The U.S. Treasury Department has imposed economic sanctions on a Chinese company that operates in Cambodia, citing its land seizure and displacement of families to make way for a $3.8 billion luxury gambling and lifestyle project.

The Dara Sakor Seashore Resort, developed by the Chinese company Union Development Group (UDG) in unspoiled Koh Kong province, includes an international airport and a port for cruise ships that "credible reports" suggested could be used by the Chinese military.

The company describes the undertaking as part of Beijing's global Belt and Road infrastructure initiative, and on Thursday, its parent company, Tianjin Union Development Group, told Cambodia's government-affiliated Fresh News, the allegations against UDG by the U.S. Treasury Department have "ignored the facts on the ground" and made up a story.

The company denied that the facility would be used for military purposes, citing numerous statements by Cambodian officials and the country's constitutional prohibition on foreign troops on its territory.

U.S. Secretary of State Mike Pompeo said there were "credible reports" that Dara Sakor "could be used to host (Chinese) military assets."

"If so, (this) would go against Cambodia's constitution and could threaten Indo-Pacific stability, possibly impacting Cambodia's sovereignty and the security of our allies," he added in a statement on Tuesday, the same day the Treasury Department announced the sanction.

The U.S. has raised concerns in the past that the site could be used as a military asset housing Chinese naval forces, but Cambodian authorities have repeatedly denied it.

The U.S. sanctioning of the Chinese state-owned entity is pursuant to Executive Order (E.O.) 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act to target perpetrators of serious human rights abuse and corruption and their supporters.

"UDG-funded activities have forced Cambodians from their land and devastated the environment, hurting the livelihoods of local communities, all under the guise of converting Cambodia into a regional logistics hub and tourist destination," the Treasury Department said Tuesday. The Treasury's Office of Foreign Assets Control (OFAC) designated UDG as a Chinese state-owned entity.

The U.S. has alleged that UDG operated as a Cambodian entity under the aegis of Gen. Kun Kim, a close ally of Cambodia's Prime Minister Hun Sen. He allegedly used the military's right to seize land for its needs to move local people off the area UDG wanted for its resort project.

In its statement to Fresh News, the company defended Kun Kim, saying "During the relocation, UDG respected and followed Cambodian law and lease terms by working with inter-ministerial commission without committing any wrongdoings through General Kun Kim."

The U.S. sanctioned the senior general, his wife and two children on December 9, 2019, for "his involvement in corruption," according to the Treasury. Kim was allegedly using his influence and network to benefit Chinese companies in Cambodia.

"After falsely registering as a Cambodian-owned entity in order to receive land for the Dara Sakor development project, UDG reverted to its true ownership and continued to operate without repercussions,"  Treasury Secretary Steven Mnuchin said Tuesday.

"We will not tolerate these actions against innocent people and will always stand with the Cambodian people," Pompeo tweeted soon after the sanction announcement.

On Wednesday, the Chinese Embassy in Phnom Penh posted a statement on Facebook saying, "The US sanction citing domestic law is a blatant hegemonic act. It completely ignores the facts and is based on unwarranted charges. The US suppression on the legitimate investment of a Chinese enterprise in Cambodia will not only harm the lawful rights and interests of the enterprise [UDG], but also trample on the sovereignty of Cambodia."

The embassy continued to express "its strong opposition and condemnation towards the US sanction. The Embassy further urges the US side to correct its wrongdoing and withdraw the so-called sanction."

Simmering controversy

UDC's plans have drawn attention since 2008, when the company received a 99-year land concession from the Cambodian government for 36,000 hectares, land that included 20% of the nation's coast. Plans for development included the Dara Sakor International Airport, with the longest runway in Cambodia and features favored by fighter-jet pilots, and a yacht basin deep enough for naval ships.

The planned construction encroached on the dense evergreen rainforest of Botum Sakor National Park, Cambodia's largest. Renowned for its biodiversity, it hosts rare animals such as the clouded leopard, the Asiatic black bear, the dog-related dhole, pileated gibbon and the fishing cat. The park serves as a link in one of Asia's remaining elephant corridors, thin strips of land that allow elephants to move from one habitat to another while largely avoiding people.

