Through Phosphate Rush, Detention Centers, Money Laundering, and Corruption

Image: Aerial photo of Nauru Island

The once-wealthiest nations on the face of the Earth, now barely surviving on the Australian aid for detention camps on the island.

The Republic of Nauru or once called the Pleasant Island located in the Central Pacific Ocean is an island with rich history and culture as well as times haunted by war, corruption, humanitarian crisis, and a struggling economy.

With a population of just 10,000 people, Nauru is the second-smallest state after Vatican City. Nauru is located northwest of Tuvalu, northeast of the Solomon Islands, east-northeast of Papua New Guinea, and south of the Marshall Islands.

History of  the Republic of Nauru

Nauru’s history dates back to the 1000BCE when it was first settled by people from Micronesia. Although little to nothing is known about the Nauruan prehistory as the island has been isolated from the world for centuries until the 18th century when British sea captain John Fearn first discovered the island on the map.

During WWII, the Japanese captured Nauru after bombing the island twice disrupting the food supplies to Nauru. 1800 Nauruans were deported to Chuuk islands to work on an airstrip. Only 737 Nauruans survived the war and were relocated back to Nauru.

Nauru has been global since after the European sightseeing of the island. Deserters from Europe began to hide on the island, bringing wine and firearms onto the small island. Later in the 19th century, Nauru was annexed by Germany in agreement with Great Britain in 1888. Germans ruled the island for three decades until Australians captured the island in 1919 at the brink of WWI.

Image: Japanese Invasion of Nauru in WWII

In 1923, the league of Nations announced Australia as a trustee over Nauru and UK with New Zealand as co-trustees.

After WWII, in 1947, Australia, New Zealand, and the UK were announced as Nauru’s Trustee again by United Nations. Nauru became independent on 31 January 1968 and became a self-governing island state and bought the rights to the phosphate mines from Australia, and then began the prosperity of one of the smallest nations on the planet.

Phosphate Conquest, A Sinking Economy, and Corruption

Nauru was just a scrap yard for pirates, gangs, and drunken people for years and the island had little to no strategic value in the Pacific Ocean for the colonial powers of that time. It was until 1899 that Albert Ellis, a geologist turned around the sinking ship that was Nauru. Ellis inspected a rock-like object that later turned out to be high-grade phosphate ore, a fantastic fertilizer that can earn a fortune.

Ellis found out that 80 percent of the entire island was a raised plateau that Nauruans called “Topside” – was abundant in phosphate of lime. An Australian company that was known as “Pacific Islands Company’, renamed itself Pacific Phosphate company and made a deal with Germany in 1905 to mine the island for minerals.

Nauruans never built houses on Topside, rather living on the cool shoreline but often grew almond trees, flocks of birds could be seen including terns, frigatebirds, and noddies. Miners dug out the topsoil of the plateau and started extracting ores from the pits and crevices of the ancient coral underneath.

By the time of WWII, the mining sector grew exponentially on the island, with offshore mining sites popping up and building mining structures, mechanizing mining, and ramping up the phosphate exports.

By the early 1920s, Nauru was exporting 200,000 metric tons of phosphate per year. Four years later the number went up by 4 times – all sold at price less than the world average so that Australia, Great Britain, and New Zealand can subsidize their farmers.

Image: A ship being loaded with phosphate in Aiwo District, Nauru

The phosphate discovery proved a great fortune for the locals as they became one of the wealthiest nations on the planet at that time. By 1968, Nauru had the highest GDP per capita in the world thanks to its phosphate deposits.

Most of the income generated from the phosphate exports was invested in trust funds to secure the economic future of Nauru. The government set aside $1.8 billion, however, due to wasteful expenses and questionable foreign investments, Nauru was running out of time to survive as a sovereign nation and was on the brink of bankruptcy.

While the phosphate mining proved to be a fortune, it also destroyed the island. Phosphate mining in Nauru required scrapping off everything on the surface and removing the phosphate from the surface of ancient coral.

This activity left the island with patches of land that were leftover from the ancient coral and uneven solid depressions between the walls that were not suitable for habitation, plantations, or anything useful.

Mining also caused contamination of the drinking water and marine life of the island and its surroundings due to silt and phosphate runoff.

Image: Remains of the ancient coral after the phosphate was removed.

The phosphate mining left 80% of the island strip-mined and resulted in environmental catastrophe. The phosphate deposits ran out by 2000 although small-scale mining still continues to date on Nauru.

Since the island was economically dependent on phosphate mining, when the phosphate reserves were exhausted and the trusts that had been established diminished in value, Nauru started to struggle financially coupled with a series of bad investments including Nauru Airlines which never made a profit, and some overseas hotels that were repossessed.

This economic and financial struggle left Nauru with no choice but to take desperate measures to revive the economy. Nauru started selling passports to foreign nationals and providing asylum to war refugees which other countries refused to take in.

