The Country With Nothing Left to Lose

Like any responsible doomsday prepper, the now-convicted FTX founder hatched a survival plan. According to a memo between his brother and an FTX executive, Bankman-Fried planned to buy the Pacific island nation of Nauru and build a bunker that he could retreat to if a cataclysmic event wiped out at least half of the global population. Never mind, of course, that Nauru—a sovereign country—was never actually up for sale.

A tiny island whose very future may be threatened by climate change may seem like a strange doomsday hideout. Stretching just 8.1 square miles, the country has scarce fertile land and fresh water—a far cry from the lush escape that Bankman-Fried may have envisioned. With so few domestic options, the island’s nearly 13,000 residents must import more than 90 percent of their food, and childhood obesity rates have skyrocketed to some of the highest in the world.

All of these troubles mark a surprising turn for a country that once claimed the world’s second-highest GDP per capita. Nauru is the “world’s richest little isle,” the New York Times proclaimed in 1982, the result of a decadeslong mining rush for the island’s phosphate bounty. But once the mining boom went bust, so too did the money—setting Nauru on a quest for cash that has seen it launder money for the Russian mafia; effectively imprison refugees seeking asylum in Australia; and, most recently, abandon its long-standing Taiwan ties for Beijing.

None has quite done the trick. Now, Nauru is making one of its most controversial bets yet: mining the seafloor for the mineral treasures powering the global energy transition. It’s a move that has sparked alarm and suspicion, given the island’s checkered history. Yet the many contradictions of Nauru’s path here are as much a twisted tale of exploitation and extraction as they are a story of what one nation will do to survive.

Nauru is “one of the most unique and unusual countries in the world,” said John Connell, a professor at the University of Sydney who studies the South Pacific. “That country has inspired all kinds of strange things to happen, and Sam Bankman-Fried’s one is just a very recent one of a chain of strange activities,” he added.

Workers mine phosphate in Nauru in 1968.

Bird droppings may not strike you as even a mildly desirable resource, but they are rich in phosphate, a fertilizer input that underpins the world’s agricultural systems—and Nauru’s land was once covered in the stuff, which accumulated and hardened over millions of years. That natural bounty has long enticed a steady stream of colonial powers—namely Australia, Britain, and New Zealand, which were named as Nauru’s trustees in the aftermath of World War II—that swiftly stripped and then shipped away the country’s phosphate, allocating only a tiny fraction of profits to Nauruans.

Nauru “hasn’t been dealt an easy hand. It’s been exploited in many, many different ways by a whole range of larger powers,” said Cleo Paskal, an expert in the Indo-Pacific region at the Foundation for Defense of Democracies.

Nauru ultimately secured its independence in 1968. But before that point, the three powers had so thoroughly stripped its phosphate deposits that in the early 1960s, Canberra—then charged with administering the country—proposed eventually resettling Nauruans on an Australian island. Nauruans rejected that plan, electing instead to buy back control of their phosphate industry in 1967 and continue extraction; they later took Canberra to the International Court of Justice over the plunder. To this day, phosphate mining has left more than 70 percent of the country uninhabitable, according to the United Nations.

The upside was that money was flooding into Nauru, at one point catapulting the country’s GDP per capita to the second highest in the world as phosphate royalties peaked at 1.7 billion Australian dollars (about $1.1 billion in the United States). The “phosphate economy was booming, and the spinoff was all of this income that was coming into the country,” Connell said. “Unfortunately, most of their investment strategies were bogus.”

Flush with cash, mismanagement and corruption were rampant as officials splurged on ostentatious projects, including financing a failed London musical that fictionalized Leonardo da Vinci’s life; briefly owning what was at the time one of the biggest buildings in Melbourne (“locally referred to as ‘birdshit tower,’” Connell said); and establishing a disproportionately large new airline, the passenger jets of which were later forcibly repossessed by creditors.

Soon, there was no money left. “Once the island was pretty much made bankrupt, there weren’t any other viable economic sectors that had been developed to then continue with,” said Julia Morris, a professor at the University of North Carolina Wilmington and the author of Asylum and Extraction in the Republic of Nauru.

In 2001, Australia offered Nauru a crucial—and contentious—lifeline: Canberra would pay the island to hold and process asylum-seekers who arrive to Australia by boat, effectively remaking the island nation into Australia’s own detention center. In exchange, Nauru would receive a vast sum of money that would ultimately amount to two-thirds of the country’s GDP; in 2021, for example, Canberra paid the island some 40 million Australian dollars (about $26 million) per month to run the facilities.

But the scheme came at a steep human cost, and revelations of the detention center’s dire conditions sparked global outcry, prompting Amnesty International to characterize Nauru as an “open-air prison.” After the facility’s brief closure between 2008 and 2012, in 2016, the Guardian published a trove of leaked documents that shed light on the abuse and assaults rife in the system; according to another report, nearly 90 percent of children held in Nauru faced physical health challenges. Over the years, several refugees have resorted to sewing their mouths shut to protest Canberra’s policy.

