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New $2.3 Billion Deal: Examining the Strategic Marshall Islands-US Relationship

What’s in the News?
The United States recently signed a new 20-year agreement worth $2.3 billion to provide economic assistance to the Marshall Islands. This highlights the strategic importance of the Marshall Islands for the US in the Pacific region.
Overview
Sections | Details |
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Background |
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Compact of Free Association (COFA) |
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Geostrategic Relevance |
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Recent $2.3 Billion Accord |
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Challenges for the Marshall Islands | Economic constraints and environmental threats, particularly climate change impacts. |
Introduction
The Republic of the Marshall Islands (RMI) is located in the western Pacific Ocean. It consists of five volcanic islands and 29 coral atolls spread over 750,000 square miles of ocean. The capital is Majuro and the population is about 68,000. Agriculture and tourism are the economic mainstays. The US dollar is the official currency.
The islands have been controlled by Spain, Germany and Japan over the centuries. After World War II, the RMI became part of the UN Trust Territory of the Pacific Islands administered by the United States. The RMI Government was established in 1979 and gained independence in 1986 after signing the Compact of Free Association with the US.
Compact of Free Association with the United States
Background
After WWII, the Marshall Islands were part of the UN Trust Territory of the Pacific Islands administered by the US. During this period, the US conducted nuclear testing in the Marshall Islands, affecting the health and environment of the islands.
In the 1970s, the Marshall Islands began seeking independence. Negotiations led to the signing of the Compact of Free Association in 1986, ending the Trusteeship.
Key Elements
The Compact recognizes the RMI’s right to self governance. Key elements include:
- RMI has full control over its internal and external affairs.
- US provides economic assistance to promote budgetary self-reliance.
- US has full authority over RMI’s security and defense matters.
- Citizens can live, work and study in US without a visa.
- RMI has access to various US federal programs and services.
The economic assistance provisions were amended in 2003 with new funds for 2004-2023 period.
Strategic Importance
The Compact allows US military access to Marshall Islands’ land and waterways. The Ronald Reagan Ballistic Missile Defense Test Site located on Kwajalein Atoll is a key US missile defense installation.
This military access is strategically important for the US in countering China’s growing influence in the Pacific amid increasing great power competition.
Marshall Islands Location Map
Recent Developments
New Economic Assistance Agreement
In October 2022, the US signed a new 20-year economic assistance agreement worth $2.3 billion with the Marshall Islands. The new agreement will extend US economic assistance to the RMI from 2024 to 2043.
The grant assistance will support education, healthcare, environment and infrastructure projects. A trust fund will also be created for projects determined by the RMI government.
Legacy of Nuclear Testing
Compensation for damages from the US nuclear testing program in the 1940s and 1950s has remained a sticking point in negotiations between the two countries.
The testing program adversely affected human health, environment and livelihoods of Marshall Islanders. While the US has provided some compensation, concerns remain over full redressal of the damages.
Structural Economic Challenges
Like other small Pacific island economies, the Marshall Islands also faces challenges of small size, lack of economies of scale, limited resources and poor infrastructure. Its economy remains dependent on external assistance.
Climate change also threatens the low-lying atoll nation. Rising sea levels are a major long-term challenge.
Final Thoughts
The Marshall Islands holds strategic importance for the United States in the Pacific region. The Compact of Free Association reflects this complex relationship of history, nuclear legacy, economic dependence and strategic interests between the two countries.
Recent developments indicate that the Compact will continue to be an important factor in the RMI’s engagement with the US in the face of both domestic and geopolitical challenges.