Superpower rivalry is making Pacific aid a bargaining chip – vulnerable island nations still lose out

The A$140 million aid agreement between Australia and Nauru signed last week is a prime example of the geopolitical tightrope vulnerable Pacific nations are walking in the 21st century.

The deal provides Nauru with direct budgetary support, stable banking services, and policing and security resources. In return, Australia will have the right to veto any pact Nauru might make with other countries – namely China.

The veto terms are similar to the “Falepili Union” between Australia and Tuvalu signed late last year, which granted Tuvaluans access to Australian residency and climate mitigation support, in exchange for security guarantees.

And just last week, more details emerged about a defence deal between the United States and Papua New Guinea, now revealed to be worth US$864 million. In exchange for investment in military infrastructure development, training and equipment, the US gains unrestricted access to six ports and airports.

Also last week, PNG signed a ten-year, A$600 million deal to fund its own team in Australia’s NRL competition. In return, “PNG will not sign a security deal that could allow Chinese police or military forces to be based in the pacific nation”.

These arrangements are all emblematic of the geopolitical tussle playing out in the Pacific between China and the US and its allies.

This strategic competition is often framed in mainstream media and political commentary as an extension of “the great game” played by rival powers. From a traditional security perspective, Pacific nations can be depicted as seeking advantage to leverage their own development priorities.

But this assumption that Pacific governments are “diplomatic price setters”, able to play China and the US off against each other, overlooks the very real power imbalances involved.

The risk, as the authors of one recent study argued, is that the “China threat” narrative becomes the justification for “greater Western militarisation and economic dominance”. In other words, Pacific nations become diplomatic price takers.

Defence diplomacy

Pacific nations are vulnerable on several fronts: most have a low economic base and many are facing a debt crisis. At the same time, they are on the front line of climate change and rising sea levels.

The costs of recovering from more frequent extreme weather events create a vicious cycle of more debt and greater vulnerability. As was reported at this year’s United Nations COP29 summit, climate financing in the Pacific is mostly in the form of concessional loans.

The Pacific is already one of the world’s most aid-reliant regions. But considerable doubt has been expressed about the effectiveness of that aid when recipient countries still struggle to meet development goals.

At the country level, government systems often lack the capacity to manage increasing aid packages, and struggle with the diplomatic engagement and other obligations demanded by the new geopolitical conditions.

In August, Kiribati even closed its borders to diplomats until 2025 to allow the new government “breathing space” to attend to domestic affairs.

In the past, Australia championed governance and institutional support as part of its financial aid. But a lot of development assistance is now skewed towards policing and defence.

Australia recently committed A$400 million to the Pacific Policing Initiative, on top of a host of other security-related initiatives. This is all part of an overall rise in so-called “defence diplomacy”, leading some observers to criticise the politicisation of aid at the expense of the Pacific’s most vulnerable people.

Lack of good faith

At the same time, many political parties in Pacific nations operate quite informally and lack comprehensive policy manifestos. Most governments lack a parliamentary subcommittee that scrutinises foreign policy.

The upshot is that foreign policy and security arrangements can be driven by personalities rather than policy priorities, with little scrutiny. Pacific nations are also susceptible to corruption, as highlighted in Transparency International’s 2024 Annual Corruption Report.

Writing about the consequences of the geopolitical rivalry in the Solomon Islands, Transparency Solomon Islands Executive Director Ruth Liloqula wrote:

Since 2019, my country has become a hotbed for diplomatic tensions and foreign interference, and undue influence.

Similarly, Pacific affairs expert Steven Ratuva has argued the Australia–Tuvalu agreement was one-sided and showed a “lack of good faith”.

Behind these developments, of course, lies the evolving AUKUS security pact between Australia, the US and United Kingdom, a response to growing Chinese presence and influence in the “Indo-Pacific” region.

The response from Pacific nations has been diplomatic, perhaps from a sense they cannot “rock the submarine” too much, given their ties to the big powers involved. But former Pacific Islands Forum secretary-general Meg Taylor has warned:

Pacific leaders were being sidelined in major geopolitical decisions affecting their region and they need to start raising their voices for the sake of their citizens.

While there are obvious advantages that come with strategic alliances, the tangible impacts for Pacific nations remain negligible. As the UN’s Asia and the Pacific progress report on sustainable development goals states, not a single goal is on track to be achieved by 2030.

Unless these partnerships are grounded in good faith and genuine sustainable development, the grassroots consequences of geopolitics-as-usual will not change.