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

Marshall Islands & US: A Bond Beyond Geography
SectionsDetails
Background
  • Located in the central Pacific Ocean, the Marshall Islands is an island country.
  • Historically under Spanish, German, and Japanese dominion.
  • Post WWII, it was part of a UN Trust Territory overseen by the US.
  • Attained independence in 1986 via the COFA.
Compact of Free Association (COFA)
  • Transitioned the Marshall Islands from UN Trusteeship to self-governance.
  • US extends economic aid and certain programmatic access.
  • US entrusted with military access and defense of the islands.
  • Marshall Islands citizens can reside and work in the US visa-free.
Geostrategic Relevance
  • US has a missile testing site on Kwajalein Atoll.
  • Offers US a strategic military footing, countering China’s influence in the region.
Recent $2.3 Billion Accord
  • A renewed 20-year economic support contract.
  • Acknowledges and addresses the aftermath of US nuclear testing in the region.
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

Marshall Islands 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.

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