Canal Crisis As Caution: Why India Must Prioritize Physical Security Assessments Of Critical Infrastructure – Analysis

In recent weeks, a geopolitical flashpoint has re-emerged in Central America, echoing the historical tremors of a long-settled controversy; the Panama Canal.

A renewed American interest in reclaiming control over the canal, which the U.S. originally administered until 1999, has ignited fresh diplomatic tensions. The U.S. Defence Secretary Pete Hegseth’s visit to Panama for ridding China’s control over the canal and his remarks advocating for military presence over the canal have been met with categorical rejection from Panama. The Panamanian government, in a pointed Spanish-language press release, reaffirmed that US has confirmed the sovereign rights of Panama over the canal, a segment notably absent in the English version issued by the United States.

Historical Legacy & Geo Strategic Relevance of Panama Canal 

To understand the motives for the recent renewed interest of US in this somewhat settled aspect  of Panama Canal, it may be prudent to visit the historical legacies and unravel the hidden forebodings. The idea of Panama Canal was first conceptualised in 1513 by  the Spanish Explorer, Governor, and Conquistador ‘Vasco Núñez de Balboa’ when he passed through the Isthmus of Panama. He mentioned about the likelihood of canal in his journals however, no action was taken during that time. (2) The first attempts at the construction of the canal were carried out by the French Diplomat and Entrepreneur, Ferdinand de Lesseps in the year 1881. He had by then, successfully completed the construction Suez Canal in 1869. (3) Engineering challenges, debilitating climate, incumbering disease led to high death toll amongst the work force and the first French effort soon went bankrupt. Another French Company was created to take over the project, but to no avail. Soon under President Roosevelt in the year 1902, the US senate voted in favour of building Panama Canal provided, necessary rights could be obtained from Columbia. (4) However, that was not to be! In 1903, USA and Columbia signed the Hay-Herrán Treaty, proposing a onetime amount of $10 million and an annual payment by USA to Columbia for a 100 year renewable lease on the land proposed approximately six mile across the Isthmus of Panama for building the canal. The treaty was ratified by the US Senate, but rejected by the Senate of Colombia unanimously due to Sovereignty rights and the issue of perpetuity. (5) President Roosevelt, therefore, had to change the tactics.

By 1903 the writings of Admiral A T Mahan, the famous author of ‘Theory of Sea Power’ already had strong influence on President Roosevelt. As per Mahan, nation’s greatness was inextricably associated with the sea, with its commercial use in peace and its control in war. He used the teachings of French General ‘Jomini’ and historical examples to perpetuate his writings. (6) His arguments emphasised the role of  strategic locations such as choke points, canals, and coaling stations, as well as quantifiable levels of fighting power in a fleet. In his seminal work ‘The Influence of Sea Power upon History 1660-1783’ in 1890 and in line with the Monroe Doctrine (7) of the USA,  he wrote,

“It need scarcely be said that the successful piercing of the Central American Isthmus at any point may precipitate the moment that is sure to come sooner or later. The profound modification of commercial routes expected from this enterprise, the political importance to the United States of such a channel of communication between her Atlantic and Pacific seaboards, are not, however, the whole nor even the principal part of the question.”  (8)

Columbia by 1902, was already weakened by the civil war known as ‘Thousand days War’ between the Liberals and the Conservatives. The peace treaty ending this civil war was signed under the aegis of USA on USS Wisconsin in November 1902.  The US took advantage of the Colombian weakness and actively supported the rebel forces clamouring for separation of Panama from Columbia. Alongside, in a classic example of ‘Gunboat Diplomacy’, on 02 November 1903, the warships of US created a sea lane blocked against the Colombian troop movements to put down the Panama rebellion. Thus, Panama declared independence on 03 November 1903. The US without any further delay recognized the new nation (9) and shortly thereafter, signed a treaty with the newly formed government on the similar lines of Hay–Herrán Treaty. (10)

Panama Canal, apart from providing Strategic Flexibility and the logistic pliability to the US Forces in switching from Atlantic to the Pacific and vice versa, had been critical to the global maritime transportation for over one century. By reducing the distance between the East and West Coast ports of US, the Canal facilitated efficient trade and transportation by reducing the carbon imprint and mitigating the environmental impact worldwide. Presently, the ships by utilising Panama Canal avoid the passage around the Cape Horn which is one of the dangerous maritime routes in the world, with the fierce winds of “Roaring Forties”, “Furious Fifties” and strong currents. Accordingly, the canal is a blessing, for the transportation of the perishable goods from one coast to the other and for the sustainability of Just-in-time supply chains.

