By Li Xianchi | 2025-08-20

Australia and Vanuatu have reached a landmark agreement worth 500 million AUD ($326.5 million) to strengthen economic development and security cooperation, a move widely seen as a counterbalance to China's growing influence in the Pacific.

The pact, known as the Nakamal Agreement, will channel Australian funding into Vanuatu over the next decade, covering climate resilience, infrastructure and security support, labor mobility and budget assistance.

A formal signing by Vanuatu Prime Minister Jotham Napat and Australian Prime Minister Anthony Albanese is expected in September, according to BBC.

Australian Deputy Prime Minister Richard Marles hailed the breakthrough as "transformational," underscoring the close ties between the two countries.

"What this agreement really does is, for the first time, acknowledge what has always been the truth, and that is that as two nations, we are family and that our future is very much bound together," Marles said during a news conference on the island of Tanna.

Napat echoed the sentiment, describing the deal as a "win-win" for both countries. "The agreement … will transpire into a lot of trade benefits between the two countries, whether it be the security agreement, economic transformation, with some specific focus on labor mobility," he told journalists at the same news conference.

The agreement represents a rebound from a failed 2022 Australia-Vanuatu security deal, which the then-Vanuatu prime minister abandoned over last-minute security concerns, according to the Australian Broadcasting Co. (ABC).

This time, the pact has the backing of Vanuatu's National Security Council and Council of Ministers, giving it a stronger footing.

"The process is the main difference," Pacific analyst Tess Newton Cain told ABC, noting that broader commitments across economic and climate domains make it more resilient than past attempts.

Climate and security boost

Vanuatu, badly exposed to climate risks, will benefit from targeted funding for disaster preparedness and infrastructure rebuilding. Australian Foreign Minister Penny Wong stressed the long-term focus, saying: "The most important thing [about the deal] is where we will be [in] three and five and ten years."

The agreement bolsters Vanuatu's security forces, including the Vanuatu Police Force and Maritime Wing, which face mounting challenges from climate-related disasters and illegal fishing, according to ASPI Strategist.

Australia's prior assistance has included barracks upgrades, maritime patrol support and training under the Defense Cooperation Program. With the Nakamal Agreement, Canberra has pledged about 100 million AUD ($64.5 million) in new security assistance.

While the deal does not grant Australia veto rights over Vanuatu's partnerships with other powers, it is intended to reaffirm Canberra as Vanuatu's "partner of choice" for security. As analysts Blake Johnson and Astrid Young observed in ASPI Strategist: "The agreement with Australia demonstrates the importance of that partnership as well as Australia's ability to listen and adapt to the needs of its Pacific neighbors."

Still, unresolved issues remain. Chief among them is Vanuatu's demand for visa-free travel to Australia, a politically sensitive topic in Port Vila. Napat has publicly pressed Canberra for concessions, saying the issue carries weight domestically. While visa-free travel appears off the table, both sides have signaled willingness to explore easing broader restrictions.

Counterbalancing China's reach

The geopolitical backdrop looms large. China has become Vanuatu's largest external creditor after years of infrastructure loans and building of roads, government offices and a presidential palace estimated to cost 31 million AUD ($19.6 million).

Beijing has provided police training, patrol boats and forensic support. Against this backdrop, the Nakamal Agreement reflects Australia's effort to cement its position as the leading partner in Vanuatu's security and development and to limit China's ability to "embed itself as a major commercial and security partner" in the island nation.

For Canberra, the deal is part of a broader push to deepen ties across the Pacific, following agreements with the Solomon Islands, Tuvalu and Papua New Guinea. For Vanuatu, it represents a bid to diversify partners while safeguarding sovereignty under its long-standing "friends to all, enemies to none" policy.

Despite lingering questions on visas, analysts see the pact as a major step forward. "It acknowledges that, as neighbors, we have a shared security environment and a commitment to each other, which is embodied in this agreement," Marles said on Tanna.

The breakthrough highlights Australia's continued responsiveness to Pacific concerns and marks progress toward a regional landscape less dependent on Beijing's economic leverage.