U.S. aims for over $7 billion in aid for 20-year Pacific islands compacts

WASHINGTON (Reuters) - President Joe Biden's administration is seeking more than $7 billion over the next two decades for economic assistance to three Pacific island countries, a State Department official said on Thursday, funds seen as key to insulating the U.S. allies from growing Chinese government influence.

Washington said earlier this year it had reached consensus with the Marshall Islands, Palau and the Federated States of Micronesia (FSM) on terms of U.S. economic assistance in talks to renew Compacts of Free Association, or COFAs, but had not provided details.

Under those pacts, first agreed in the 1980s, the United States retains responsibility for the islands' defense and exclusive access to huge swaths of the Pacific. Current COFA provisions expire in 2024 for Palau, and later in 2023 for the Marshall Islands and the FSM.

Jane Bocklage, a senior State Department official involved in COFA talks, told a congressional hearing the Biden administration's fiscal year 2024 budget request included $7.1 billion over 20 years for extended COFA deals. That included $6.5 billion in direct economic assistance and $634 million for the unfunded costs of extending the U.S. Postal Service in the three island countries, she said.

"We are working very, very hard with all three countries to complete the final negotiations. We are aiming for weeks, not months," Bocklage added.

"Absent the new economic assistance provisions, we really leave the three countries open to predatory behavior, coercive behavior," she said, alluding to China's efforts to court Pacific island countries.

The three countries have complained that assistance has not kept pace with U.S. obligations, and though they still enjoy close ties to Washington, critics warn that a failure to reach new terms could spur them to look to China for funding or increased trade and tourism.

U.S. basing and military access rights are not subject to the negotiations, but experts say as sovereign nations the three countries could always terminate those agreements should they be dissatisfied with U.S. support.

(Reporting by Michael Martina and David Brunnstrom; editing by Jonathan Oatis)