For months, Australia and the small Pacific nation of Vanuatu have been negotiating a sweeping $500 million security and economic pact, a deal that both sides say could reshape their relationship and the strategic balance in the region. Yet, just as the ink was expected to dry on the so-called Nakamal agreement, Vanuatu hit the brakes, citing concerns that have everything to do with the growing influence of China in the South Pacific.
Australian Prime Minister Anthony Albanese arrived in Port Vila, the Vanuatuan capital, on September 9, 2025, hoping to celebrate the signing of the landmark treaty. Instead, he found himself facing a pause, as Vanuatuan Prime Minister Jotham Napat announced that his government was not yet ready to commit. The reason? Worries that the pact could limit Vanuatu’s ability to secure infrastructure funding from countries other than Australia—a veiled reference to China, which has poured significant loans and aid into Vanuatu for buildings, wharves, and other critical projects.
“Some members of the Vanuatuan government feel it requires more discussions, particularly on some of the specific wordings in the agreement,” Napat explained at a joint press conference with Albanese, according to the Associated Press. When pressed on whether the sticking point was about restrictions on funding from other countries, Napat was clear: “Yes.”
Albanese, for his part, struck a conciliatory note, expressing confidence that the deal would eventually be signed. “The prime minister and I confirmed our commitment to keep working towards the upgrade of our relationship through a new treaty-level agreement. We’ve made good progress towards that goal today,” he told reporters in Port Vila, as reported by the Australian Broadcasting Corporation.
The delay comes at a time when Australia is seeking to shore up its influence in the Pacific, a region that has become a geopolitical chessboard as China expands its economic and strategic footprint. The proposed agreement is one of several Canberra has pursued in recent years to counter Beijing’s growing presence, which includes substantial investment in infrastructure and development projects throughout the Pacific islands.
Australian ministers remain publicly optimistic. Defence Minister Richard Marles, who also serves as deputy prime minister, told reporters in Sydney, “Progress is happening in our relationship with Vanuatu, it is being utterly transformed.” According to Australian Associated Press, Marles visited Vanuatu with other senior ministers in August, believing negotiations on the treaty had been finalized ahead of Albanese’s visit.
Pat Conroy, Australia’s Pacific Minister, echoed the sentiment, emphasizing respect for Vanuatu’s sovereignty and the importance of allowing the nation to work through its own processes. “The important thing here is that we respect the sovereignty of Vanuatu and we respect their need to work through their processes to get this finalised,” Conroy said, as reported by Australian Associated Press.
Yet, the nature of the wording that has caused Vanuatu to hesitate remains undisclosed. What is clear, however, is that similar agreements Australia has struck with other Pacific nations restrict them from entering into security or critical infrastructure agreements without Canberra’s approval. These restrictions span vital sectors such as telecommunications, banking, energy, ports, and aviation—areas where China has shown keen interest and investment.
Foreign Minister Penny Wong, speaking to reporters, argued that the bilateral pact would be “certainly in Vanuatu’s interest in terms of development and also in the interests of Australia in the broader region.” Wong acknowledged that Australia had “lost the opportunity to be the only partner of choice” in the Pacific, blaming previous governments for creating a diplomatic vacuum that Beijing quickly filled. Still, she insisted that Australia would “continue to engage with Port Vila to reach an agreement that works for them and works for the Australian people,” as cited by Australian Associated Press.
Vanuatu, for its part, has not shied away from seeking relationships beyond Australia. Over recent years, the island nation has benefited from Chinese loans and aid, which have helped build critical infrastructure but also left Vanuatu with substantial debt and increased Beijing’s leverage. While Napat did not mention China by name, the subtext was unmistakable: Vanuatu does not want to jeopardize its ties—or future funding opportunities—with the world’s second-largest economy.
Negotiations over the treaty have also touched on other issues. Vanuatu has pushed for visa-free travel arrangements with Australia, though Napat acknowledged this would be handled through a separate agreement. Wong, for her part, said the government was “always very conscious of the importance of managing that appropriately” when asked about possible concessions on the visa issue.
Another wrinkle in the talks is development funding reform. Conroy has advocated for changes that would ensure local Pacific islanders are employed to complete infrastructure projects, a move that would limit the ability of Chinese state-owned enterprises to win contracts and import Chinese workers. Such reforms, while potentially boosting local economies, could further complicate the delicate balance Vanuatu seeks to maintain between its two largest partners.
Meg Keen, head of the Australian National University’s Pacific Research Program, described Vanuatu’s situation as “a delicate political navigation.” As she told the Associated Press, “The prime minister of Vanuatu is having to take and he’s got to bring his political supporters along with him if he wants to sustain the deal.”
Despite the current impasse, both sides seem eager to keep the door open. Albanese accompanied Napat to the Pacific Islands Forum in Solomon Islands on September 10, 2025, a key regional gathering where further security deals are expected to be announced—particularly with Papua New Guinea, which is set to celebrate its 50th anniversary of independence from Australia on September 16.
For Australia, the stakes are high. The Pacific is not just a matter of foreign policy, but of national security and regional stability. For Vanuatu, the challenge is balancing the benefits of Australian partnership with the need to retain flexibility—and independence—in its international dealings.
As the region watches closely, the outcome of these negotiations will likely echo far beyond the shores of Vanuatu, shaping the strategic landscape of the Pacific for years to come.