirmed its strength. “The project is financially and economically healthy, profitable and viable,” Pang said. “To date we have demonstrated that the financial resources necessary for each step of the project have been available and this will be the case as we move through each step of development.”

But many experts and observers question the company’s optimism.

“There is still no clear indication there is sufficient financial backing to move ahead with canal construction,” noted Margaret Meyers, director of the China and Latin America programme at Inter-American Dialogue, a policy institute in Washington.

“Whether there is sufficient demand for a second canal in Central America is also debatable,” she said, noting that the project was likely to exceed initial cost estimates.

Andy Lane, an expert in the container shipping industry and partner at Container Transport International Consultancy, raised similar doubts.

The British company Environmental Resources Management conducted a study commissioned by the HKND group, which noted that such a schedule was challenging and that the project was “fraught with risks and uncertainties”.

The study, completed in May last year, said the project did offer potential benefits to the environment and people of Nicaragua, but only if its business case was robust, if the finance to complete construction was secure, and if international standards were followed in the construction and operation of the canal.

Otherwise, it would do more harm than good. “Nicaragua may be worse off than doing nothing,” it said.

Iran’s Foreign Minister Mohammad Javad Zarif visited Nicaragua last month, during a tour of Central and Southern America. After meeting with Nicaraguan counterpart Samuel Santos Lopez, Zarif said that Iran greatly values ties with the country and its Latin American neighbors.

“The people of Iran and Nicaragua are known in the world for their revolutions and resistance against pressure from outside,” Zarif said, IRNA reported. “I hope that Tehran and Managua will be able to enhance their economic relations in addition to their diplomatic ties.” Zarif talked about the construction of the Nicaraguan Grand Interoceanic Canal, a project to build a waterway linking the Pacific and Atlantic Oceans. “Cooperation between Iran and Nicaragua can include collaboration in the construction of the [Grand] Interoceanic Canal [as well as] agriculture, energy production, petrochemistry, banking, lending, transportation, food and pharmaceutical industries, and science and technology,” he added, Press TV reported.

Rostami explained that Tehran is interested in seeing China, which has offered to finance the project, gain a foothold in the region and provide a counterweight to the US, which has military control over the nearby Panama Canal.

Chinese industrialist Wang Jing has agreed with the Nicaraguan government to finance the canal. Russia also supports the project in principle, and earlier this year agreed to supply $80 million of defense equipment to Nicaragua. The country ordered 50 modernized T-72B1 tanks, 20 of which were delivered earlier this year.  Rostami said that Zarif’s comments in Latin America received a lot of attention back home, where the public criticized Zarif for devoting so much attention to Nicaragua.

“You can’t argue with that. However, let’s not forget about the political interests which are pushing Iran to strengthen its influence in these kinds of small, but strategically attractive countries, as a counterweight to the US,” Rostami explained.


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