U.S. funding tapped for Pacific undersea cable after China rebuffed

(Reuters) - The Federated States of Micronesia will tap a U.S. funding facility to construct a Pacific undersea communications cable, two sources told Reuters, after rejecting a Chinese company-led proposal that was deemed a security threat by U.S. officials.

The United States has taken great interest in several plans in recent years to lay optic fibre cables across the Pacific, projects that would bring vastly improved communications to island nations.

The undersea cables have far greater data capacity than satellites, leading Washington to raise concerns that the involvement of Chinese firms would compromise regional security. Beijing has consistently denied any intent to use cable infrastructure for spying.

Two sources with knowledge of the plans said FSM would use U.S. funds to construct a line between two of its four states, Kosrae to Pohnpei, replicating part of a route proposed under a previous $72.6 million project backed by the World Bank and Asian Development Bank.

Reuters reported in June that project, which also encompassed Nauru and Kiribati, was scuppered after Washington raised concerns the contract would be awarded to Huawei Marine, now called HMN Technologies and majority owned by Shanghai-listed Hengtong OpticElectric Co Ltd. .

One source told Reuters that FSM would draw around $14 million from the American Rescue Plan, a U.S. facility created by President Joe Biden to distribute funds both at home and abroad to combat the health and economic impacts of the COVID-19 pandemic.

FSM said it was committed to providing fibre connectivity to the State of Kosrae, and onward connectivity to Kiribati and Nauru. It did not respond directly to questions about U.S. funding.

The U.S. State Department declined to comment.