And, as alluded to in the sanction, the UDG project has demolished more than 1,500 households in Koh Kong province, according to the Cambodian rights group Community Legal Education Center.

The Cambodian government rejected evidence shown by the U.S. to back their sanctions against UDG, calling it political rhetoric in the middle of a trade war between the U.S. and China.

"This one does not have anything to do with the government because it's a private company," government spokesperson Phay Siphan told VOA Khmer on Wednesday.

Hun Sen's ruling party contends that any land disputes related to UDG's Dara Sakor project are not human rights violations.

"If using only this petty case as a basis for human rights violation, I'd say there is no human rights in Cambodia," said Sok Eysan, spokesperson of the Cambodian People's Party. "This happens everywhere because once there is development, the land prices rise, and people come to claim the land."

Objections voiced

Cambodian human rights activists told VOA that the settlements handed out by the government to the families displaced by the UDG project were unacceptable, in part because the families were relocated far from the Gulf of Thailand, their source of livelihood.

"They are fishermen and have been relocated to a hillside area," said Hour In, the Koh Kong province coordinator for Licadho, a national Cambodian human rights organization. "They cannot fish anymore because the infrastructure doesn't meet the conditions as promised. Most people are not satisfied with the solution provided by Union Development Group."

Cambodia's opposition party in exile welcomed the sanctions.

"This is a partial justice," said Mu Sochua, vice president of the Cambodia National Rescue Party. "The real justice is to give our farmers and fishermen their land, but at least they've received partial justice now. At the same time, this demonstrated that the U.S. joins us in demanding an end to impunity, which means taking those perpetrators to face justice, if not in our court system, but under the U.S. system."

The U.S. alleges that Cambodia uses development project such as UDG to expand its sphere of influence in the world, especially through its Belt and Road Initiative. The U.S. raised the alarm last year after media reports quoted the Cambodian government spokesperson, Phay Siphan, as saying that Dara Sakor could be converted to host military assets.

"A permanent PRC military presence in Cambodia could threaten regional stability and undermine the prospects for the peaceful settlement of disputes, the promotion of maritime safety and security, and the freedom of navigation and overflight," the statement from the Treasury Department said.

Phay Siphan said he never acknowledged that the UDG project could be retooled as a Chinese military base.

"I reject the report that implicated my name in it," Phay Siphan told VOA Khmer. "It's shameful because I've never said that."  In July 2019, he told Bloomberg, "Dara Sakor is civilian ⁠- there is no base at all. It could be converted, yes, but you could convert anything."

Expanding influence

CPP spokesperson Sok Eysan also asserted that the government wanted to create an economic zone in the Dara Sakor area, and had no intention of the facilities becoming a military base for any superpower.

"Cambodia does not seek to be a military power," Sok Eysan said. "We only want to ensure a sustainable economy to feed 16 million people. ... Therefore, we're trying our best to develop the country. We do not want war to come to Cambodia."

Cambodia has allied with China as Beijing is expanding its sphere of influence in the region without many challenges from competing powers other than the U.S.

Under President Xi Jinping, China has sought to expand its political, military, cultural, and economic dominance through bilateral aid and mega development projects like the Belt and Road Initiative that includes the Dara Sakor Seashore Resort.

Ro Vannak, a geopolitical expert and the co-founder of the Cambodia Institute of Democracy, believes that a U.S. sanction on a Chinese company in Cambodia is part of Washington's strategy to curb China's emergence as a regional power.

"The sanction on a Chinese company in Cambodia is a sign that makes Cambodia uneasy," said Ro Vannak. "This means that once superpowers start to compete, push, and splash water at each other, smaller countries that rely on them economically, especially on China, would find their reputation and economic growth is affected."

This report originated with VOA's Khmer Service. Men Kimseng reported from Washington, D.C., Hul Reaksmey and Aun Chhengpor reported from Phnom Penh, Cambodia.