The brilliant blue waters, thick foliage and bucolic atmosphere on this seemingly idyllic archipelago deep in the Pacific Ocean belie the key role it now plays in a titanic geopolitical struggle.
Palau is again on the front line as China, and the US and its allies prepare their forces in an intensifying contest for control over the Asia-Pacific region.
The democratic nation of just 17,000 people hosts US-controlled airstrips and soon-to-be-completed radar installations that the US military describes as “critical” to monitoring vast swathes of water and airspace. It is also a key piece of the second island chain, a string of strategically located islets that the US is fortifying in an effort to deny China access to the Western Pacific.
Photo: AP
Now, that outsized strategic value has made Palau the target of a concerted influence campaign by individuals with ties to the Chinese government, according to intelligence reports, police files, court records and land filings reviewed by Reuters, as well as interviews with more than 20 diplomats and local law enforcement officials.
At the same time, the once-sleepy nation has been transformed into a hub of illegal activity, rife with drug smuggling, online gambling operations, money laundering and prostitution allegedly linked to Chinese people and syndicates.
Some of those Chinese have cultivated close ties to senior political figures on Palau, making “donations” to some of them, two intelligence reports distributed to Palauan officials by the local US embassy showed. Those people have also allegedly facilitated meetings between Chinese officials and Palauan politicians.
Photo: Reuters
An effort also appears to be underway to block the expansion of US military installations on Palau, which include radar stations and airstrips built to service military aircraft. A review of land records revealed that Chinese businesspeople and Chinese-linked businesses have leased land overlooking or adjacent to some of those US military facilities.
US Ambassador to Palau Joel Ehrendreich warned that Beijing is using organized crime to infiltrate Palau, buy the backing of political leaders and establish a foothold in the nation.
In response, a spokesperson for China’s Ministry of Foreign Affairs said that claims that China is undermining Palau’s stability or interfering in its elections “are far-fetched, slanderous and completely fabricated nonsense.”
Palau, which is geographically closer to China than any other Pacific Island nation, is also one of the few countries that formally recognize Taiwan. The Chinese government has spent decades successfully persuading countries not to recognize Taiwan.
Speaking at a think tank in Sydney earlier last month, he addressed the issue of crime in Palau.
“Drugs, human trafficking, all of these kinds of activities have a way of undermining the political structure,” he said. “Online scamming or gaming that happens, they end up influencing politicians and things that go on in Palau.”
POLITICAL INFLUENCE
A tangled web of Chinese influence efforts and illicit activity emerged from US intelligence reports and other documents reviewed by Reuters, and from interviews with local law enforcement officials.
Take Palauan Senate President Hokkons Baules, who has been one of the nation’s most vociferous advocates for China.
“We want to go with China, because we need a lot of help with infrastructure,” Baules said, adding that Palau should drop its recognition of Taiwan.
Baules has allegedly built relationships with Chinese investors, including a man named Sun Maojin (孫茂金), who runs a technology company that lists state-controlled research centers and universities in China as partners on its Web site.
In November 2023, Sun flew to Palau with several associates and US$119,000 in cash, according to flight records, photos and three Palauan law enforcement officials. When Sun was questioned by customs officials for failing to disclose the money, Baules called one customs officer to ask for his release, and he was let go after paying a fine, the officials said.
Palau’s Land Court has no record of a transaction between Baules and Sun.
Corporate records showed that Baules’ family operates a local business called Fuji Restaurant, which Palauan authorities have linked to Chinese criminal activity. The family rented out space in the building between 2018 and 2020 to Chinese brothels masquerading as massage parlors, legal filings related to another case that were submitted by Palau’s anti-corruption office showed.
Baules insisted the brothels were massage parlors.
“It’s not my business, it’s their business,” he said of the Chinese businesspeople his family rented space to.
The address of restaurant was also on a package of methamphetamine that was intercepted at Manila airport last year, which had a Chinese man in Palau as the intended recipient, Philippine news reports said.