Present Crisis

What makes this resurgence of interest particularly alarming is the current operation of the Canal’s terminals by a Hong Kong-based company, alleged to be under indirect influence of the Chinese government. A subsequent audit by Panamanian authorities led by their Comptroller-General Anel Flores unveiled a series of concerning defaults by the company, leading to questions over the security of this globally critical asset. 

Is this episode being a diplomatic row or a rerun of Cold War-style proxy influence? It is a powerful reminder of how control, security, and sovereignty over infrastructure are intricately linked in today’s multipolar world. The Canal’s strategic significance has led to the US Defence Secretary stating, “China-based companies continue to control critical infrastructure in the canal area. That gives China the potential to conduct surveillance activities across Panama”. He further stated that the US and Panama shall together keep the area secure. (11) Panama has firmly rejected these assertions. 

President José Raúl Mulino emphasized that the Canal remains under Panamanian control and that no foreign nation interferes with its administration. While the US maintains priority access for military vessels under the ‘1977 Torrijos–Carter Treaties’, there have been recent developments suggesting closer cooperation between the two nations. In April 2025, the US and Panama signed an agreement allowing for the reintroduction of US troops to former military sites like Fort Sherman and Rodman. While Panama retains the sovereignty over the canal, the agreement grants US operational control over certain facilities and enhanced access to the canal.​

For India, which is rapidly expanding its critical infrastructure portfolio under various national missions, this controversy serves as a timely warning.

The Indian Context: Building, Securing, Sustaining

India is currently amid an infrastructure renaissance. From greenfield expressways, smart grids, and inland water transport systems to strategically positioned ports and emerging artificial intelligence data centres, India’s landscape of critical infrastructure is evolving both in scale and sensitivity. 

While digital security gets its due attention in an era of cyber threats and hybrid warfare, Physical Security Assessments, both at construction and operational stages, remain under-addressed in many sectors. The Panama Canal case illustrates how vulnerabilities in physical operations, left unchecked, can open the doors not just to functional disruptions, but also to geopolitical manipulations.

In India, ports like Chabahar and the Sagarmala projects, Airbases in the Northeast, Nuclear Power Plants, and even AI and telecom infrastructure being built under FDI arrangements must undergo thorough and periodic security audits, not just from a compliance standpoint, but from a sovereignty and resilience point of view.

Understanding Critical Infrastructure in Strategic Terms

Critical infrastructure is not just about roads, bridges, or pipelines. It is about who operates them, how they are monitored, and what dependencies they create. If the operator of a major port or logistics hub has opaque ownership structures, cross-border financial links, or weak compliance records, the physical asset becomes a vector for geopolitical vulnerability.

Panama’s discovery of defaults only after controversy erupted shows how superficial audits or delayed action can cost a country both control and credibility. India cannot afford such blind spots, especially as it courts private, including foreign, participation in infrastructure development.

Legal Framework: Current Gaps and Imperatives

India’s legal landscape for the protection of critical infrastructure is evolving but remains fragmented. The Unlawful Activities (Prevention) Act, 1967 (UAPA) and amendment thereto in 2019 does not provide definition of “critical infrastructure” but in the context of damage of property as an attack on national security. (12) However, its use is largely reactive and tied to prosecuting offences which damage the property (can be construed as infrastructure) and not preventive oversight. The National Critical Information Infrastructure Protection Centre (NCIIPC), under Section 70A of the Information Technology Act, 2000 and its amendment thereto, appoints a Nodal agency and mandates the protection of digital infrastructure. (13) However, it does not cover physical infrastructure unless it has an IT component. Also, under the Sec 2(e) of the IT (National Critical Information Infrastructure Protection Centre and Manner of Performing Functions and Duties) Rules, 2013, critical sectors in India include the sectors that are critical to the nation, and incapacitation or destruction of these will have a debilitating impact on national security, economy, public health or safety. (14) Some of the critical sectors, including communications, energy, banking, transport, etc are listed on NCIIPC website. (15) But a common framework remains missing. The Public Private Partnership (PPP) Guidelines by NITI Aayog and various line ministries touch upon risk allocation and performance audits but lack binding requirements on physical security audits or ownership screening beyond financial compliance. (16) The Companies Act, 2013, particularly under beneficial ownership disclosure (Section 89 and 90), offers some tools to trace foreign control. (17) However, there is limited integration of this mechanism into infrastructure regulation. The Environment and Infrastructure-specific laws like the Atomic Energy Act, 1962; Airports Authority of India Act, 1994; and the Major Ports Authority Act, 2021, provide regulatory control but seldom mandate recurring physical security audits or intelligence assessments.

