US officials say pact with strategically key Pacific island nations underscores American commitment

U.S. officials stressed Tuesday that newly-approved legislation providing billions of dollars in funding for three strategically important Pacific island nations is an important sign of American commitment, which comes amid warnings China is actively trying to pry them away from Washington's sphere of influence.

The renewal of funds for the Marshall Islands, the Federated States of Micronesia and the Republic of Palau — known collectively as the Freely Associated States — had been held up for months by broader infighting in Congress over budgetary issues, even though they enjoyed widespread bipartisan support.

Leaders in the islands had warned that delays could have forced their governments to cut services, and swayed public opinion toward offers of investment from China.

Palau President Surangel Whipps Jr., who faces an election later this year, cautioned in a February letter that was made public that the Chinese Communist Party was seeking to take advantage of the American delay.

“Every day it is not approved plays into the hands of the CCP and the leaders here ... who want to accept its seemingly attractive economic offers at the cost of shifting alliances, beginning with sacrificing Taiwan,” he wrote.

“The PRC has already offered to ‘fill every hotel room’ in our tourism-based private sector — ‘and more if more are built’ — and $20 million a year for two acres for a call center,” he wrote, using the abbreviation for the People's Republic of China.

While the $7.1 billion in aid, approved March 9 and to be spread over 20 years, is not a lot compared to other aid being considered by Congress — like $95 billion for Ukraine, Israel and Taiwan — it makes up a significant portion of the small island nations’ budgets and is critical for health services, infrastructure projects, and education.

“We understand the past several months have been frustrating for, and uncertain for our friends in the Pacific,” said Taylor Ruggles, the State Department’s senior advisor for the implementation of the pact through which funds are allocated, known as the Compact of Free Association.

“We’ve heard their concerns about getting it done, and frankly we shared those frustrations.”

The new pact comes amid an American diplomatic push in the region, which gained new impetus when the Solomon Islands signed a security pact with China in 2022, a wake-up call that raised the prospect of Beijing establishing a naval foothold in the South Pacific.

“It was a top priority for this administration,” Ruggles said.

He said it was a sign of the COFA agreement's importance that it was passed while other national security priorities are still stalled in Congress.

“This relationship really supports the security, stability, freedom and prosperity throughout the Indo-Pacific,” Ruggles said.

Under the COFA agreement, citizens of the three nations have the right to live and work in the U.S. among other benefits, while the U.S. provides for their postal service, national defense and uses their territory — a maritime area larger than the continental United States — for military installations and exercises.

The first COFA agreement was signed with the U.S. in the 1980s, and it has already been renewed once.

‘Strong ties between the United States and the Pacific islands form the foundation of our engagement and presence in the Pacific,” said Interior Department official Keone Nakoa in a call from Washington with reporters.

“The provision of 20 years of new economic assistance sends a clear signal of the United States’ commitment to the long, historic relationships we have held with the associated states.”

The Freely Associated States have a combined population of less than 200,000 spread across more than 1,000 islands and atolls, about 4,000 kilometers (2,500 miles) southwest of Hawaii.

In addition to Guam, the states give the U.S. military a forward presence in the Pacific, including a missile test facility in the Marshall Islands and a high-frequency radar system being built in Palau.

The countries have had strong ties to the U.S. since American forces liberated them from Imperial Japan in World War II, but China has been working hard to try and win influence, and also convince Palau and the Marshall Islands, which still recognize Taiwan, to change loyalties.

In February, the presidents of the three countries warned American congressional leaders that the delays in the COFA renewal had “generated uncertainty among our peoples” and created “undesirable opportunities for economic exploitation by competitive political actors active in the Pacific.”

The ties between the Freely Associated States and the U.S., however, are much deeper than strictly financial, Ruggles said.

“We have a really unique and special relationship with the Freely Associated States, arguably one of the closest relationships possible between sovereign nations,” he said.

“Their citizens serve in the U.S. military, they can travel and work freely in the United States, our military provides for the national defense — we're as close as countries can be and this has been a longstanding relationship.”