Features | Security | Oceania

US Pacific Command Considers Moving Billions in Planned Infrastructure Out of Micronesia

The U.S. is threatening to pull a $2 billion infrastructure project in Yap. It’s second time recently there have been major problems in U.S. defense negotiations with a COFA partner.

A U.S. Marine Corps F-35B Lightning II prepares for takeoff after receiving fuel from a KC-130J Hercules during an aviation delivered ground refueling as part of exercise Slingshot in Pohnpei, Micronesia June 26, 2026.

Negotiation failures are leading U.S. Pacific Command (PACOM) to look for alternative locations for the $2 billion Department of Defense investment in infrastructure in Yap, Federated States of Micronesia (FSM).   

On June 29, 2026, Admiral Samuel Paparo, the PACOM commander, wrote to President Wesley Simina of FSM that the country’s demand for a “$1.3 billion compensation package is unreasonable, unanchored to demonstrable costs, and divergent from the spirit of our partnership under the Compact of Free Association.”  As a result, “U.S. PACOM intends to move forward by assessing alternative locations across the region to meet the needs of Pacific defense.”

Yap state, made up over a hundred islands, is a core part of the Second Island Chain. The main island in Yap state, also called Yap, is just over 500 miles southwest of Guam. The strategic importance of the Yap group of islands was proven toward the end of World War II. After the United States took the region from Japan, one of Yap’s atolls, Ulithi, became the largest and busiest American naval base in the world.  

Map by Cleo Paskal and Pavak Patel.

FSM’s Compact of Free Association With the U.S.

In the decades after the war, Yap joined with neighboring island groups to form the independent country of Federated States of Micronesia. FSM then signed a Compact of Free Association (COFA) with the United States that ties the two countries together in profound ways, including the citizens of FSM being allowed to live and work freely in the U.S.

Additionally, according to COFA, the “Government of the United States has full authority and responsibility for security and defense matters in or relating to the Federated States of Micronesia.” This goes far beyond usual U.S. defense agreements as it stipulates that this responsibility includes “the obligation to defend the Federated States of Micronesia and its people from attack or threats thereof as the United States and its citizens are defended.”

However, as seen by the latest negotiations, new U.S. defense site access is not guaranteed and requires agreement on terms.  The word “free” in Compact of Free Association has real meaning.

As Howard Hills, former lead counsel and advisor for COFA negotiations under Presidents Ronald Reagan, Joseph Biden, and Donald Trump, explained: “Under COFA the U.S. power to deny military forces of third nations access to the FSM, Palau and Republic of Marshall Islands is absolute and permanent. But to the extent U.S. authority and responsibility for mutual security and defense requires military use and operating rights, that is subject to mutual agreement by the governments concerned, in this case FSM.”  

This is at least the second time recently there have been major problems in U.S. defense negotiations with a COFA country. One reason that Washington pursued Yap airport improvements in the first place was that Department of Defense negotiations for increased access in Angaur, in the neighboring Second Island Chain country of Palau, fell apart. 

There are at least three interconnected reasons this will keep happening unless efforts are made to course correct.

In part because locals see for themselves the comparatively lavish lifestyle of visiting U.S. government officials – often staying the best hotels in town, and eating out every meal – and the relatively astronomical rates given to U.S. consultants and contractors, there is often the perception in FSM that the U.S. government is a bottomless piggy bank. This combines with reporting about the importance of Second Island Chain defenses to give some the feeling they have the U.S. over a barrel.  

There is a pool of lawyers, negotiators, environmental experts, and others keen to fan this perception (and, incidentally, few of them seem to be around when Chinese projects are involved). Given human nature, some local leaders and land owners are drawn to hiring these representatives. In this case, Yap’s negotiators and leaders clearly overreached.  

The $1.3 billion demand comes out to over $185,000 for each of the 7,000 or so resident of the island of Yap. And that amount, combined with the around $1.4 billion appropriated in the NDAA for the Yap airport makes investments in, for example, the airport on the main island of Palau, cost effective. 

Also, at least in the case of FSM, the United States is not necessarily negotiating bilaterally. As made clear in a series of letters written in 2022 and 2023 by then FSM........

© The Diplomat