Facing immense global pressure, Australia is again winding down its operations in Nauru, although some asylum-seekers are still held on the island, and Canberra continues to pay hundreds of millions of dollars to maintain Nauru’s facilities as a “contingency” plan. For Nauru, that money, alongside revenues from leasing its waters for fishing, has helped prop up its teetering economy as it scrambles for other options.

“The detention center is basically their cash cow at the moment,” said Grant Wyeth, a Melbourne-based political analyst specializing in Australia and the Pacific. “It’s the thing that keeps them alive.”

Taiwanese President Tsai Ing-wen (left) and then-Nauruan President Lionel Aingimea inspect an honor guard during a welcome ceremony outside the presidential palace in Taipei on Dec. 13, 2019.Sam Yeh/AFP via Getty Images

It was a touching scene that seemed emblematic of a lasting bond between the two islands—one that Waqa’s successor, President Lionel Aingimea, even likened to that of family. In another sign of Nauru’s allegiance to Taipei, Waqa lashed out at the Chinese delegate to the 2018 Pacific Islands Forum, accusing him of being a “bully” and “insolent” after he “demanded to be heard” during another country’s turn.

“They’re not our friends. They just need us for their own purposes,” Waqa said of the Chinese government. “Sorry, but I have to be strong on this because no one is to come and dictate things to us.” He added: “We’re seeing a lot of big countries coming in and sometimes buying their way through the Pacific, some are extremely aggressive, even to the point that they tread all over us.”

Yet just a little more than five years later, that would all change. In January, the island abruptly abandoned its long-standing ties with Taiwan for Beijing, dealing Taipei a major diplomatic blow after its recent presidential election and further isolating it on the global stage. In a world where governments can covet international recognition more than hard cash or military shipments, Nauru’s shifting loyalties reflect how one of its most precious assets is its diplomatic relationships.

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This isn’t the first time the country has harnessed this tool. In 2009, the island announced that it would recognize two Russian-backed breakaway provinces in Georgia, Abkhazia and South Ossetia, in exchange for a $50 million aid package from Moscow.

Like then, bouncing between Taipei and Beijing has helped Nauru rake in more money. When the island first traded its Taiwan ties for Beijing in 2002, for example, the Taiwanese Foreign Ministry alleged that Nauru had received some $137 million from China in the form of a grant and debt repayments.

Yet the shift didn’t last long: Nauru closed its embassy in China just one year later, and by 2005, the two islands had drawn together again. The next year, Taiwan funded Nauru’s purchase of a new Boeing 737 airplane for its national airline after its previous plane—the only one the airline had at the time—was repossessed. And the Brisbane Times reported in 2011 that Taipei was secretly paying top Nauruan officials, including then-President Marcus Stephen and then-Foreign Minister Kieren Keke, 5,000 Australian dollars ($3,200) per month to ensure Nauru’s continued support.

But as Canberra wound down its offshore detention center operations, Nauru was scrambling for more cash. Before announcing its recognition of Beijing, the island reportedly sought around $83.23 million from Taiwan to make up for the financial deficit from the reduction in funding for the Australian facility, according to Taiwan’s Central News Agency. The Nauruan government reportedly cut ties before Taipei responded with its decision.

Aingimea and Chinese Foreign Minister Wang Yi toast after signing a joint communique on the resumption of diplomatic relations between the their countries in Beijing on Jan. 24.Andrea Verdelli/Getty Images

“China has been actively courting Nauru’s political leaders for a long time, and using economic inducements to bring about a change of direction in the country’s diplomacy,” said Taiwan’s Foreign Ministry, later adding that it was “deeply grieved.” The Nauruan government did not respond to Foreign Policy’s request for comment.

Nauru’s shifting allegiance marks the latest success in China’s long-standing strategy of using checkbook diplomacy to win friends and build influence. Across the Pacific, 17 nations now back Beijing—eclipsing the three Pacific nations that still recognize Taiwan—loyalties that China often cultivates by doling out massive sums of money. When the Solomon Islands and Kiribati joined Beijing’s ranks in 2019, for example, China ramped up its loans and investments to the two countries even though its overall Pacific financing has been falling since 2016, according to the Lowy Institute.

In both the Solomon Islands and Kiribati, “sizeable new financing from China has displaced existing support from Taiwan,” the Lowy Institute said in 2022. “China has not given up on using development assistance to cement key relationships.”

Nauru’s cash-strapped government has high hopes for this new chapter of its relationship with Beijing. This change “is in the best interests” of the country, the government declared, and constitutes “a significant first step in moving forward with Nauru’s development.”

