Australia secures a $140M economic and security treaty with Nauru, enhancing regional stability, blocking Chinese influence, and reinforcing Australia's role as Nauru's key security partner.

Australia struck an economic and security treaty with Nauru on Monday, pledging A$100 million ($64 million) in direct budget support over five years and A$40 million to boost security in the remote Pacific Islands nation that is also being courted by China.

It is the second security deal Australia has made in the Pacific Islands that effectively blocks China from forming policing ties after a similar deal agreed with Tuvalu, and gives Australia a veto over Chinese involvement in Nauru's security, banking or telecommunications sector.

Concern in Canberra about Beijing's ambitions in the Pacific Islands grew after Solomon Islands struck a security deal with China in 2022, and China test-fired an intercontinental ballistic missile with a dummy war head into the Pacific Ocean in September.

A Chinese space tracking vessel was sailing northwest of Nauru at the time of the launch.

Under the treaty, Nauru must notify and gain agreement from Australia before Chinese navy vessels use its main port, which was recently upgraded by a Chinese state company.

The new deal prevents third countries from accessing Nauru's critical infrastructure for security purposes, Australian Prime Minister Anthony Albanese and Nauru's President David Adeang said at a joint media briefing.

Australia will commit to ensuring Nauru's banking service, and provide budget support for education, health and other needs.

"(The deal) will strengthen Nauru's longer-term stability and economic resilience. It is also firmly in Australia's interests in a peaceful, secure and economically resilient Pacific region, the region that together we call home," Albanese said.

Albanese said Australia will remain Nauru's primary security partner, and pledged fresh investments to support the island's policing and national security needs.

"We appreciate Australia's steadfast support as we try to address our unique development challenges while we continue diversifying our economy, exploring innovative opportunities and safeguarding our region's peace and stability," Adeang said.

Nauru is the world's third-smallest country and uses Australian currency. In January it switched diplomatic ties to China from Taiwan, and The Bank of China later signed an agreement to explore opportunities there.

Under the deal announced on Monday, the Commonwealth Bank of Australia will gain an exclusive right to offer banking services, filling a gap left by the exit of Australia's Bendigo and Adelaide Bank next year.

Australia operates a Regional Processing Centre for asylum seekers in Nauru that is forecast to contribute about $135 million in government revenue in 2024-25. An Australian official said the treaty was unrelated to the asylum seeker centre.

Nauru said in a statement on Facebook on Monday it was exploring an air services agreement with China to boost its international airline connectivity

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