Rare earths, rough seas: FSM at the crossroads of US-China resource rivalry

By Joyce McClure

China’s new restrictions on the export of rare earth minerals are reverberating across the Pacific, raising concerns that the Federated States of Micronesia could become a new arena for resource competition between Beijing and Washington.

The Chinese government announced last month that it would impose new licensing rules on exports of critical minerals used in computer chips, batteries and defense systems. U.S. officials condemned the move, calling it an attempt to use global supply chains as a form of leverage.

U.S. Trade Representative Jamieson Greer described the policy as “a global supply-chain power grab,” according to Reuters, while Treasury Secretary Scott Bessent told the Financial Times that China “wants to pull everybody else down with them” through its mineral restrictions.

The export controls, which take effect later this year, follow escalating trade and technology disputes between the world’s two largest economies. But for Pacific island nations such as the FSM, the implications extend beyond trade. They touch on sovereignty, environmental protection and the balance of power that has long defined U.S.-Micronesia relations.

Covering more than a million square miles of ocean, the FSM’s exclusive economic zone is among the largest in the Pacific. Beneath those waters lie potential reserves of polymetallic nodules rich in cobalt, nickel, manganese and copper. These minerals are essential for renewable energy and defense technologies.

Over the past several years, Chinese research vessels have conducted repeated expeditions in and near the FSM’s EEZ. While Beijing describes the voyages as oceanographic studies, regional security analysts say they could also be mapping mineral deposits.

China’s maritime research often serves dual purposes, blending scientific study with strategic resource mapping, according to some policy analysts. Micronesia’s deep-sea floor is of growing interest to both commercial and military planners.

U.S. officials have expressed unease about these activities, noting that the FSM’s security and defense responsibilities fall under the Compact of Free Association,

which gives Washington strategic access to Micronesian waters. The recently amended compact reflects Washington’s effort to reassert its role in the Pacific amid rising Chinese influence.

While the U.S. remains the FSM’s key defense partner, China has become its largest trading partner and an active development donor. Chinese-funded infrastructure, including government buildings, roads, and bridges, can be seen throughout the islands.

Analysts say Micronesia is navigating between two powerful partners, one providing security and the other offering investment—a situation that creates both opportunities and vulnerabilities.

FSM authorities have so far taken a measured approach to Chinese maritime activity. In past public notices, the national government has acknowledged the presence of Chinese research vessels operating under permits but has not accused Beijing of violating FSM laws.

The FSM has also established a legal framework for future seabed mining. The Seabed Minerals Act of 2014 requires all exploration or extraction within its EEZ to undergo licensing and environmental review. The law affirms FSM ownership of marine mineral resources.

Although the act has been in force for a decade, no commercial permits have been issued. Officials say the government continues to evaluate both the economic potential and ecological impact of any future projects.

Environmental organizations have warned that seabed mining could permanently damage fragile ecosystems due to their extremely slow recovery rate. Once mining begins, it would be nearly impossible to repair the damage.

The debate over seabed mining divides the region. Palau and Fiji have called for a moratorium, while Nauru and Tonga have defended their policy decisions to open their waters to deep-sea mining. The FSM has taken a cautious middle ground, emphasizing consultation and scientific study.

Palau President Surangel Whipps Jr. has been among the region’s most vocal critics of deep-sea mining, saying it threatens biodiversity and food security.

FSM leaders, meanwhile, have framed the issue primarily in economic and environmental terms, noting that any resource development must safeguard the ocean on which the country depends.

China’s export controls arrive as Washington renews its diplomatic and economic focus on the Pacific. Both the Biden and Trump administrations have described the region as “strategically critical,” reopening embassies, expanding Coast Guard cooperation and promising new infrastructure investments.

Despite this renewed attention, some observers question whether U.S. engagement will last. There’s still a trust gap. Pacific partners want sustained, predictable cooperation, not policies that react only to China's actions.

If China’s control over mineral exports continues, experts say demand for alternative sources will intensify, potentially drawing greater interest in Pacific seabed resources. This prospect creates both opportunities and risks for small island nations.

As U.S.-China competition intensifies, analysts anticipate that the FSM’s strategic importance will increase. Its vast EEZ lies along key routes between Guam, the Philippines and the central Pacific. Both Washington and Beijing are likely to expand engagement—one through defense and diplomacy, the other through trade and investment.

FSM President Wesley Simina recently reiterated his government’s position of neutrality and balance. “We are friends to all and enemies to none,” he said during a ceremony marking the renewal of the compact’s economic provisions. “Our decisions will always be guided by the best interests of our people and our environment.”

Observers say that the approach will be tested as resource competition intensifies. Micronesia sits on valuable minerals and in a strategic corridor, a combination that ensures attention and pressure from both sides. The challenge will be preserving sovereignty while navigating between giants.

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