U.S. agrees to renew strategic pact with second Pacific island state

Secretary of State Antony Blinken meets with Palau's President Surangel Whipps Jr, Micronesia's President David Panuelo and Marshall Islands' President David Kabua at the State Department in Washington

By Kirsty Needham and David Brunnstrom

SYDNEY/WASHINGTON (Reuters) - The United States and Palau agreed on Wednesday to renew a key strategic pact, part of U.S. efforts to shore up support among Pacific island states to counter competition from China, even as President Joe Biden called off a historic stop in the region.

The two sides initialed a new Compact of Free Association agreement (COFA) in Palau after the United States reached a similar agreement with Micronesia on Monday.

"It's a historic day!!" the office of Palau President Surangel Whipps Jr posted on its Facebook page. "God bless Palau! God bless the United States of America! God bless us all!"

U.S. presidential envoy Joseph Yun told a ceremony the pact with Palau would be formally signed next week in Papua New Guinea. He told Reuters this week a renewed COFA with Micronesia would also be signed on Monday in Port Moresby.

Biden was due to attend that ceremony, but on Tuesday he called off what was to have been a brief stopover in Papua New Guinea due to the U.S. debt ceiling crisis.

Analysts said calling off the stop was a blow to U.S. credibility in the Pacific island region, which has long felt neglected by Washington.

Yun told Reuters on Monday he expected to be in the Marshall Islands from Thursday until Sunday, but was "doubtful" its COFA agreement could be finalized at the moment.

Washington first reached COFA accords with the three island states in the 1980s, under which it retains responsibility for their defense and provides economic assistance while gaining exclusive access to huge strategic swathes of the Pacific in return.

Renewing them has become a key part of U.S. efforts to push back against China's bid to expand its influence in the Pacific. Chinese diplomats have been courting the region and China's construction and mining companies have expanded their business in many of the island nations.

The Marshall Islands COFA is due to expire this year. Yun give no reason for the hold-up in renewing that, but a parliamentary election is expected there in November.

He said last month "topline" agreements would provide the three COFA states with a total of about $6.5 billion over 20 years.

Last year, more than 100 arms-control, environmental and other activist groups urged the Biden administration to formally apologize to the Marshall Islands for the impact of massive U.S. nuclear testing there and to provide fair compensation.

Marshall Islanders are still plagued by health and environmental effects of the 67 U.S. nuclear bomb tests from 1946 to 1958, which included "Castle Bravo" at Bikini Atoll in 1954 - the largest U.S. bomb ever detonated.

(Reporting by David Brunnstrom in Washington and Kirsty Needham in Sydney; Editing by Don Durfee and Alex Richardson)