Maersk crew members speak to then-Nauruan President Baron Waq and DeepGreen officials in San Diego on April 11, 2018. The Maersk Launcher was then on a mission for DeepGreen to the Central Pacific to advance research for deep-ocean metals.Sandy Huffaker/AP Images for DeepGreen Resources

“This mining venture is absolutely critical, absolutely critical to Nauru’s economic survival,” said Peter Jacob, a former chief of staff for Nauru’s Office of the President of Nauru who now works at the Metals Company (TMC), a Canadian firm that has been one of the most vocal proponents of deep-sea mining. (Private companies wishing to unlock the deep sea’s riches must first secure a country sponsor; TMC has teamed up with Nauru, Kiribati, and Tonga.)

While countries are free to ransack their own waters, their activity is restricted in the high seas, which are the waters lying beyond nations’ exclusive economic zones. Mining in particular remains prohibited in international waters until the International Seabed Authority (ISA), the governing body established by the U.N. Convention on the Law of the Sea, finalizes the rulebook for the industry—a massive undertaking that involves wrangling a raft of environmental, regulatory, and financial concerns.

Back in 2021, Nauru and TMC got tired of waiting. Eager to begin mining, Nauru invoked a little-known regulatory rule that effectively set a two-year timer for the ISA to determine regulations for the nascent industry. Since the ISA missed that deadline in 2023, countries can now apply for mining licenses in lieu of official guidelines; TMC plans to apply in July 2024.

“The Nauruan government is in pretty struggling financial circumstances, and so [they] are trying to find another long-term economic sector,” said Morris, the University of North Carolina professor. “I think it’s quite appealing in that they won’t be extracting from their land, like with phosphate mining, or from people being held on their land, like asylum.”

Yet in targeting an area of the planet that’s still largely untouched and unexplored, the decision has alarmed hundreds of scientists who warn of irreversible damage in an environment teeming with life and thousands of species that have yet to be discovered. Worried about the environmental risks, more than 20 countries as well as several big automakers—the latter of which rely on the minerals in question to power their electric vehicles—have called for a moratorium until more information is known; others have cast doubt on the financial and technical viability of mining in such unforgiving underwater conditions.

A fisherman is silhouetted at sunset at the northern end of the airport runway on the coast of Nauru on April 15, 2010. Rod Henshaw/Reuters

“Mining the deep sea to solve the climate crisis is like smoking for stress: You’re causing long-term serious harm for very short-term gain,” said Diva Amon, a marine biologist who is part of the Deep-Ocean Stewardship Initiative. “The ocean is our greatest ally in the fight against the climate crisis. It absorbs heat, it sequesters carbon, and it is critical.”

With some $31 billion in earnings on the line over the next 25 years, TMC remains undeterred. The company has funneled at least $100 million into environmental impact assessments and argues that deep-sea mining is both essential for the energy transition and less damaging than onshore mining, despite fierce pushback. The company has played an aggressive, if controversial, role in spearheading the race amid scrutiny of its murky ties with both the ISA and Nauru.

“For a small country such as Nauru, with a relatively small annual government budget, this is going to be transformational,” said Corey McLachlan, the head of stakeholder engagement at TMC. “We would expect to become, if we get up to full operations, probably the largest contributor to Nauru’s GDP.”

On top of its current annual administration fee, McLachlan said, the island will receive a fixed payment for every ton of nodules recovered from mining. Nauru Ocean Resources Inc., TMC’s deep-sea mining subsidiary, has also committed to paying corporate income tax in Nauru, which currently stands at 25 percent. Mining revenues will go into a seabed minerals fund, which the Nauruan government is committed to ensuring will be “governed in a transparent way,” he said.

Elsewhere in the Pacific Ocean, where climate change threatens the very survival of low-lying islands, Nauru’s push has proven divisive. While Tonga and the Cook Islands also want mining to begin, a growing number of nations—including Palau, Fiji, Vanuatu, the Solomon Islands, Papua New Guinea, Samoa, and the Federated States of Micronesia—are pushing for more time. “How can we in our right minds say ‘let’s go mining’ without knowing what the risks are?” Palau President Surangel Whipps Jr. asked in June 2022.

“This is the cradle of life, and we don’t want to be guinea pigs,” French Polynesian President Moetai Brotherson told Islands Business. “We’ve been guinea pigs for the nuclear tests, and we don’t want to be guinea pigs for deep-sea mining if it goes full scale before the technology is ready.”

Nauru, though, apparently feels as if it has nothing left to lose.

“We don’t see any way forward for us in terms of economic development” without deep-sea mining, said Jacob, the former chief of staff who is now at TMC. While some other countries may have plans to relocate residents to other countries such as Australia or New Zealand, he said, Nauruans “don’t have that opportunity.”

“We are staying here,” he said.