The air above Palau's pristine waters smells of salt and breadfruit, and on calm mornings in Koror, Palau's commercial centre, the whirr of dive boat engines echoes across the bay.
A few years ago, those boats were filled with tourists – many from China – drawn to Palau's lagoons and limestone caves. Hotels were full, restaurants bustling, and fishermen could barely keep up with demand. But that is no more.
The boom – and the abrupt collapse – was no accident. Between 2015 and 2017, Chinese tourists made up around half of its visitors. Then, in 2017, Beijing reportedly ordered tour operators to stop selling packages to Palau, slashing the main source of tourism to the islands at the time.
Palauan officials allege this was a clear message from China, using its massive tourism market as leverage to draw Palau away from recognizing Taiwan—an assertion that China has vehemently denied in the past.
Amidst these strained diplomatic ties, Palau remains one of the last few nations recognizing Taiwan, directly opposing China's 'one China’ policy. Its strategic location has made it a target for influence from major powers, with the US and China vying for control.
Historically, before achieving independence in 1994, Palau was a US-administered territory. Currently, an agreement allows the US exclusive military access in exchange for substantial aid. As tensions rise with China, the US has been ramping up its military presence, constructing new facilities and upgrading infrastructure to support its strategic interests in the region.
This power struggle isn't just political; it significantly impacts Palau’s daily life and economy. President Surangel Whipps Jr. expressed the weight of these geopolitics on their small nation, emphasizing that Palau’s geographic significance means it will be a focal point for military activity.
Paradoxically, this geopolitical turmoil has also given rise to local concerns: a surge in organized crime linked to Chinese interests has emerged, exploiting the vacuum created by the lack of diplomatic ties between China and Palau. Reports have surfaced indicating that criminal enterprises are finding sanctuary in Palau due to its ambiguous diplomatic relations with China.
Residents are increasingly anxious about their national security, with many calling for clarity from their US allies regarding potential conflicts. With ongoing situations threatening to escalate into conflict, the people of Palau, though geographically and politically remote from major events, find their lives deeply intertwined with the fierce rivalries of global powers.
This environment of tension has prompted voices within Palau to call for prioritization of domestic issues over international rivalries; community members stress the need for investment in environmental sustainability rather than military expansion and diplomacy.
As Palau navigates this complex landscape, its leaders and citizens grapple with feelings of vulnerability amid the grand strategies of more powerful nations, underscoring the precarious balance of global diplomacy in a small yet strategically significant nation.
