Vanuatu delays $500 million agreement with Australia over Chinese funding concerns

Tuesday 09 September 2025 - 11:20

By: Dakir Madiha

Vanuatu delays $500 million agreement with Australia over Chinese funding concerns

Vanuatu has postponed the signing of a landmark $500 million security and economic agreement with Australia, citing concerns that the deal could limit its ability to secure infrastructure financing from China, its primary external creditor.

Political divisions delay agreement finalization

Australian Prime Minister Anthony Albanese arrived in Port Vila on Tuesday, aiming to finalize the “Nakamal Agreement.” However, mere hours before departure, he acknowledged that the agreement would not be signed as planned. Speaking alongside Vanuatu Prime Minister Jotham Napat, Albanese admitted, “There is still work to be done” on the comprehensive pact.

The delay stems from internal political divisions within Vanuatu’s government regarding specific terms of the agreement. Napat explained during a joint press conference, “I had to allow the Nakamal Agreement to go through various stages with coalition partners. Some of my ministers and MPs believe it needs further discussion, particularly on certain precise terms of the deal.”

When asked if the agreement could restrict Vanuatu’s ability to seek funding from other nations for critical infrastructure, Napat replied, “Yes.” This response underscores Vanuatu’s delicate balancing act between maintaining strong ties with both Australia and China. The latter has provided significant loans for projects such as a presidential office complex, a parliamentary building, and roads.

China’s growing influence in the Pacific

Vanuatu owes China an estimated $100 million in public debt, representing around 20% of its GDP. Beijing has deepened its security cooperation with the Pacific nation, notably during a political crisis in 2023 when it sent police experts and equipment. Recent Chinese aid included patrol boats, riot gear, drones, motorcycles, and uniforms for Vanuatu’s police force.

This delay marks a diplomatic setback for Australia’s broader Pacific strategy. Unlike agreements signed with Tuvalu and Nauru that grant Canberra veto power over security arrangements with third parties, the Nakamal Agreement appears less restrictive. However, it seeks to position Australia as Vanuatu’s key partner in security and development.

Regional security discussions ahead

Both leaders will attend the Pacific Islands Forum in the Solomon Islands, where regional security and climate change are expected to dominate talks among the 18 member nations. Notably, traditional donor partners, including China, the United States, and Taiwan, will not participate due to a dispute over Taiwan’s involvement.

While Albanese expressed confidence that the agreement would eventually be finalized, stating, “There is agreement on the principles that have been signed off in the Nakamal Agreement,” the delay highlights the complex political maneuvering required as Pacific nations navigate competing regional powers while safeguarding their sovereignty.