The FSM at the crossroads of US-China resource competition
By Joyce McClure
China's new restrictions on the export of rare earth minerals are reverberating across the Pacific, raising concerns that the Federated States of Micronesia could become a new arena for resource competition between Beijing and Washington. The Chinese government announced last month that it would impose new licensing rules on exports of critical minerals used in computer chips, batteries and defense systems. U.S. officials condemned the move, calling it an attempt to use global supply chains as leverage.
U.S. Trade Representative Jamie Greer described the policy as "a supply-chain power grab," according to Reuters, while Treasury Secretary Bessent told the Financial Times that China "wants to pull everybody else down with them" through its mineral restrictions.
The export controls, which take effect later this year, follow escalating trade and technology disputes between the world's two largest economies. For Pacific island nations such as the FSM, the implications extend beyond trade. They touch on sovereignty, environmental protection and the balance of power that has long defined U.S.-Micronesia relations.
Covering more than a million square miles of ocean, the FSM's exclusive economic zone is among the largest in the Pacific. Beneath those waters lie potential reserves of polymetallic nodules rich in cobalt, nickel, manganese and copper-minerals essential for renewable energy and defense technologies.
Over the past several years, Chinese research vessels have conducted expeditions in and near the FSM EEZ. While Beijing describes the voyages as oceanographic studies, security analysts say they could also be mapping mineral deposits.
China's maritime research often serves dual purposes, blending scientific study with strategic resource ambitions. Micronesia's deep-sea floor is of growing interest to both commercial analysts and military planners.
U.S. officials have expressed unease about these activities, noting that FSM's security and defense responsibilities fall under the Compact of Association, which gives Washington strategic access to Micronesian waters.
The recently amended compact reflects Washington's effort to reassert its influence in the Pacific amid rising Chinese influence.
While the U.S. remains the FSM's defense partner, China has become its largest trading partner and an active development donor. Chinese-funded infrastructure— government buildings and roads and bridges—can be seen across the islands.
Analysts say Micronesia is navigating between two powerful partners, providing security and the other offering investment—a situation that creates both opportunities and vulnerabilities.
FSM authorities have so far taken a measured approach to Chinese maritime activity. In past public notices, the national government has acknowledged the presence of Chinese research vessels operating under permits but has accused Beijing of violating FSM laws.
The FSM has also established a legal framework for future seabed mining per the Seabed Minerals Act of 2014. FSM ownership of marine mineral resources often sources and creates a Seabed Mining Authority to regulate potential operations.
Although the act has been in force for a decade, no commercial permits have been issued. Officials say the government continues to evaluate the economic potential and ecological impact of any future projects.
Environmental organizations have warned that seabed mining could permanently damage fragile ecosystems and threaten biodiversity and food security.
Once mining begins, it would be nearly impossible to repair the damage to their extremely slow recovery.
The debate over seabed mining divides the region. Palau and Fiji both have called for a moratorium, while Nauru and Tonga have defended their policies and active decisions to open their waters through deep-sea mining. The FSM has taken a cautious middle ground, emphasizing consultation and scientific study.
Palau President Surangel Whipps Jr. has been among the region's most vocal friends to all and enemies to none he said during a ceremony marking the renewal of the compact's economic provisions. "Our decisions will always be guided by the best interests of our people and our environment."
Observes FSM leaders, meanwhile, have affirmed the issue primarily in economic and environmental terms, noting that any resource development must safeguard the ocean on which the country sits on valuable minerals and in a strategic corridor, a combination that ensures attention—and pressure—from both sides. The challenge will be pre-empting FSM law while Washington renews its diplomatic and economic focus on the Pacific. Both are striving sovereignty while navigating between giants.