What is missing is a comprehensive law or regulatory mandate for physical security assessments, cross-border scrutiny of infrastructure operators, and enforcement of periodic audits by neutral or state-appointed agencies.

Short-Term and Long-Term Implications

In the short term, failure to conduct physical security assessments can lead to sabotage, operational failures, or unsafe environments for local populations. In the long term, it risks creating ‘choke points’ in India’s strategic and economic architecture, nodes that could be leveraged by hostile entities or become subjects of international contestation.

India’s experience with Chinese investments in telecom and power sector assets, many of which have since been rolled back, has already shown that financial inflows without strategic screening can lead to national security dilemmas. The Panama incident reinforces this further.

A National Imperative: Institutionalising Physical Security Audits

India must therefore institutionalise mandatory physical security assessments and operational audits of all critical infrastructure assets, particularly those that are:

• Developed under Public-Private Partnerships (PPP)
• Operated or financed by foreign entities
• Located in border or coastal regions
• Linked to national security or data systems

These audits must not be limited to engineering certifications. They must integrate intelligence inputs, legal vetting of ownership structures, real-time risk assessments, OSINT Analysis and geopolitical sensitivity analysis. The audit process should be overseen by an empowered authority, perhaps under the National Security Council Secretariat, in coordination with relevant ministries and intelligence agencies.

This can be complemented by a dedicated Critical Infrastructure Protection Act or Rules, modelled on international frameworks like the U.S. Patriot Act Section 1016(e) (18) or the European Union’s Critical Entities Resilience Directive (CER Directive) (19), with India-specific adaptations.

Conclusion: Securing More Than Steel and Concrete

Infrastructure today is the new frontline of national power. As India builds for the future, it must guard not only the what but also the who and the how behind each asset. The Panama Canal controversy is a cautionary tale, one that reminds us that sovereignty is not only declared in treaties but defended in terminals, tunnels, and on tarmacs.

Timely audits, sound legal mandates, and robust physical security assessments are not optional, they are the cement of India’s secure rise as it becomes Viksit Bharat by 2047. 

About the authors:

• Major General Deepak Mehra, Kirti Chakra, AVSM, VSM (Retd.), Former Indian Military Attache to Moscow, Founding Director and CEO of Thorsec Global Pvt Ltd.
• Dr Sunandini, is an Assistant Professor – Gr II (Law) at Amity Law School, Amity University Noida, UP.

References

2. Otfinoski, Steven (2005). Vasco Nunez de Balboa: Explorer of the Pacific. New York: Marshall Cavendish. p.70.
3. McCullough, David (1977). The Path Between the Seas: The Creation of the Panama Canal, 1870–1914. New York: Simon & Schuster, pp.49-57.
4.  “Hay-Herrán Treaty”. U-S-history.com. 18 November 1903. Archived from the original on 14 February 2012
5.  Ibid, “Hay-Herrain Treaty”
6.  John Whiteclay Chambers; Fred Anderson (1999). The Oxford Companion to American Military History. Oxford University Press. pp. 720–. ISBN 978-0-19-507198-6. 
7. https://www.archives.gov/milestone-documents/monroe-doctrine#:~:text=The%20Monroe%20Doctrine% 20is%20the,further%20colonization%20or%20puppet%20monarchs
8.  Mahan, A.T, pg 325
9. McCullough, David (1977). The Path Between the Seas: The Creation of the Panama Canal, 1870–1914. New York: Simon & Schuster, p. 361-386
10.  Livingstone, Grace (2009). America’s Backyard: The United States and Latin America from the Monroe Doctrine to the War on Terror. London: Zed. p. 13 
11. https://apnews.com/article/panama-us-mulino-hegseth-canal-33b7e18a1e879706712309118c3ad8c0
12.   The Unlawful Activites (Prevention) Amendment Act 2019 https://prsindia.org/files/bills_acts/bills_parliament/2019/Unlawful%20Activities%20(Prevention)%20Amendment%20Act,%202019.pdf 
13.   The Information Technology Act 2000 https://www.indiacode.nic.in/bitstream/123456789/13116/1/it_act_2000_updated.pdf 
14.  Retrieved from:  https://dit.py.gov.in/sites/default/files/NCIIPC-MPF-D-Rules.pdf 
15.  Retrieved from:  https://nciipc.gov.in/ 
16.  Retrieved from: https://cag.gov.in/uploads/media/WB-AUD-I-ppp-project-20200625161518.pdf 
17.  Retrieved from:  https://www.indiacode.nic.in/bitstream/123456789/2114/5/A2013-18.pdf 
18.  Retrieved from: https://www.congress.gov/107/plaws/publ56/PLAW-107publ56.htm 
19.  Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_3992