US must contain fallout from crypto-zone program on Pacific nuclear island

A couple bribed their lawmakers as part of a near-successful plan to establish a semi-autonomous crypto-zone on a remote Pacific island that is largely uninhabitable due to nuclear waste. The details are juicy and the plot is much thicker. Earlier this month, the US Department of Justice released the indictment of two naturalized citizens of the Republic of the Marshall Islands (RMI) for violations of the US Foreign Corrupt Practices Act, money laundering and conspiracy to commit both. The indictments involve something much bigger than a get-rich-quick scheme gone wrong. They come at a time when the relationship between the United States and the RMI is under great tension and has never been more important. The United States must carefully manage the implications of the case for geopolitics in the Pacific.

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

Cary Yan and Gina Zhou, both of Chinese descent, 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 and allegedly began communicating with RMI lawmakers about the development of RASAR. The “digital special economic zone” would be a semi-autonomous region that would ease tax and immigration restrictions to attract investment. A May 2021 report from the International Monetary Fund explains that the zone “would prove highly susceptible to illicit financial flows and activities” and that the RMI does not have the legal or institutional capacity to monitor and supervise such a zone.

To promote their plan, Yan and Zhou began paying RMI officials to travel to and from the islands and stay in New York. Yan invested in the business venture of a legislator, who then appointed Yan as a “special adviser” for the atoll. In 2018, the NGO paid several RMI lawmakers to attend a conference in Hong Kong. Some news reports have begun to portray 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 US$7,000 to US$22,000.

The original RASAR bill was struck down in August 2018 by the government of then-President Hilda Heine, who said it violated the constitution and undermined the rule of law.. Heine accused 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 their plot. They soon began emailing and meeting with RMI officials, promising that if RASAR were created, the “manager’s family would be one of the most powerful” in RMI. In March 2020, the legislator endorsed the RASAR concept. Yan and Zhou were arrested in Thailand at the end of 2020 at the request of the United States and extradited this month.

The indictments come as the United States renegotiates the Compact of Free Association (COFA) with RMI, Palau and the Federated States of Micronesia. The RMI’s COFA expires in 2023. The United States provides COFA states with economic support and is responsible for their defense, and in return receives military access and certain rights. COFA citizens can live and work in the United States and serve in the United States military. The United States maintains a major military base in the RMI and has floated the idea of ​​establishing more as competition with China increases in the Pacific. However, COFA’s negotiations with the RMI have stalled. The United States would refuse to bind the RMI on claims for damage to health and the environment resulting from nuclear waste. The United States says its earlier settlement with the Marshallese is fair and final, while RMI says 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 the Pacific. Meanwhile, the indictments will likely strain US relations with the RMI government. Mid-month, calls by the RMI opposition to investigate RMI lawmakers for corruption were met with silence. Meanwhile, the US investigation continues, with unknown implications for RMI lawmakers who may be co-conspirators. The effects of indictments on RMI policy are also uncertain.

The indictment also has implications for US-China competition in the Pacific. Despite former RMI chairman Heine’s claims, the indictment does not indicate that China was directly involved in the plot. He simply alleges that Yan and Zhou obtained their payments illegally in China and elsewhere. The plot involves many of the hallmarks of Chinese-backed corruption schemes: promises of economic development, bought through personal connections, bribes, and payments for travel and entertainment. China has also been actively working to gain inroads into Pacific legislatures. The RMI is of particular interest to China because it is one of the thirteen countries that maintain 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 ties with Taiwan. China has actively pressured the RMI to change. Investigation may reveal whether he was willing to resort to underhanded means.

Through these indictments, the United States has shown that it is ready to use the long arm of the law to fight corruption on the other side of the world – and implement its foreign policy in the process. In doing so, he signals to other Pacific island countries that do business with China that the United States stands ready to uphold the rule of law. However, the case has uncertain implications for US foreign policy in the Pacific, and its relationship with the RMI in particular. The United States must carefully manage any fallout from the indictments that affects RMI and regional policy. Above all, the United States must ensure that it is not seen as a restriction on the sovereign right of Pacific island nations to do business with whomever they choose. The law is a powerful weapon and the United States must handle it with care.