Albanese’s $500m Pacific security deal founders over China clause

Australia’s bid to block China from gaining a security foothold in the Pacific through ports, airports and other sensitive critical infrastructure assets has been dealt a blow after Prime Minister Anthony Albanese was forced to scrap plans to sign a sweeping $500 million treaty-level agreement with Vanuatu.

Albanese hoped to kickstart a major fortnight of diplomacy in the Pacific by finalising a long-awaited deal with his counterpart during a visit to the capital of Port Vila on Tuesday, but resistance in Vanuatu meant the 10-year agreement had to be put back on ice at the last minute.

Vanuatu’s Prime Minister Jotham Napat said the key sticking point was that the pact, known as the Nakamal Agreement, could overly restrict Vanuatu’s ability to receive funding from other nations for critical infrastructure projects.

“Some of my ministers and my MPs feel it requires more discussion, particularly on some of the specific wordings in the agreement,” Napat said during a joint press conference with Albanese.

The setback is a blow for the Albanese government following its success at negotiating treaty-level agreements with Tuvalu and Nauru that grant Australia de facto veto rights over any security and military agreements with countries, including China.

Government sources, speaking on condition of anonymity, said the wording in the Vanuatu agreement was less explicit than for Nauru or Tuvalu, prompting fears it could unduly limit overseas investment in infrastructure projects in Vanuatu.

Beijing funded a new presidential palace for Vanuatu last year and welcomed the Melanesian nation’s “active participation” in its Belt and Road infrastructure initiative, raising concerns in Canberra about deepening ties with China.

Defence Minister Richard Marles, Foreign Minister Penny Wong and Pacific Minister Pat Conroy participated in a lavish ceremony atop a volcano in Vanuatu in August to celebrate the apparent conclusion of negotiations on the agreement, heightening expectations it would be signed imminently.

Marles declared at the time that the pact would “transform the relationship between our two countries”, adding that Albanese and Napat were hoping to finalise the agreement “in the coming weeks”.

Albanese said he and Napat “made good progress” during their meeting on Tuesday and would keep working towards striking an agreement.

“Both sides will go through our processes, but we’re very confident that the agreement can be reached, and I’m reassured by the discussion I’ve had with the prime minister,” Albanese said.

“This is in the interests of both our nations and is a very positive agreement going forward.”

Albanese will give Napat a lift to the Pacific Island Forum in the Solomon Islands on Wednesday, allowing the pair more time to discuss the deal.

Speaking later in the day, Napat said he and Albanese had decided to “pause momentarily” to ensure the agreement served the needs of both nations.

“The Nakamal agreement, when sealed, will serve as a cornerstone of our bilateral architecture,” he said.

Opposition foreign affairs spokeswoman Michaelia Cash said it was disappointing that Albanese had not been able to finalise a deal with Vanuatu.

“With an agreement still being pursued, Australians deserve clarity on how the half a billion dollars of taxpayer money will be spent and how it will deliver lasting benefits for both Vanuatu and Australia,” she said.

Australia and China’s fierce rivalry for influence in the Pacific has been underscored by duelling gifts of vehicles to be used by delegates and police officers during the forum in the Solomons capital of Honiara.

Solomon Islands Prime Minister Jeremiah Manele announced in late August that Australia would provide a fleet of 61 vehicles – including 40 Ford Rangers, 10 Nissan Navaras and 11 Toyota Hilux utes – valued at $5.2 million.

These would be used to ferry around leaders and other dignitaries during the forum, before they are given to the police force.

On the same day, Manele announced that the Solomons had received the first 27 of a fleet of 40 vehicles paid for by China.

Under the agreement, Australia would pour $500 million into Vanuatu to help fund its economic, security and climate needs while locking in Australia as the nation’s main security and development partner.

Australia and Vanuatu agreed on a security deal in 2022, but it was blocked by Vanuatu’s parliament after it became mired in domestic political debate.

Vanuatu, a nation of 330,000 people, is seen as a key “swing” state in the Pacific given its historically strong ties to Australia and burgeoning relationship with China.

Mihai Sora, program director of the Pacific Islands Program at the Lowy Institute, said there would be “definite disappointment” in the government about the apparent delay in reaching an agreement with Vanuatu.

“Australia was looking to celebrate the finalisation of this deal,” Sora said.

He said the deal was not dead as it was still in the interests of both countries to strike an agreement, even if the details prove difficult to finalise.

“Australia will keep trying,” he said.

Meg Keen, head of the Pacific Research Program at the Australian National University, said critical infrastructure was a key point of tension between Australia and Vanuatu.

“Australia sees critical infrastructure as a security issue, but some in Vanuatu feel it is more of a development issue and don’t want to close options or funding sources,” she said.

“Napat has to build a consensus to implement the deal in Vanuatu; otherwise it will be scuttled.”

Keen said she believed a deal could still be reached, but it would take time, and more compromises may be required.

Sora said he was more optimistic about a bilateral security agreement between Australia and Papua New Guinea that Albanese and counterpart James Marape are set to sign next week during PNG’s 50th anniversary of independence celebrations. As part of the agreement, PNG nationals will be allowed to serve in the Australian Defence Force and be put on a pathway to Australian citizenship as the two nations move to integrate their military operations.

“This is a huge step for PNG and a change to their foreign policy,” he said. “It’s a big deal for the Australia-PNG relationship.”

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