This mistake of the Nauru government led to the creation of a new humanitarian crisis in which Australia created Nauru detention centers in 2001 and in return helped Nauru’s economy as well as provided employment to most of its people.

Nauru Humanitarian Crisis – Australian Detention Centers

The first time Nauru agreed to build detention camps on its soil was in 2001 by the Australian government. The statement of Principles was signed by the then-president of Nauru, Rene Harris, and Australia’s then-minister for defense, Peter Reith.

Australia opened up a detention center for up to 800 people and promised a payment of A420 million for its development activities. Initially, the detainees were to be captured by a ship and by understanding that they would leave by May 2002.

Later on, another memorandum was signed between Australia and Nauru to accommodate 1200 people in detention camps and promised another $10 million for developmental purposes.

By 2005, 32 people were detained from Nauru as asylum seekers, and 30 of them were released to Australia. In 2006, eight Burmese Rohingya men were detained on Christmas Island. In 2007, Australia announced that 83 Tamils from Sri Lanka will be detained in Nauru from Christmas Island.

In late 2007, the newly elected Australian Prime Minister, Kevin Rudd, announced that they would no longer use Nauru as a detention center and would discontinue the “Pacific Solution” (deporting detainees to islands rather than letting them enter Australia) immediately.

This came as a shock to the Nauru government as ending the detention center meant losing jobs and major aid needed from Australia.

Australia’s detention camps in Pacific Islands created a mess like the US-Mexico border where kids were separated from families, and reports of sexual abuse and suicides were common.

Children between 7 and 12 age are making multiple attempts at suicide. At least two people killed themselves and three others died. People are losing hope in humanity living on this dreaded island with only one to blame – AUSTRALIA, for it bought the man-made refugee crisis in this country and still considers Nauru as its colony.

In 2013 when the detention camps were reinstalled and the second version of the offshore processing policy started with detaining up to 900 people including 109 children.

Riots broke out in 2013 when the detainees attacked the police and guards with sticks and rocks. Four people were injured and many were left bruised. The riots cost $60 million in damage. Up to 200 detainees escaped, and 130-545 male detainees were involved in the riot, destroying several vehicles, offices, an accommodation center for up to 600 people, a dining room, and a health center with fire.

In 2015, Nauru announced that asylum seekers can freely roam on the island after reports were published that three women were raped in the vicinities of the detention center.

United States of America offered humanitarian help and agreed to resettle asylum seekers in US but only 335 out of 1250 people left. New Zealand also offered to resettle 150 people but Australia has refused to accept the offer knowing no other country would be making offers to resettle the asylum seekers.

In 2021, Australia made a new deal with Nauru to keep operating the ongoing asylum seeker processing center on the island. It is costing an Australian taxpayer more than $4m a year to hold a person in Nauru’s Offshore regime – a little over $11,000 per person per day. It is estimated only 107 people – 81 refugees and 26 asylum workers are being held on Nauru.

There are several severe refugee situations across the world. There are currently more refugees in the globe than people in Australia. However, there is a very easy solution to the man-made refugee problem in Nauru – and it is more apparent than ever that it is the only viable that the suffering must end, and they should be sent back to Australia.

Nauru – A Tax Haven

During the 1990s when Nauru’s economy tumbled after phosphate reserves ran out, it turned itself into a money-laundering haven, selling bank licenses and diplomatic passports that confer immunity.

Nauru had an influx of Russian mafia and al-Qaida coming to the island and exploiting its corrupt laws. It is estimated that Russians placed $70 billion in Nauru’s banks primarily to evade taxes in 1998 alone.

Throw in selling passports to foreign nationals (including at least a few to Al Qaeda) and Nauru was starting to look shadier than a palm tree.

A senior U.S. official in 1998 said: “The representatives from the central bank of Russia met us and confirmed that large amounts of the Russian capital are flowing into and out of Nauru, and that has raised concerns on their part and on ours and certainly raised suspicions.”

The rise of this speck in the Pacific as a significant offshore player is a new phenomenon, spurred in part by the Internet’s growth, and it demonstrates how hard it is for international agencies to keep up in the fight against money laundering. Even when law enforcement persuades more established offshore havens to allow them access behind the curtain of secrecy, suspicious money transfers elsewhere.

To the chagrin of international law enforcement, the Republic of Nauru maintains an even higher level of secrecy than Switzerland and the Cayman Islands.

The State Department stated in a 1998 report published in February that “Nauru’s present offshore banking environment… is an open invitation to financial crime and money laundering.”

The United States declared Nauru as a money-laundering state alongside Ukraine and imposed the same sanctions as those slapped on Iraq. These sanctions gave Nauru’s lawmakers the wake-up call they needed to do something about the growing criminal activity on the island.

The Financial Action Task Force (FATF), a global organization that regulates the economic activities of countries and works on eliminating tax havens, started working with Nauru to walk back from its life of wild west of finance.

In 2004, Nauru passed anti-money laundering and terror financing laws that helped in getting rid of offshore companies on the island.

