Australia dealt strategic blow as crucial Pacific agreement stalls with China looming
A landmark $500 million deal between Australia and Vanuatu has stalled and remained unsigned during Prime Minister Anthony Albanese's trip to the Pacific nation.
Albanese arrived in the capital of Port Vila today for talks on the Nakamal Agreement with local counterpart Jothan Napat, with both leaders confirming to the media that it is yet to be inked.
That comes amid reports China is proving to be a sticking point in negotiations.
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Prime Minister Anthony Albanese and Vanuatu counterpart Jotham Napat in Port Vila on September 9, 2025. Michael Read/AFR
The agreement would see Canberra pour $500 million into Vanuatu for economic, security, and climate resilience plans, but would also cement Australia as the Pacific nation's security partner of choice.
That's despite China playing an increasing role in Vanuatu – Beijing is the country's largest external creditor, having funded a string of construction projects including a new president's office last year.
When asked whether the limit on Chinese influence was behind the agreement stalling, Napat confirmed this afternoon that there were concerns from within his coalition government about preventing Vanuatu from getting critical infrastructure funding from outside Australia.
"Some of my ministers and my MPs, they feel it requires more discussions, particularly on some of the specific wordings in the agreement," he said.
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The Nakamal Agreement was initialled by several senior ministers from Australia and Vanuatu on the side of a volcano last month. Penny Wong/X
The Nakamal Agreement was initialed by senior ministers from both nations – including Deputy Prime Minister Richard Marles and Foreign Minister Penny Wong – last month, and a signing ceremony today seemed a mere formality after Napat had praised the deal as "win-win".
Despite the setback, Albanese said he was confident of the agreement still being signed off.
"There is agreement on the principles that have been agreed and initialled in the Nakamal Agreement, it's a matter of processes going through," he said.
"I respect the processes that Prime Minister Napat needs to go through.
"Both sides will go through our processes but we're very confident that the agreement can be reached, and I'm reassured by the discussion that I have had with the prime minister."
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Beijing has been playing an increasing role in the Pacific, with a security deal signed with the Solomon Islands in 2022 fuelling fears of a Chinese military foothold in one of Australia's closest neighbours. AP
Albanese and Napat will now fly to the Solomon Islands for the Pacific Islands Forum, where China's influence will continue to loom.
The Solomons, under previous prime minister Manasseh Sogavare, inked a security pact with Beijing in 2022 in a major diplomatic blow to Australian influence in the Pacific.
Current Prime Minister Jeremiah Manele decided to bar Taiwan, as well as China, the United States and other partner nations, from this year's forum, limiting it to the 18 members including Australia and New Zealand.
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