Are there consequences for the Pacific from the Ukraine invasion?

The Russian invasion of Ukraine inevitably raises questions about the stability and security of the South Pacific. In this contribution I want to offer the view there are no direct or immediate consequences for Australia, and more importantly, the Islands of the South Pacific.

My confidence is based on an assessment of China's approach to the South Pacific which differs vastly from that of Russia.

For the last 10 to 15 years China has been pursuing quite deliberate policies in our immediate region. The one certainty to be derived from these policies is that while China seeks to incorporate Taiwan as a fully owned PRC state it has not shown any intentions with regard to the islands of the South Pacific.

Indeed when you look closely at its policies, especially in countries most closely aligned with China, such as Solomon Islands, Vietnam, Tonga and Kiribati, they show no indication of any desire to actually include any of them as PRC "states".

To my mind the reason is quite simple - China's total focus is on pursuing economic relationships which it believe makes these countries subservient to China in ways it wants - such as the establishment of military bases, trade dominance - especially in areas such as forestry and fisheries and the exclusive use of PRC contractors to undertake infrastructure.

Central to Xi's policies are his "Belt and Road" agenda which effectively makes countries that have signed up to it heavily in debt to China - and allows China to effectively determine even key domestic policy priorities.

As far as I can see most South Pacific countries already have Belt and Road debt levels that are unsustainable. It can be argued they include Papua New Guinea where China has focussed in road and electricity infrastructure.

PNG is running annual K6 billion plus deficits, including for the 2002 national budget. It ran up a simlar deficit in 2021 and 2020.

Despite that I have calculated that since the state of 2021 PNG has added at last K6 billlion to its debts to China - principally through PNG Power, which is a basket case even before the debt to China is added!

Its apparent that China is in the box seat to provide the funding - through loans - to enable the ambitious national highways program to proceed. That will cost another K20 billion for the first stages. This project is being pushed hard by the PRC even though its real economic benefits are highly questionable.

When you look beyond PNG, the position in its closest neighbour The Solomon Islands is arguably much more dire.

In the three years since the SI recognised China rather than Taiwan China has put the SI Government heavily into debt and gained an effective 90 per cent control of the construction sector.

And in return for the SI signing up to Belt and Road China has promised to "grow" the SI tourism industry - with up to 190,000 PRC tourists a year! This nonsense just demonstrates an over the top and unrealistic approach to a small island nation's economy. It is clearly a case of over-promise with no intention of delivering.

The extent of China's influence in the SI is surely evident thanks to the placement of PRC police in the Solomon Islands to undertake "training". It might only be six today, but it will be sixty plus soon!

Today China takes 90 per cent of the SI's main export commodity - timber. It also dominates the fisheries sector.

No matter what Australia does to help the SI, it is a waste of time and money, while the current SI Government is in office.

The same can be said for Tonga, an even smaller island nation which is heavily indebted to the PRC. It has sought loan relief from the PRC - with no success.

The PRC simply runs up debt agreements regardless of the capacity of county's to repay them. It is also what has happened in Sir Lanka and an increasing number of African countries.

If a B and R recipient cannot repay loans, China looks at taking over assets as it has already done with a major port in Sir Lanka.

If Tonga cannot meet its loan obligations, the PRC will look at what assets it can take over.

The same will apply to the PNG electricity sector - which would give China an enormous strategic advantage right on our northern border.

The complex loan arrangements China has with national governments and state owned entities - especially in PNG - means that the most strategically important infrastructure in PNG is beholden to China.

To untangle that would cost PNG at least K8 to K10 billion. Only a massive structural adjustment with Australia, the IMF and the World Bank could rectify that

These instances alone explain why China does not have to focus on actually colonising any South Pacific country. The sad truth is that they effectively control most already!

Our island neighbours are sitting on the debt trap time bomb. The day of reckoning will soon arrive in most countries, if not all of them.

There is no way China (unlike Australia) is simply going to write off or forgive debts. It seems reluctant to even defer loans to its closest regional friends.

They are in vulnerable and dangerous positions.

I have come to the view there is little in the immediate future Australia can do anything about it!

China won't colonise - but in all but name it will have even more effective control of our closest neighbours.