Palau's President says it is preparing to leave the Pacific Islands Forum, the region's premier political and economic policy organisation, after the country's preferred candidate lost a vote to become the organisation’s Secretary-General.

Former Cook Islands prime minister Henry Puna won by just one vote on Thursday, beating the Marshall Islands' candidate Gerald Zackios.

Republic president Surangel Whipps Jr said it was leaving after a gentleman’s agreement to accede to a request to install a Micronesian successor to Dame Meg Taylor had been ignored.

"After recent events, the Government of the republic of Palau will be terminating its participation in the Pacific Islands Forum," the Government said in a diplomatic note. 

"The process regarding the appointment of the secretary-general has clearly indicated to the republic of Palau that unity, regionalism and the Pacific Way no longer guide the Forum." 

Five Micronesian countries had argued it was their turn to select the forum secretary-general under an informal arrangement that has stood for decades. 

The other four members of the Micronesian bloc -- the Marshall Islands, Kiribati, Nauru, and the Federated States of Micronesia -- will hold a virtual meeting Monday to discuss following Palau's lead.

The region had been divided for months in the lead up to the vote, but the weight of academic opinion had been that the Micronesian states would not make good on their threats to walk out of the body and that it instead represented brinkmanship negotiation.

It remains to be seen if other states will follow Palau.

Late last year the former U.S. Secretary of Defense Mark Esper made an historic visit to Palau and the country almost immediately made an open request to host a U.S. military request in response.

When asked by the Samoa Observer earlier this month, Derek Grossman, a senior analyst at the RAND Corporation, an American think tank, said the potential for a walkout could presage a north-south Pacific divide.

Several states in the North Pacific including a number of “Freely Associated States” (the Federated States of Micronesia. Guam; the Republic of the Marshall Islands; Guam and others) have historic ties to America.

They also retain ties to Taiwan - and a further breakaway could change the region’s geopolitical balance between the north and south Pacific and that between China and America in the region more broadly, Mr. Grossman said, in an conducted interview before Thuesday’s decision:

“The other north Pacific states of Kiribati and Nauru may or may not become more aligned with the US. In the case of Kiribati, it recently switched diplomatic relations away from Taiwan to China—a bad sign for relations with the US,” he said. 

“Nauru is currently aligned with Taiwan. If these relationships stick, then Kiribati and Micronesia will have ties to China, but then three others—Palau, Marshall Islands, and Nauru—will all have Taiwan ties. 

“That ratio generally bodes well for America, but China still has some influence. 

“Southern Pacific Islands, however, would only have one state—Tuvalu—that recognizes Taiwan over China. All others would recognize China, and Beijing has historically been stronger in the South Pacific, especially through Belt and Road Initiative projects in places like Fiji, Tonga, and Vanuatu.”

A split in the forum's ranks could provide an opening for China to boost its influence with the sparsely populated but strategically important Pacific island nations. It would also risk diluting the Pacific's strong message to the rest of the globe on climate change. 

Many of the region's small island states face being inundated by rising seas and the forum has been a pioneer in raising the issue on the world stage and demanding meaningful action.

The grouping was established in 1971 as the South Pacific Forum, adopting its current name and expanding its membership in 1999. Just this week, chairman Kausea Natano was congratulating the grouping for reaching its 50th anniversary and saying support from members remained solid. However, Micronesian nations have long felt their north Pacific island states have been neglected in favour of their larger and more influential neighbours in the south. 

"What we have seen is a south Pacific that looks down on the north Pacific and we find that deeply unfortunate," Federated States of Micronesia President David Panuelo told Australian radio in the wake of the leadership vote. 

"It's a huge fracture in the (forum's) unity and spirit of cooperation." 

Nauru President Lionel Aingimea has already signalled his intention to pull out. "If this is the way Micronesia is treated then it is better off withdrawing from the Forum," he said in a statement Friday. 

Palau's diplomatic note also said the island nation would close its embassy in Fiji, saying the diplomatic mission was no longer needed now that it was withdrawing from the Suva-based grouping. 

"Palau deeply regrets this situation and trusts that its warm bilateral relationship with the Republic of Fiji will continue undiminished," it said.

* With AFP