US passes deal to fund Pacific Islands pacts after delays

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The US Congress has passed legislation that will fund key US agreements with Pacific Island nations, in an outcome that will spark relief across the Indo-Pacific after previous delays undermined efforts to counter China.

The Senate on Friday provided $7.1bn in funding over 20 years for the Compacts of Free Association (Cofa) — an agreement that provides the US with exclusive military access to Palau, the Marshall Islands and the Federated Republic of Micronesia in exchange for economic support.

The money was included in a $460bn spending package designed to keep government agencies from having to shut down at midnight. The move came weeks after it was stripped from another bill, sparking concern that the US was reneging on pledges to do more with partners in the Pacific.

While the three island nations are tiny, they span 4,000km across the Pacific, providing critical access for the US to operate in the Indo-Pacific and help overcome what the Pentagon calls the “tyranny of distance”. They provide a location to base missiles and early warning radars in addition to a test site for intercontinental ballistic missiles.

Senator Dan Sullivan, an Alaska Republican who takes a keen interest in the Pacific, said it was “important” to have funded Cofa.

“Our network of partners and allies — including these three island nations in the Pacific — are among our county’s greatest comparative strengths relative to the dictatorships in Beijing, Moscow, and Tehran,” he told the Financial Times. “The investment serves our mutual interests in pushing back on the Chinese Communist party’s aggressive regional designs.”

In recent weeks, the leaders of the three nations had warned the funding delay was creating uncertainty and “undesirable opportunities for economic exploitation by competitive political actors in the Pacific”.

Kathryn Paik, a former National Security Council official now at the Center for Strategic and International Studies think-tank in Washington, welcomed the outcome but said the US had “really hurt” itself with the delayed funding.

“If our budget process continues to show that the world’s greatest democracy cannot deliver for its own people and the world, it causes long-lasting damage in a region where we are always trying to prove that the US is a reliable partner,” she said. “The entire Pacific looks at Cofa as a bell weather of US commitment to the region.”

Ahead of the vote, David Panuelo, former president of the Federated States of Micronesia, said there was “growing frustration” over the lack of funding for the updated compacts, which should have gone into force last October.

“Every single day that passes without the compact being funded . . . makes it more likely that the FSM will become further beholden to China instead of our traditional allies,” he told the Financial Times.

The hand-wringing casts a spotlight on a fierce geopolitical competition as China rapidly gains influence over Pacific island nations on whose maritime territory the US fought decisive battles in the second world war.

China’s rising economic presence and efforts to build clout and security ties have triggered a pushback from the region’s traditional partners.   

Australia, the largest donor accounting for 39 per cent of all aid spent in the region over the past 20 years according to the Lowy Institute think-tank, has boosted support to its Pacific neighbours since 2018. The same year, New Zealand launched its “Pacific reset”, aiming to enhance its own security by helping its developing neighbours attain real prosperity.

After Solomon Islands and Kiribati switched diplomatic recognition from Taiwan to China in 2019 and Beijing inked a security deal with the Solomon Islands in 2022, the US sprung into action. It pledged to reopen its embassy in Solomon Islands after 29 years, organised its first-ever summit with Pacific Island leaders, and adopted a Pacific Partnership strategy backed by $1bn in aid. Japan also boosted its activity in the region.

But neither the US and its allies or China is scoring easy victories. Western countries fret that their engagement, which often comes with governance conditions, can seem less attractive than China’s loans and investments into infrastructure or direct support to individual politicians.

“Democratic values and accountability requirements limit how western donors compete with China’s fast and showy aid that often targets critical infrastructure, resource access and elite favour,” said Meg Keen, director of Lowy’s Pacific Islands programme.

But Chinese economic assistance by no means always translates into political influence. Anna Powles, a Pacific security expert at Massey University in New Zealand, pointed to China’s failure to convince Fiji to accept its Covid-19 vaccine despite putting enormous pressure on the country.

“If Fiji had accepted Sinovac, it would have given it legitimacy in the rest of region. But Fiji knew that if it accepted, it would destroy their tourism industry,” she said.