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UPDATE 1-U.S. and Marshall Islands seek economic assistance deal this year

·3 min read

(adds context on carrier launch, analyst)

By Michael Martina and David Brunnstrom

WASHINGTON, June 17 (Reuters) - The United States and the Marshall Islands agreed to try to reach a deal on U.S. economic assistance this year, a statement seen by Reuters on Friday showed, a sign of momentum in talks as Washington worries about China's expanding Pacific influence.

Joseph Yun, U.S. special envoy for Compact of Free Association (COFA) negotiations, was in the Marshall Islands this week for the first in-person talks with the strategic Pacific island country since December 2020. The next talks will be in Washington in late July.

A joint statement said Yun and Marshall Islands Foreign Minister Kitlang Kabua hoped to ink a memorandum of understanding by September with the "aim to complete the Compact talks by late fall or early winter."

It said the two sides affirmed the importance of continuing U.S. economic assistance beyond 2023, when it is due to expire.

The statement came as China underlined its ambitions on Friday by launching a third aircraft carrier. Only the United States, with 11 carriers, has more of the vessels, although China is still honing its ability to integrate them into battle groups, something the United States has been doing for decades.

Yun and Kabua also discussed the legacy of U.S. nuclear tests in the Marshall Islands, the statement said, an issue that had been a sticking point prior to Yun's appointment in March.

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

Washington has long had special diplomatic relationships with the Marshall Islands, Palau and the Federated States of Micronesia (FSM) that give it military access to a huge strategic swath of the Pacific.

But the three Pacific island countries have complained that assistance has not kept pace with U.S. obligations. Yun is also responsible for negotiations on renewing COFA deals with FSM and Palau, which expire in 2023 and 2024.

China has increased economic, military and police links with Pacific island nations, and made commercial and tourism-related overtures to the Marshall Islands, Palau and FSM, which are hungry for foreign investment.

Beijing's increasing influence was highlighted by its security pact with the Solomon Islands this year, a move that fanned concerns in Australia, New Zealand and the United States.

Harrison Prelat, a regional expert at Washington's Center for Strategic and International Studies think tank, said the carrier launch showed China's ambitions to project naval power, as did its efforts to cement security ties in the Pacific, even if these had so far seen only mixed success.

"Many Pacific island countries are open to expanding economic cooperation with Beijing, but Beijing’s recent efforts may have been perceived as too much, too soon," he said.

"Countries in the region are likely more interested in taking turns attracting investment from both China and the West than making a committal move to join Beijing’s orbit." (Reporting by Michael Martina and David Brunnstrom; Editing by David Gregorio and Alistair Bell)