It is still difficult to learn about Nauru’s corporate sector and it remains a mystery as only 59 corporations are registered under Nauru’s law while many still work without lawful registration. Many tax-fraud websites and money laundering websites still list Nauru as an option.

Although no new trust business licenses have been awarded in the last 10 years, 15 unit trusts have been established under the 11 existing licenses.

Although the very low incidence of company and trust formation in the business industry may imply that the risks are relatively minimal but offshore corporations and trusts remain a topic of concern.

Profiting from Abuse

Many companies that were authorized to operate in Nauru were made to sign contracts that had clauses of secrecy regarding Australia’s magnitude of abuses of Nauru and Manus, making it a criminal offense for medical and welfare professionals to speak out and placing service providers under strict confidentiality clauses.

An example of such a company was Broadspectrum, which works in property, defense, transport, utilities, and mining processing services.

Amnesty International reports say that between 2012 and 2014, Broadspectrum provided garrison services on Nauru for the value of AUD$350 million (then US$364.5m). Broadspectrum’s contract with the Australian government for the welfare of Nauru and Manus had been amended several times and the collective value of the contracts amounts to AUD$2.5 billion over three and a half years.

It was estimated by Australian National Audit Office that holding people in Nauru and Marnus under the contract with Broadspectrum has cost the Australian government over AUD$573,00 per person, per year as of December 2015.

Image: Asylum seekers protest at Nauru camp (Refugee Action Coalition)

Broadspectrum disputed the figure of AUD$2.5billion and says the original figure was AUD$1.2 billion, although the reasons for the two different figures were not explained.

Broadspectrum warned its employees, in a leaked internal document, that they can be fined for communicating in any way through media, letters, fax about offshore processing operations or publishing information about treatments of detainees in relation to operations.

The DIBP (Department of Home Affairs) justified this secrecy in relation to Broadspectrum saying that the contract was redacted because “it holds a significant commercial value that could reasonably be expected to be destroyed or diminished if the information were disclosed.”

It is believed that broadspectrum with the help of the Australian government is running a profitable business from the abuse of asylum seekers in Nauru. The commercial secrecy does not justify the non-disclosure about the cost of services that are being paid to Broadspectrum on Nauru and Manus Island. The secrecy around the contracts signifies that Broadspectrum and its parent company, Ferrovial are driving “hidden profits” from humanitarian abuse.

Furthermore, the secrecy around the costs of the contracts and services provided on Nauru and Manus islands by the service providers allows the Australian government to hide the full scale of abuses that are being committed on the islands.

Corruption

Nauru scores only 36 on the World Governance Indicator – Control of Corruption rendering that level of corruption in Nauru is high with low accountability.

An example of corruption in Nauru’s history is its relationship with PRC and ROC. Nauru has had on-off relationships with China and Taiwan. In 1980, Nauru established relations with ROC (Republic of China/Taiwan) but in 2002, Nauru and PRC (People’s Republic of China) adopted the One China Policy. Taiwan accused PRC of bribing and buying its allegiance with aid of over 90 million Euros.

In 2011, WikiLeaks revealed that Taiwan had been paying a “monthly stipend” to Nauruan government ministers in exchange for their continued support, as well as a smaller sum to other members of parliament, as “project funding that requires minimal accounting”.

According to a retired Australian official, Nauruan President Marcus Stephen, Foreign Minister Kieren Keke, and previous President Ludwig Scotty, among others, took “under the counter” bribes from Taiwan. According to the leaks:

“Chinese [PRC] officials have also tried to influence Nauru’s elections through financial bribes to voters, with at least $40,000 delivered in one instance in 2007,”

 

Conclusion:

Nauru may be past its glory days of mining and earning a fortune, then running down the path of crime in desperate moves to earn a living and later helping Australia in breaking Human rights laws while making a profit out of it, it is the need of the hour for Nauruans to put an end to their corrupt system that lets foreigners dictate their country and find a way back to being a prosperous sovereign country.

 

 

Sources And References:

1 – The Guardian (https://www.theguardian.com/world/2018/sep/04/corruption-incompetence-and-a-musical-naurus-riches-to-rags-tale)

2 – Wikipedia (https://en.wikipedia.org/wiki/Nauru%E2%80%93Taiwan_relations)

3 – ABC news (https://www.abc.net.au/news/2013-07-22/125-asylum-seekers-charged-over-violent-nauru-riots/4834098)

4- Amnesty International (Details about contracts between Australia and Broadspectrum) (https://www.amnesty.org/en/documents/asa12/5942/2017/en/)

5 – Washington Post (https://www.washingtonpost.com/archive/politics/1999/10/28/russians-use-tiny-island-to-hide-billions/b05c2b53-52f9-4621-aa8a-be4ee204d96d/)

6 – The Guardian (https://www.theguardian.com/world/2022/jan/24/nauru-offshore-regime-to-cost-australian-taxpayers-nearly-220m-over-next-six-months)