Nauru

The Republic of Nauru (pronounced /{{IPA|næ?u?.?u?}}/), formerly known as Pleasant Island, is an island republic in the South Pacific Ocean. It is one of the world's smallest independent countries both in terms of population and land area and the smallest independent republic in both terms. It is also the smallest non-European country (in terms of land area).

Economy

Revenues of Nauru have come from exports of phosphates, but reserves are now almost exhausted. Phosphate production has declined since 1989, as demand has fallen in traditional markets and as the marginal cost of extracting the remaining phosphate increases, making it less internationally competitive. While phosphates previously gave Nauruans one of the highest per capita incomes in the Third World, few other resources exist, with most necessities being imported, including fresh water from Australia. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. The government has been borrowing heavily to finance fiscal deficits.

Related Topics:
Phosphates - 1989 - Third World

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Another source of revenue was office rents from Nauru House, one of the tallest buildings in Melbourne, built on the profits from phosphates. Unfortunately, in the 1990s, mismanagement and corruption ruined the once-substantial savings of the island government. The huge earnings from the phosphates mining have been wasted, and now Nauru faces a very uncertain future. In November 2004, in an effort to pay off some Nauru's creditors, the nation's largest assets in Melbourne, including Nauru House, were sold for over $150 million.

Related Topics:
Nauru House - Melbourne

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In the 1990s, Nauru introduced itself as a tax haven, soon becoming one of the favourite spots for dirty money of the Russian mafia. A no-questions-asked policy enabled 70 billion dollars of assets belonging to Russian gangsters to be funneled to Nauru (an estimate by Central Bank of the Russian Federation). This led the FATF to identify Nauru as one of fifteen non-cooperative countries in its fight against money laundering. For example, a bank could be established with as little as $25,000 without visiting the island or maintaining records. At present, Nauru's days as a banking centre are waning, with anti-avoidance legislation having been introduced and foreign hot money leaving the country.

Related Topics:
Tax haven - Russian mafia - Central Bank of the Russian Federation - FATF - Money laundering - Hot money

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Nauru is currently involved in an Australian lawsuit against the United States over a failed underground agreement. Nauru claims that agents representing the United States government offered billions of dollars worth of economic recovery to the island in exchange for new legislation limiting the efficacy of overseas money laundering and tax evasion as well as the establishment of a Nauruan "stooge" embassy in China to function under United States control as a means of secretly ushering defecting North Korean scientists and officials across the border, including Kyong Won-ha, the scientist supposedly responsible for much of Pyongyang's nuclear program. This initiative was termed "Operation Weasel." When news of this agreement surfaced after Nauru faithfully followed through with the necessary legislation and the preliminaries of the embassy (which rightfully drew suspicion from China as it was staffed entirely by westerners), the United States responded that the agents who made the deal with Nauru never had the authority to make such a contract, and Nauru has not yet received the promised aid. Nauru's case against the United States is still pending, but preliminary judgments favor the island nation over the superpower.

Related Topics:
Pyongyang - Operation Weasel

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