In September 2022, the US Institute of Peace published a Senior Study Group report on China’s Influence on the Freely Associated States of the Northern Pacific, which consist of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau. The Senior Study Group was co-chaired by former US Indo-Pacific Command (INDOPACOM) Commander Admiral Phil Davidson, former Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell, and Guam’s former Delegate to the House of Representatives Robert Underwood. The three co-chairs state in the preface to the report that “China’s engagement in these countries threatens US interests both locally and in the broader Pacific region.”
The report makes the case that strengthening US relations with the Freely Associated States (FAS) is essential to secure US interests and prevent China from increasing its influence in the region. The report largely focuses on the interests of the United States, China, and the FAS, but also has significant implications for Taiwan.
The Federated States of Micronesia, the Marshall Islands, and Palau lie north of the equator and span a swath of ocean roughly the width of the continental United States, which is their closest partner. The United States administered the islands as trust territories from the end of World War II until their independence—the Federated States of Micronesia and the Marshall Islands in 1986, and Palau in 1994—leading to the unique ties they share today.
The three countries signed Compacts of Free Association with Washington upon independence, allowing them to receive grant aid and security guarantees from the US government. Citizens of these countries also receive other benefits, including the right to live and work in the United States without a visa, access to US programs and services like the US Postal Service, and the ability to enlist in the US military.
In exchange, the United States has the right to construct military facilities in the Freely Associated States and the right to deny third parties from using the islands’ airspace, territories, and territorial waters for military purposes. While the United States and the FAS are in the process of renegotiating the grant aid portions of the Compacts, the security provisions will last in perpetuity.
China’s Growing Interests in the Pacific Islands
The Senior Study Group report found that “Beijing sees Pacific Island nations as a low-investment, high-reward opportunity for China to score both symbolic and tactical victories in its global agenda.” The report states that China’s interests in the region include:
Enhancing power projection in the Indo-Pacific through strategic access to ports and Exclusive Economic Zones; cultivating supporters with voting rights in international institutions and increasing the number of voices sympathetic to its position in international disputes; constraining Taiwan’s international space and reducing the number of Taipei’s formal diplomatic partners; building soft power and promoting the Chinese model of political and economic development; enhancing access to export markets and diversifying supply chains in key commodities; advancing the Belt and Road Initiative and protecting Chinese workers and assets in the region; deepening trade relations; frustrating efforts by the United States and its allies to project military power in the Western Pacific; and increasing its intelligence gathering and surveillance capabilities across a wider geographic range, with a particular eye on the US military.
These objectives have clear implications for the FAS and for Taiwan. Beijing has made strides in recent years in its struggle for influence against Taipei. In 2019, Solomon Islands and Kiribati switched recognition from Taipei to Beijing. (Solomon Islands later signed a controversial security agreement with China in April 2022.) Among Taiwan’s diplomatic allies in the Pacific at the time, Solomon Islands and Kiribati were the two largest countries by population, and their recognition of Beijing dramatically reduced Taipei’s number of Pacific diplomatic partners from six to four.
Today, Taiwan’s partners in the region include the Marshall Islands, Nauru, Palau, and Tuvalu. The Marshall Islands and Palau are now Taiwan’s two largest Pacific partners, and both are Freely Associated States.
The Senior Study Group report found that “As Beijing seeks to expand its influence among Pacific nations, strengthening the US-FAS relationship will be essential to securing US interests in the region.” The report also determined that the strength of the US-FAS relationship is “a crucial barometer of the durability of US alliances and partnerships and regional democratic norms,” as US commitment to the FAS will be seen in the region as an indicator of US commitments to its partnerships more broadly.
The report notes that ties between the United States and the FAS are strong, “but a failure to reach a mutually satisfactory resolution to Compact negotiations would be a major setback for US interests and regional security.” In addition, the Senior Study Group asserted that “China has not focused on the FAS in its influence-building efforts in the Pacific to the degree it has focused on South Pacific nations, but nonetheless is positioning itself to take advantage of any deterioration in US-FAS relations.”
FAS Relations with the US and Taiwan
Since the publication of the Senior Study Group report, the most significant developments in this area are the signing of memoranda of understanding (MOUs) between the United States and the Freely Associated States. In January 2023, Palau and the Marshall Islands signed deals with the United States to serve as frameworks for the ongoing negotiations, and reaffirmed their shared desire to strengthen their bilateral partnerships. In February, the United States signed an MOU with the Federated States of Micronesia to the same effect.
Taiwan’s relationships with Palau and the Marshall Islands also remain strong. In October 2022, Palau President Surangel Whipps Jr. visited Taiwan President Tsai Ing-wen (蔡英文) in Taipei and reaffirmed his commitment to supporting Taiwan despite China’s “mounting aggression” in the region. The following month, Taiwan Vice President Lai Ching-te (賴淸德) visited Palau, noting areas of collaboration on climate change, aquaculture, and medical care. In December, Whipps reemphasized his support for Taiwan and advocated for Taiwan’s inclusion in the World Health Organization (WHO).
