David Panuelo, former president of the Federated States of Micronesia or FSM, has been in Washington lobbying lawmakers to approve legislation that he says Micronesia needs to counter Beijing’s political and economic pressure across the region.
Panuelo spoke with VOA last week about what is at stake if Congress does not fund the Compact of Free Association Amendments Act of 2023. The bill updates the agreement governing the relationships between the United States and the Republic of the Marshall Islands, the Republic of Palau and the FSM.
House Republicans want $2.3 billion in spending offsets to pay for the $7.1 billion in aid for the region where the U.S. and China are competing for influence and military access to strategic areas of the Pacific Ocean. As of now, there is no agreement on the offsets.
Panuelo, who once supported a stronger relationship with China, left office on March 9 with a warning in letters to his successor, Wesley Simina, about the dangers of Beijing’s influence campaign. The letters later became public. He also alleged that China had bribed Micronesian elected representatives, which China called “smears.”
This interview has been edited for clarity and brevity.
VOA: In 2021, you referred to the Chinese Communist Party as “our very dear Chinese friends.” Why?
David Panuelo, former president of the Federated States of Micronesia: Our foreign policy is, “Friend to all, and enemy to none.”
VOA: What changed your thinking on China’s presence in Micronesia?
Panuelo: It was the culmination of events that brought me to the point of putting it [in letters].
My third letter prompted Chinese agents to come to our nation to meet some of our leaders, including a governor who later came to me to disclose that they went to him to [ask me to] go against my letter [warning Pacific Island leaders about negative Chinese influence]. You can see that this activity alone is very serious — how they can interfere in our internal political affairs.
There is, for example, the envelopes that our vice president disclosed he was given.
Panuelo: [Envelopes] with cash, which he gave back to the Chinese officials.
VOA: Your vice president was given envelopes of cash from the Chinese?
Panuelo: Correct, and he had disclosed that to me. And so, you can see that they are seeking influence. During my administration, I had to stop the [Chinese] research vessels from coming into our [country’s waters], because through information and intelligence, we learned they’re doing more than just research.
VOA: What will happen if Micronesia does not get the $3.3 billion under the Compact of Free Association Amendments Act?
Panuelo: I’m here [in Washington, D.C.] meeting friends to look at expeditious approval in Congress, because it’s already past the current fiscal year [in Micronesia]. And a lot of our leaders are waiting on the funding to make sure that we continue with [the] education of our children, the health care of our folks.
VOA: Why can’t Micronesia close the gap with your trust fund that’s valued at close to $1 billion?
Panuelo: The first compact [of free association in 1982] — we did not invest. We started late with the second  renewal. That’s when we invested the trust fund so that we can build it up. If we start dipping into it, it’s not going to be sustainable, and so it’s not going to be wise.
VOA: What’s your message to Congress?
Panelo: This is important for the security of the entire Indo-Pacific region, because our region has strategic value that is the cornerstone of foreign policy of the United States in the Pacific.
Our treaty has defense ties that we delegated through our constitution to give the United States some of, if not most of, the defense responsibilities, because we lack defense capacity. We consider ourselves a part of the homeland security of the United States, even though we are a sovereign nation.
VOA: What happens if this doesn’t pass?
Panuelo: It will open the window wider that’s already been opened for Chinese influence to come in. I think China is making every effort to come in with the influence to try to disrupt our strong and enduring partnership with the United States.