With a land area of only 8.1 square miles, it is the smallest country in the world after Vatican City and Monaco.
Its population of about 10,000 makes it the world’s smallest republic, as well as the smallest island nation. It has no rivers or streams and virtually all of its water, food, and manufactured goods have to be imported. There are no harbors or protected anchorages, and no sizable arable land fit for farming. Nauru has no official capital.
Because of its heavy dependence on financial aid from Australia, Nauru is considered by some sources as a client state of Australia.
What Nauru once did have plenty of was found inland, on a plateau 30 to 65 meters above sea level, which was largely composed of rock phosphate, leached from guano or bird droppings that accumulated over thousands of years. This high-grade mineral deposit used to cover more than two-thirds of the island.
Phosphate has been mined on Nauru since 1907, and for decades was its sole export and economic resource. Before its independence in 1968, the phosphate industry was owned by a corporation jointly managed by the British, Australian, and New Zealand governments. It was only in 1970 that Nauru gained full control of mining operations.
In the 1980s, Nauru was one of the richest countries in the world in terms of gross domestic product per capita, earning for it the sobriquet “Kuwait of the Pacific.” A major portion of its earnings from mining phosphate was invested abroad by means of a sovereign wealth fund. The envisioned economic well-being of the country depended on the success of this investment program.
Unfortunately, its public officials irresponsibly exploited and abused Nauru’s trust funds for decades. Fund assets were even used as collateral to finance the budget deficit. Because of mismanagement and depredation of capital, high government expenditures, fraud, and risky investments in real estate, shipping, and air services, the fund lost much of its value.
By 1990, its phosphate deposits had been depleted and Nauru experienced a severe drop in earnings, leading to bankruptcy in the early years of the 21st century. To generate income, Nauru became a tax haven, an offshore banking center, and a conduit for the illegal money laundering activities of organized crime groups and terrorist organizations.
Since 2001, Nauru has been accepting aid from Australia in exchange for its hosting an offshore Australian refugee processing facility.
As if the economic downturn is not enough, Nauru is slowly sinking back into the ocean from whence it came, a result of rising waters brought about by climate change. In the last 10 to 15 years, there has been an acceleration in the rates of both temperature rise and sea-level rise. There has also been a general escalation in the frequency and intensity of the tropical cyclones that visit Nauru regularly.