Australia gains veto power over Nauru's deals with China and others

Australia and Nauru established a multimillion-dollar agreement that grants Canberra veto rights over agreements Nauru might pursue with third nations, including China. This treaty, announced in December 2023, involves significant Australian financial support amounting to 140 million Australian dollars (approximately 89 million US dollars) allocated over five years to aid the Pacific nation's development and enhance its security capabilities. A portion of this funding, specifically 40 million Australian dollars (26 million US dollars), is earmarked for bolstering Nauru's policing and security infrastructure. The prime ministers of both nations emphasized this partnership, asserting that mutual security is crucial, especially in light of global geopolitical tensions involving larger powers. The new arrangement indicates a shift in Nauru's foreign policy direction, sacrificing its previous autonomy regarding security and infrastructure agreements with other nations, particularly as it relates to China. This development is a direct response to the rising influence of China in the South Pacific and efforts by the Australian government to reassert its position as the preferred security partner in the region. The timing of this treaty coincides with similar agreements Australia has made with other Pacific nations like Tuvalu, which aim to strengthen regional ties while countering China's expanding footprint through infrastructure and security initiatives. In addition to the strategic implications for both Australia and Nauru, the agreement also solidifies Australia’s role in shaping the economic landscape of Nauru. As part of the treaty framework, Nauru plans to retain an Australian banking presence, with the Commonwealth Bank of Australia set to establish a branch in the territory the following year. This move comes in the wake of Bendigo Bank's exit from Nauru, reflecting Australia's commitment to ensuring economic stability and security in the region. By enhancing Nauru’s economic resilience and security measures, the treaty is positioned as a vital step toward addressing challenges such as debanking and inclusive growth for Nauru's small population of around 12,000 residents. The agreement underscores the delicate balance Pacific island nations must navigate between powerful allies and neighboring superpowers while striving for economic development and regional stability. It reflects a broader regional trend where small nations like Nauru are increasingly entangled in the geopolitical power dynamics between Australia and China, with the latter's growing influence raising concerns among U.S. allies in the area. As such, Nauru's decisions moving forward will be closely monitored, given their potential ripple effects on the strategic landscape of the Pacific Islands.