The United States must contain fallout from the Nuked Pacific Island Cryptozone scheme

A couple bribed their lawmakers in a nearly successful scheme to establish a semi-autonomous cryptozone on a remote Pacific island largely uninhabitable due to nuclear waste. The details are juicy – ​​and the action is much thicker. Earlier this month, the US Department of Justice dropped charges against two naturalized citizens of the Republic of the Marshall Islands (RMI) for violating the US Foreign Corrupt Practices Act, money laundering and conspiracy to commit both. The charges involve something much bigger than a get-rich-quick scheme that has gone out of control. They come at a time when the relationship between the US and RMI is under great strain – and has never been more important. The US must carefully manage the case’s implications for the geopolitics of the Pacific.

RMI’s Rongelap Atoll is an unlikely location for an investment project. It is about 120 km from Bikini Atoll, where the US conducted nuclear tests between 1946 and 1958. The atoll’s thousand or more residents were not warned about the tests or the resulting radiation, and many became ill before the US evacuated them. They were allowed to return a few years later, but radiation levels are still high more than seven decades later.

Cary Yan and Gina Zhou, both of Chinese origin, hatched a plot to form a Rongelap Atoll Special Administrative Region (RASAR), also known as the Rongelap Atoll Digital Economic Zone (DEZRA). According to the indictment, in 2016, the couple formed and registered an NGO in New York City, and allegedly began communicating with RMI lawmakers about developing RASAR. The “digital special economic zone” would be a semi-autonomous region that would relax taxation and immigration restrictions to attract investment. A May 2021 International Monetary Fund report explains that the zone would “prove highly vulnerable to illicit financial flows and activity” and that the RMI does not have the legal or institutional capacity to oversee and monitor such a zone.

To further their plan, Yan and Zhou began paying for RMI officials to travel to and from the islands and stay in New York City. Yan invested in the business venture of a lawmaker, who then appointed Yan as a “special adviser” to the atoll. In 2018, the NGO paid for several RMI legislators to attend a conference in Hong Kong. Some news reports began touting RASAR as “the next Hong Kong”. Yan and Zhou then allegedly began bribing and offering other financial incentives to lawmakers for their support, ranging from $7,000 to $22,000 USD in value.

The first RASAR bill was repealed in August 2018 by then-President Hilda Heine’s government, which said it violated the constitution and would undermine the rule of law. Heine accused the bill’s promoters of working for China to make RMI “a country within a country.” At some point, Heine’s administration revoked Yan’s passport.

After Heine left office in January 2020, Yan and Zhou renewed their passports and revived the plot. They quickly began emailing and meeting with RMI officials, promising one that if RASAR was created, the official’s “family will be one of the most powerful” in RMI. In March 2020, the legislature approved the RASAR concept. Yan and Zhou were arrested in Thailand in late 2020 at the request of the United States, and extradited this month.

The indictment comes as the US renegotiates the Compact of Free Association (COFA) with RMI, Palau and the Federated States of Micronesia. RMI’s COFA expires in 2023. The United States provides the COFA states with economic support and is responsible for their defense, receiving military access and certain rights in return. COFA citizens can live and work in the US and serve in the US military. The US has an important military base in the RMI, and has floated the idea of ​​establishing others as competition with China increases in the Pacific. However, COFA negotiations with RMI have stalled. The United States reportedly refuses to engage RMI in allegations of health and environmental damage resulting from nuclear waste. The US claims its previous settlement with the Marshallese is fair and final, while the RMI claims it got an unfair deal. Bipartisan lawmakers have repeatedly expressed concern that the stalled negotiations will allow China to gain power in the RMI and in the Pacific. Meanwhile, the indictment is likely to put pressure on US relations with the RMI government. As of mid-month, calls by the RMI opposition to investigate RMI lawmakers for corruption have been met with silence. Meanwhile, the US investigation continues, with unknown implications for RMI lawmakers who may be co-conspirators. Any effects of the indictments on RMI policy are also uncertain.

The indictment also has implications for the competition between the US and China in the Pacific. Despite former RMI president Heine’s claims, the indictment does not indicate that China was directly involved in the plot. It simply alleges that Yan and Zhou sourced their illegal payments from China and elsewhere. The plot involves many hallmarks of China-backed corruption schemes: promises of economic development, bought using personal relationships, bribes and payments for travel and entertainment. China has also worked actively to gain a foothold in Pacific lawmakers. The RMI is of particular interest to China because it is one of the thirteen countries that have diplomatic relations with Taiwan. In recent years, China has successfully used economic and development incentives to persuade Kiribati and the Solomon Islands to end diplomatic relations with Taiwan. China has actively lobbied the RMI to switch. The investigation may reveal whether it was willing to resort to underhanded means.

Through these indictments, the United States has shown that it is willing to use the long arm of the law to fight corruption half a world away – and implement its foreign policy in the process. By doing so, it signals to other Pacific Island countries that do business with China that the United States is willing to enforce the rule of law. However, the case has uncertain implications for US foreign policy in the Pacific, and especially the relationship with RMI. The US must carefully manage any fallout from the indictments affecting RMI and regional politics. Above all, the United States must be careful to ensure that it is not perceived as limiting the Pacific Islands’ sovereign right to do business with whomever they choose. Law is a powerful weapon – and the United States must use it carefully.