Marshall Islands President David Kabua also reaffirmed his country’s commitment to Taiwan during a visit to Taipei in March 2022. At the UN General Assembly in September, he voiced support for Taiwan’s inclusion in the UN, and condemned China’s large-scale military drills around the island following a visit by US House of Representatives Speaker Nancy Pelosi.
In March 2023, outgoing Federated States of Micronesia President David Panuelo revealed in a letter to national leaders that he had discussed with Taiwan the possibility of switching recognition to from Beijing to Taipei, and he suggested that Taiwan could pick up any projects China is currently undertaking. However, it remains to be seen how Panuelo’s successor, who has not yet been elected, will handle the issue.
Image: President of Palau Surangel Whipps Jr. (at podium) speaking during an appearance with Taiwan President Tsai Ing-wen (center right) during an official visit to Taiwan (October 6, 2022). (Image source: ROC Presidential Office)
China’s Influence Operations
In same letter in March, Panuelo excoriated China for conducting “political warfare” in the Federated States of Micronesia, including clandestine intelligence operations, interference in government affairs, and bribery of government officials to further Beijing’s interests. Panuelo described how Chinese officials had frequently given gifts and envelopes of cash to members of the government, how China had supported secessionist movements in the country, how Chinese research vessels had conducted espionage, and how in July 2022, during the Pacific Islands Forum, Panuelo himself had been followed by men who worked for the Chinese Embassy, one of whom was an intelligence officer. Panuelo argued in the letter that these influence activities had severely undermined his country’s sovereignty and national security.
There have also been troubling activities in Palau and the Marshall Islands potentially linked with the Chinese government. In December 2022, a report by the Organized Crime and Corruption Reporting Project (OCCRP) revealed that a Chinese triad leader with ties to the Chinese Community Party (CCP) has cultivated ties with Palauan elites, and hundreds of Chinese citizens have been working in illegal gambling operations in the country. In the absence of diplomatic relations between Palau and China, the report notes, “unofficial proxies remain a powerful tool of attempted influence.”
China may have proxies in the Marshall Islands as well. Starting around 2018, a Chinese-Marshallese couple attempted to bribe Marshallese politicians to enable the establishment of a “special administrative region” on Rongelap Atoll that would have undermined Marshallese sovereignty and opened the atoll to money laundering and other criminal activity. In 2018, support for the scheme nearly toppled former Marshall Islands President Hilda Heine in a vote of no confidence, which she suspected was an effort by the Chinese government to depose her. Kenneth Kedi, the speaker of the National Parliament and senator for Rongelap, supported the no confidence vote at the time—but has since stated that he thinks the scheme was connected to the Chinese government.
The Military Significance of the FAS
As the Senior Study Group report notes, China has an interest in “increasing its intelligence gathering and surveillance capabilities across a wider geographic range, with a particular eye on the US military.” This will certainly include the FAS.
The proximity of Rongelap to the Ronald Reagan Ballistic Missile Defense Test Site on Kwajalein Atoll raised further concerns about the Rongelap proposal. Even if the Chinese government was not involved in the deal from the beginning, the creation of an autonomous region on Rongelap would potentially have allowed the Chinese government to conduct illicit activity there with little to no oversight from the Marshallese or US governments. Kwajalein is “critical to US space and missile-defense capabilities,” according to the Senior Study Group report, and it could also “play a critical role in supporting missile launches, space reconnaissance, and surveillance operations during a defense of Taiwan,” according to senior experts at the Pacific Forum.
Palau is becoming increasingly important to the US military as well. It was a training location for US-led military exercises in February 2023, and also hosted one of the US military’s largest joint Field Training Exercises in the Pacific in June 2022. The exercises aimed to increase integration of US and allied fighting forces and to explore how a variety of locations could be used in a potential future conflict. In addition, by 2026 the United States plans to install Tactical Mobile Over-the-Horizon (OTH) Radar in Palau to bolster maritime and air domain awareness and monitor Chinese and North Korean activities.
It is clear that Palau and the Marshall Islands—as well as the Federated States of Micronesia—could play crucial roles in a potential US defense of Taiwan. The Senior Study Group report found that “the FAS play an important role in US defense planning, force posture, maritime operations, and power projection in the Indo-Pacific region and beyond.”
As tensions with China rise, the Freely Associated States are becoming even more valuable to the security of the United States and Taiwan. The US government has made it a priority to further strengthen its close relationships with the FAS, and Taiwan must do the same with Palau and the Marshall Islands—as well as potentially with the Federated States of Micronesia. The United States’ and Taiwan’s mutual relations with the FAS should be high on the agenda for policy coordination between Washington and Taiwan, and joint consultations should not be off the table.
The main point: While Washington and Taipei maintain strong ties with the Freely Associated States, China is increasingly exerting its influence in these countries in an effort to undermine US and Taiwanese interests. Accordingly, Washington and Taipei should prioritize strengthening their relationships with these crucial partners.