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  • Writer's pictureMar-Vic Cagurangan

Vowing to stay on neutral ground, FSM balances ties with US and China

Being courted by the world’s superpowers, the Federated States of Micronesia stays out of the geopolitical rivalry between the U.S. and China, and as far as President David Panuelo is concerned, the balancing act has been quite manageable.

“Never have I felt that the FSM is feeling sandwiched between the two superpowers. We highly cherish our sovereignty,” Panuelo said during a virtual forum hosted this month by Reuters Next Interview moderated by Kirsty Needham.

Panuelo said the FSM’s foreign policy decisions are consistent with his administration’s own strategy. “First and foremost, our national interest comes first,” he said.

The FSM, which is freely associated with the U.S. under the Compact of Free Association, has also aligned itself with Beijing through its one-China policy. Unlike other Pacific island neighbors that are torn between China and Taiwan, the FSM has sealed its 30-year-old ties with Beijing.

Panuelo said the FSM’s relationships with Washington and Beijing are well-defined and are conflict-free.

“Our alliance with the U.S. is political. We have a defense relationship with the U.S. and that is a clear alliance that we have formed,” he said. “Whereas with China, it’s purely economic and technical cooperation and cannot go beyond that.”

“China respects our policy. We deal with the U.S. under a very close treaty, where defense is also delegated by the U.S. under our Constitution,” he added.


The U.S. oversees the FSM’s defense. In turn, Panuelo said, “we also endorse the Indo-Pacific strategy, which must preserve the rules-based international order, and that is important for the sake of the rule of law and freedom of navigation.”

Besides receiving a significant amount of Covid-19 relief aid from the U.S., the FSM has also been a recipient of Beijing’s largess, which poured in during the pandemic. Their cozy relationship is being frowned on by the anti-China camp.

China’s cash diplomacy has raised warnings about the risk of debt problems in the Pacific islands.

But Panuelo said his administration has a cautious debt policy.

“We don’t get loans from any country despite the assistance that they give. We must preserve our sovereignty to make sure that the decisions we make are also in the best interest of our citizens. That has been the modus operandi of my administration,” he said

Just the same, Panuelo recognized that the growing tension between the U.S. and China is threatening regional stability.

“If we decide that our relations, in a way, result in unhealthy competition, I said to the U.S. and China, they can compete on a healthy basis in the region, but to be mindful that we don’t like and we do not appreciate being disrupted in the way they are doing things in the Pacific,” the president said.

“So as a global community, I believe that we must all endorse rules-based international order,” he added.

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