Baules dismissed the allegations, saying he was the target of a smear campaign aimed at ruining his name.
He also has ties to prominent Chinese figures in the nation, including Hunter Tian (田行), the president of Palau’s Overseas Chinese Association, which promotes the interests of Chinese residents.
Baules has leased land to Tian for a hotel Tian runs, land court records showed.
In 2023, Tian participated in training courses in Beijing and Nanjing that were organized by the Chinese government for overseas Chinese leaders, promotional material from three pro-Beijing Chinese diaspora groups showed. The course was run by a group under the United Front Work Department.
CAMPAIGN FUNDING
The US intelligence reports, one from November last year and the other undated, also asserted that Chinese businesspeople gave tens of thousands of dollars in cash to politicians ahead of elections last year in Palau.
Wang Yubin, a Chinese citizen who is secretary of Palau’s Overseas Chinese Association, donated US$20,000 to former Palauan president Thomas Remengesau Jr, who was seeking another term, and gave US$10,000 to Raynold Oilouch, who was running to be vice president. Remengesau lost his race. Oilouch won and is now Palau’s vice president.
Anti-corruption prosecutor Tamara Hutzler said that political donations by foreign nationals are illegal in Palau.
Oilouch said he “never received a penny” from a foreigner for his political campaigns, while Remengesau said accusations that he had received donations from Chinese businesspeople were “ridiculous.”
AMERICAN INFLUENCE
The US administered the country’s 300 or so islets for half a century after capturing them from Japan in World War II. The former colony won independence in 1994, but remains deeply tied to and dependent on the US.
The connections to the US are particularly resonant in Palau’s southern islands of Peleliu and Angaur.
Many of the 100 or so residents of Angaur have relatives serving in the US military. US law permits Palauans to enlist like Americans.
In 2017, the US military announced plans to build radar facilities in Angaur and other Palauan islands. Later, it began redeveloping multiple airstrips. The facilities would allow the US to disperse its forces in anticipation of a strike by China on US strategic hubs such as Guam, and to monitor air traffic in the region without tying up ships or aircraft.
Soon, Angaur began attracting attention from Chinese entities. Multiple media outlets reported that in 2019, Wan Kuok Koi (尹國駒), a former leader of Chinese triad 14K, visited Palau with the goal of leasing land on Angaur and opening a casino there.
Foreign nationals cannot purchase land in Palau, but they can lease it for decades-long periods.
In 2020, the US Department of the Treasury identified Wan as a leader of the triad and sanctioned him for leading an entity engaged in “corruption.” The sanction notice alleged that he was a member of the Chinese People’s Political Consultative Conference. A photo published in local media shows Wan meeting with Remengesau, who was president of Palau at the time.
Remengesau said he was not aware of Wan’s identity during their meeting.
Wan’s efforts were stymied when Palauan officials learned he was a triad leader, Remengesau said.
Court records show that Chinese individuals have leased large swathes of communally owned land on Angaur.
Tian has acquired roughly 280,000m2 of land on Angaur, including a large plot abutting the nation’s airstrip. The US subsequently announced plans to develop a radar station next to the airstrip.
Another set of land registry documents show that an investor named Zhuang Cizhong leased a further 380,000m2 of land near the airstrip. Zhuang acquired the land after the US announced its development plans.
Lease records and interviews with environmental regulators also revealed that a company connected to the Prince Group, a Chinese-Cambodian conglomerate, has acquired an islet near a new US coastal monitoring station in the Palauan region of Kayangel.
Lease records and a visit to the site showed that another company connected to the Prince Group is also developing a piece of land near Palau’s airport, which the US uses for military exercises.
Corporate filings show the local agent in Palau for one of these companies is Rose Wang, a former vice president of Palau’s Overseas Chinese Association, one of the reports said.
Ehrendreich said the leases were almost certainly strategic.
The land lease tactic was “how they maybe are able to keep an eye on what we’re trying to do here,” he said.
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