At first glance, Australia’s new treaty with Nauru seems to be a win-win. But questions remain

At first blush, today’s announcement that Australia and Nauru have signed a security treaty offers something for both countries. Australia increases its influence in a region in which it feels threatened by China. Nauru receives economic assistance and reliable banking services.

But important questions remain unanswered.

For the past decade, Australia has been concerned about China’s ambitions in the Pacific Islands region. It is also conscious that the diplomatic landscape of the region has become more “crowded and complex”, as Australia now cooperates – and competes – with a wider range of partner countries in the region.

Australia has therefore ramped up its development assistance, infrastructure lending, security initiatives, labour mobility and migration opportunities, as well as other policies in the region.

It has also developed an appetite for greater integration with Pacific Island countries. The 2017 Foreign Policy White Paper identified Australia’s aim as being to “integrate Pacific countries into the Australian and New Zealand economies and our security institutions”.

Most famously, during a 2019 speech, Kevin Rudd proposed Australia should offer citizenship to people from Kiribati, Nauru and Tuvalu in exchange for control of their seas and fisheries. Versions of this proposal had been circulating in Canberra for years, but with limited support. Chinese influence has changed the calculation.

Todays’ announcement of the Nauru–Australia Treaty, a year after the signing of the Falepili Union Treaty between Australia and Tuvalu, seems to vindicate this call for integration by Rudd and others.

Under the Nauru–Australia Treaty, the two countries agree to “deepen and expand security cooperation”, and “consult and consider” in the event of threats. Then there is the big-ticket item: Nauru will “mutually agree with Australia any partnership, arrangement or engagement with any other State or entity on matters relating to Nauru’s security”. This echoes the language used in the Falepili Union with Tuvalu.

Australia has effectively acquired a veto over Nauru and Tuvalu entering any security arrangement with China. This has been Australia’s major concern in the region since Solomon Islands and China entered into a security agreement in 2022. With respect to Nauru, this was further heightened after it switched diplomatic recognition to China in January 2024.

So, the Nauru–Australia Treaty seems like a diplomatic “win” for Australia.

In exchange, Australia has agreed to provide A$100 million of budget support over five years to help Nauru’s “economic resilience, fiscal stability and prosperity”.

Australia will also provide A$40 million over five years to support Nauru’s security and policing needs, particularly the work of its recently appointed National Security Advisor.

Crucially, it will support the Commonwealth Bank to step in to provide banking services in Nauru, after Bendigo Bank announced it would withdraw. This helps secure Nauru’s economic future and removes Nauru’s risk of becoming “unbanked”.

So it seems like a similar “win” for Nauru.

But the treaty has several aspects that are still unclear.

First, how does it sit with Australia’s history with Nauru? As Nauru’s coloniser, Australia oversaw – and benefited from – the extraction of much of Nauru’s surface during phosphate mining. Mismanagement of the Nauru Phosphate Royalties Trust, established at independence to help return some profits to the people of Nauru, has been a major cause of Nauru’s longstanding economic woes since the 1990s.

But Australia also contributed to Nauru’s challenges through its policy of processing and resettling refugees in Nauru.

Second, Nauru’s democracy has not always benefited from Australia’s presence. Conscious of the need to maintain good relations with the Nauru government to keep its refugee processing centre open, and more recently to counter Chinese influence attempts, Australia has at times been reluctant to comment on the erosion of political rights in Nauru.

This was exemplified during the trial of the “Nauru 19”, who were prosecuted for protesting against government corruption. At the time, retired Australian judge Geoffrey Muecke, who sat on the Nauru Supreme Court, described the prosecution as a “shameful affront to the rule of law”. Will the treaty similarly constrain Australia in the future?

Third, the treaty requires Australia to provide extensive support to the Nauru government’s economic policies. Nauru has agreed it will “ensure integrity, transparency and accountability in its fiscal and financial management systems to prevent fraud, corruption, and misconduct”. But given Australia’s strategic interests in maintaining the treaty, what will Australia do if the Nauru government does not meet this undertaking?

Fourth, critics will justifiably ask questions about the impact of the treaty on Nauru’s sovereignty, echoing concerns raised about the Falepili Union, and before that, Rudd’s 2019 proposal.

In this regard, to dilute its apparent power, Australia may have been better off pursuing a trilateral security agreement that also included New Zealand, of the type proposed by Cook Islands Prime Minister Mark Brown.

On one reading, Australia has taken advantage of the vulnerabilities of Nauru (economic and banking) and Tuvalu (climate change) to secure the treaties and advance its strategic interests.

During the 1960s negotiations on Nauru’s decolonisation, Nauruan negotiators rejected Australia’s proposal to create a relationship of “free association” because they had access to the wealth of the Phosphate Royalties Trust.

Today’s treaty, by contrast, goes a long way to solving several of Nauru’s pressing economic challenges. In exchange, the “cost” – constraints on Nauru’s future security partnerships – may not be seen as steep as they were more than half a century ago. Time will tell.

The Australian government must now sell the Nauru–Australia treaty to an Australian people struggling to meet cost-of-living pressures. This may be easier than the Falepili Union, because a migration pathway is not a key feature of the Nauru deal.

But at the same time, the absence of migration reveals the elephant in the room: for decades the Australian taxpayer has been propping up the economy of an island whose main resource – sovereignty – it mined via its “Pacific Solution” to house refugees. Now it will do so in perpetuity for its strategic interests.