Wed, Sep 05, 2018 - Page 13 News List

Nauru: From riches to rags

The once-wealthy island now barely survives on income from Australia’s detention regime and is pinning its economic hopes on undersea mining

The Guardian

The national flag of Nauru is shown as the country hosts the Pacific Islands Forum this week.

photo: AP

Nauru is banking on fields of mineral-rich smooth brown rocks about the size of a potato that lie on the sea floor around the tiny island as the possible savior of its fragile economy.

For the island nation of just 10,000 people, financial viability has been a pressing problem since the exhaustion of its rich phosphate deposits in the 1970s.

The nodules that lie 4km below the sea might be the answer. They are rich in the metals that are essential for the clean-energy industry: nickel, cobalt and manganese.

The deep-sea mining venture needed to tap the resource is being led by a Canadian company, DeepGreen, which is run by an Australian entrepreneur, Gerard Barron, and backed by mining giant Glencore and shipping company Maersck. It is in the exploration phase but results are promising and it hopes to begin mining in 2025.


For Nauru it will be just in time.

At the moment Nauru’s main industry could perhaps be described as misery and suffering, courtesy of Australia’s offshore detention policies. Since 2013, when the offshore detention and processing center reopened, Australia has been providing about two-thirds of Nauru’s GDP of US$170 million by way of direct aid, visa fees and payments to the government for hosting the refugees.

But with hundreds of refugees sent to Nauru being resettled in the US and others moved to Australia, that industry is winding down, posing a new economic challenge for the troubled island nation.

The story of tiny Nauru, once one of the wealthiest states per capita in the world, is a tale of rapacious colonialism, epic mismanagement and avarice.

Australia, New Zealand and Britain had nearly exhausted the viable deposits of phosphate by 1968 when Australia granted Nauru sovereignty, leaving behind one of the world’s worst environmental disasters.

It might look like a Pacific island paradise but, thanks to phosphate mining, its interior is a moonscape of jagged limestone pinnacles unfit for agriculture or even building.

There was talk in 1963 and again in 1970 of moving the 10,000 inhabitants to an island off Queensland, which the Nauruans opposed.

Instead, the islanders have soldiered on as one of the smallest and most geographically isolated nations.

The royalties from phosphate accumulated in a trust by the Nauruans — worth A$1.7bn at its peak — were squandered in the years following independence.


By 2002, Nauru had stopped paying its loans, which had blown out thanks to the devaluation of the Australian dollar against the US dollar. GE Capital, which was owed US$239 million on mortgaged properties, sent in the receivers.

The assets, which included the 50-storey Nauru House in Collins Street, Melbourne, the Downtowner Motel in Carlton and the Mercure Hotel in Sydney, are long gone.

A series of corrupt and incompetent governments found extravagant and spectacular ways to lose the country’s wealth, including, notoriously, funding a disastrous West End musical based on the life of Leonardo da Vinci.

Nauru spent years in desperate penury as the country ran out of money. Its central bank went broke, its real estate overseas was repossessed, its planes seized from airport runways.

As the financial crisis engulfed the island, it turned to exploiting its sovereignty. During the 1990s it transformed into a money-laundering haven selling banking licenses and passports, including diplomatic passports, which confer immunity. Customers included the Russian mafia and al-Qaida.

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