The Pacific and Indian Ocean region has become the most important theatre of major-power rivalry since the Cold War, a Canberra think tank has declared, warning that China is locking into Pacific nations into crippling debt deals and using its influence to steal a march on Australia.
Trying to be friends with China and other powers was a risky game and many small island states "have little room for error in resisting larger powers", according to the report, authored by Australian Strategic Policy Institute senior fellow Anthony Bergin and Australian National University National Security College senior fellow David Brewster.
Tonga, Vanuatu and Samoa are among the nations most heavily indebted to China anywhere in the world, threatening their sovereignty, the report says.
The decision of the Solomon Islands and Kiribati not to recognise Taiwan underscored the challenge when China offered big money to small states, it says. China has promised "unprecedented opportunities for development" for the Solomon Islands as a result.
Pacific nations are increasingly looking to China for tourists, but that was risky, the report says, pointing to China's ban on tour groups visiting Palau because it recognised Taiwan. The other three nations that recognised Taiwan, Nauru, Tuvalu and the Marshall Islands, also faced pressure.
China's soft power moves include teaching regional languages, which would give China "a pretext to recruit and incorporate island lecturers and cultural advisers into an academic environment".
China is drawn to the region for fisheries and resources but there was also a military element acknowledged by China itself, according to the report. Australia was alarmed when Vanuatu signed up to a $100 million port project with China with indications it might involve a military base on the island.
China is proposing undersea cable networks in Papua New Guinea and the Solomon Islands. More than 4000 Vanuatu passports had been sold to Chinese citizens, with passports allegedly bought by Chinese criminals.
And its investments in the Pacific were financed though loans from Chinese banks and tied to the use of Chinese companies for construction.
Island states are at a big disadvantage in dealing with big countries trying to gain economic or political influence, without the ability to assess major infrastructure projects, "potentially leaving them with economically unfeasible projects and large debts", the report said.
"Their small size, weak governance and limited financial resources make many island states uniquely vulnerable to the adverse effects of major-power competition, but it shouldn't be assumed that they're always mere pawns in a wider strategic contest.
"They have agency, often considerable agency, in pursuing their own national interests, whether through aligning themselves with larger powers or playing off larger powers against each other. But that can be a risky game, and many small island states have little room for error in resisting larger powers."
China's rise had brought major-power competition the doorsteps of Indo-Pacific island states, which were seen as "prizes or even battlegrounds to gain or retain influence or access".
China is using the climate change threat to ingratiate itself with the Pacific, including accusing Australia of being condescending on the issue.
Climate change is a major challenge in the region, the report said, causing storms, flooding and sea level rise, with the risk of pressure on food and water supplies, maritime crime, poverty and grievance. The people of the Carteret Islands "could become the world's first climate-change displaced persons".
The report pointed to other challenges facing the Pacific, including:
- World War II shipwrecks with corroding metal hulls, with the 3800 wrecks now ticking time bombs for the environment as their metal hulls corroded.
- Mining run-off and waste, ocean mining, illegal dumping, and ship waste, and plastic, threatening pristine oceans.
- Drug traffickers, with Fiji, Vanuatu, Papua New Guinea, Tonga and New Caledonia, extremely vulnerable to drug traffickers and a dramatic expansion in the number of boats carrying cocaine and methamphetamine from Latin America intended for Australia.
- Poor shipping, with container ship and ferry disasters.
- Violent extremism, boosted by the displacement of communities after the 2004 tsunami, a significant security threat for Indian island states, including Sri Lanka and the Maldives.
- People smuggling, with Chinese nationals using Palau and Fiji as transit points for human trafficking.
The rise of China and its challenge the US and its alliance in Asia "may be the defining feature of the 21st century", with China now a key aid, investment and trade partner for most states in the South Pacific. Australia and its partners had come late to the party, only recently taking serious notice.
It had gifted 21 new Guardian-class patrol boats to 12 Pacific Islands, but the report warns that the islands differed in "their national pride (or lack of it) in the vessels; and their ability and desire to maintain and run the new boats efficiently".