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The ticking COFA clock

US-Marshall Islands standoff over nuclear liability derailing compacts’ progress

By Mar-Vic Cagurangan

Washington is running out of time. The economic provisions of the Compacts of Free Association with the Federated States of Micronesia and the Marshall Islands are expiring on Sept. 30.

While the compact’s economic assistance for Palau won’t expire until next year, the U.S. has agreed to complete the negotiation and seal an agreement a year ahead. Yet, uncertainties continue to hover over the new agreements, which U.S. lawmakers are still trying to comprehend.

The U.S. aid to the freely associated states under the compacts is more than just doling out America’s largess. It represents the United States’ most crucial strategy to clinch its long-term defense interests in the Pacific island region, where China has made inroads.

“It is impossible to discuss the national security importance of the compacts without first understanding the strategic environment,” Dr. Siddharth Mohandas, deputy assistant secretary of defense, said in his July 13 testimony before the U.S. Senate Committee on Energy and Natural Resources. “The People’s Republic of China seeks to challenge U.S. alliances and partnerships in the Indo-Pacific and leverage its growing capabilities, including its economic influence, to coerce its neighbors and threaten their interests,” he added.

Meanwhile, Beijing continues to dangle its Belt and Road Initiative, which critics view as a Trojan Horse.

The U.S. began to pay more serious attention to the Pacific island region when Kiribati and the Solomon Islands switched diplomatic ties from Taiwan to China in 2019.


Palau and the Marshall Islands have maintained their ties with Taiwan, while the Federated States of Micronesia has diplomatic relations with China. Former FSM President David Panuelo’s attempt to switch to Taiwan prior to the end of his term was defeated by the FSM Congress's rejection of his proposal.

Palau President Surangel Whipps Jr. said China managed to exert its influence in his country when the U.S. tuned out the Pacific nation. “Our familiar relationship was significantly undermined by the failure to implement the 2010 review agreement for eight years due to internal U.S. political reasons. Palauans were being wooed by China,” Whipps said during a July 18 hearing held by the U.S House of Representatives Indo-Pacific Task Force.

Throughout Washington’s absence, Whipps said, China poured large amounts of investments and sent its tourists to Palau.

U.S.-Palau relations cannot be taken for granted again, Whipps said. While his country now hosts the U.S. military’s warning radar, the president warned that its competition is standing by. “China has offered to send more tourists than ever and make huge investments in new industries,” he said. “We need constant policy attention. We are on the frontline of competition and not just because their early warning radar makes us a target.”

The compacts allow the U.S. to use the land, water and air space in the freely associated states for military purposes, and grant it the right of strategic denial to foreign nations.

“Since the first compact entered into force, the FSM has continuously granted the U.S. security and defense rights in our territory, which represents a very large section of the Pacific Ocean with utmost strategic importance to both the U.S. and the region,” Leo Falcam, the FSM’s chief negotiator, said at the Indo-Pacific Task Force’s hearing. “While these crucial defense compacts do not expire, we are at a crossroads on economic support by the U.S.”

More than half of key government services are funded by the U.S. “A funding lapse would create an unprecedented economic and political crisis in our country and our people, and would have an overall destabilizing effect in the region,” Falcam said.

The U.S. has pledged $7.1 billion to the FAS over the next 20 years. While both the FSM and Palau have accepted the separately negotiated terms, the Marshall Islands deal remains pending due to the unresolved conflict over the U.S.’s nuclear liability.

Joseph Yun, the presidential envoy to the compact negotiation, said the Marshall Islands has backed out of the $2.3 billion in economic assistance it has initially agreed to receive. The Marshall Islands and the U.S. negotiating teams signed a memorandum of agreement on Jan. 12. However, the Marshallese officials’ retreat from the agreed-upon deal now threatens to derail the compact approval process.

“It is in the mutual interest of both the United States and the freely associated states to not allow the compacts to lapse,” said Sen. Joe Manchin, chair of the Senate Committee on Natural Resources. “But unfortunately, I must acknowledge that the same cannot be said for the negotiations with the Marshall Islands, which are ongoing. The Senate is not able to give its consent to an agreement that does not exist.”

In order for the Senate to take action, Manchin said, the negotiators must “conclude quickly” in accordance with what was previously agreed to. “The United States must continue to commit to addressing our nuclear legacy in the Marshall Islands,” Manchin said.

From 1946 until 1958, the United States tested nuclear weapons in the northern Marshall Islands.

“Those tests were necessary to win the Cold War against Soviet aggression. But it’s important to recognize the disproportionate sacrifice borne by the people of the Marshall Islands,” Manchin said. “While the United States fully settled all legal nuclear compensation claims in the 1980s, our moral and statutory responsibility to the people of the Marshall Islands endures, especially in light of any changed circumstances.”

Yun said the U.S. government’s legal responsibility for nuclear liability has been met. “And they have agreed to that. We’ve always felt that there were additional needs,” the ambassador said. “Which is why, within the $2.3 billion that we offered, $700 million was set aside to put into the trust fund.”


He reminded the Senate committee that the U.S. is racing against time and immediate congressional action is imperative. “Our strategic competitors are well aware that the scheduled end of U.S. economic assistance is fast approaching. Now is not the time to leave the FAS open to predatory and coercive behavior by other nations,” Yun said. “We cannot take the goodwill generated from our historic bonds of friendship for granted at a time of increasing competition from the People’s Republic of China and other countries to exert greater influence in the FAS and Pacific region more broadly.”

Accompanying the economic aid that would be coursed directly to the FAS governments is the proposed Compact Impact Fairness Act that would restore federal benefits to compact migrants who live in the U.S.

“While some may argue that the United States is expending too many resources to secure renewed engagement through these compact-related agreements, others will counter that the United States, as a Pacific nation itself, cannot afford to abandon decades of investment in these special relationships at such a critical time for the Indo-Pacific region,” said Carmen Cantor, assistant secretary for the Department of the Interior’s Insular and International Affairs.

While anticipating debates on the proposed compact packages, Cantor urged the U.S. Congress to “swiftly introduce and approve” the compact-related legislation.

“Now is the time to send a clear signal across the Pacific that these compacts and their related agreements are a cornerstone of U.S. national interest in the Pacific,” she said.

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