A former US official has praised a recent executive decree from Panama aimed at revoking the domestic licenses and registrations of maritime vessels facing global sanctions.
On Tuesday, John Feeley, who served as the US ambassador to Panama from 2015 to 2018, remarked to Al Jazeera that this decision represents a “welcome step by Panama’s new government, which is working hard to improve the business climate.”
Panama’s Strategic Position
Panama, home to one of the world’s busiest maritime routes—the Panama Canal—has also maintained the largest ship registry since 1993. However, the country is increasingly pressured by Western nations to combat illicit trades, particularly oil smuggling from Iran and Russia.
“There are basically just a few big registries in the world,” Feeley explained. “The international maritime authorities, as well as the US government and the European Union member states, watch them closely… Reputation risk is at play.”
Executive Decree Details
In response to growing pressure, Panama’s President Jose Raul Mulino issued an executive decree on October 18, which states that the national registration of vessels will be revoked if they are sanctioned by the US, the UK, the UN Security Council, or EU member states.
The decree noted that such sanctions “may affect the prestige and reputation of the Panamanian flag.” It further explained, “In order to maintain a Panamanian Vessel Registry free of international sanctions, it is considered necessary to establish a regulatory framework that allows the immediate cancellation of the registry of those vessels.”
The Panama Maritime Authority (PMA) is tasked with executing any cancellations.
Implications for the Shipping Industry
Feeley highlighted the immediate consequences for vessels that lose their licenses. “If a ship is de-flagged, there are industry watchers who track and report where it goes and what it does,” he said.
Panama is known as a “flag of convenience” state, allowing global ship owners to register their vessels under its jurisdiction. This facilitates bypassing stricter regulations in their home countries, which is why over 8,000 ships are registered to Panama.
Response to International Scrutiny
Experts view the decree as a response to international pressure, particularly from the US and its allies. However, Panama has voiced its frustration, claiming the international scrutiny has “stigmatised” the country.
This week, President Mulino traveled to Paris to meet with French President Emmanuel Macron, seeking to remove Panama from the EU’s list of tax havens. Mulino’s office emphasized that it is “unfair for Panama to be included” in such a list.
Given Panama’s pivotal role as a shipping hub, foreign governments have sought to limit illicit trade through its waters. In September, the US Treasury imposed sanctions on seven Panama-flagged vessels for allegedly transporting oil for Iran’s Islamic Revolutionary Guard Corps (IRGC) and its ally, Hezbollah.
Impact on the Shipping Landscape
Shipping expert Mike Schuler noted that the executive decree is “expected to have a significant impact on vessel owners and operators, particularly those engaged in risky or illicit activities.” He added that Panama’s decisive actions could prompt other flag states to review their own regulations.
In a similar move, the island nation of Palau revoked the registration of three liquefied natural gas carriers in August after they were sanctioned by the US due to ties with Russian gas.
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