Initially inhabited by Micronesian and Polynesian peoples, Nauru was annexed by Germany in the late 19th century, and became a mandate territory administered by Australia, New Zealand, and the United Kingdom following World War I. The island was occupied by Japan during World War II, and after the war entered into trusteeship again. Nauru achieved independence in 1968.

Nauru is a phosphate rock island, and its primary economic activity since 1907 has been the export of phosphate mined from the island. [2] With the exhaustion of phosphate reserves, its environment severely degraded by mining, and the trust established to manage the island's wealth significantly reduced in value, the government of Nauru has resorted to unusual measures to obtain income. In the 1990s, Nauru briefly became a tax haven and money laundering centre; since 2001 it has accepted aid from the Australian government; in exchange for this aid, Nauru houses an 'offshore' detention centre that holds and processes asylum seekers trying to enter Australia.

Geography
Nauru (pronounced NAH-oo-roo) is an island in the Pacific just south of the equator, about 2,500 mi (4,023 km) southwest of Honolulu. Phosphate mining has virtually destroyed the tiny nation's ecology, turning its tropical vegetation into a barren, rocky wasteland.

Government
Republic.

History
In 1798, a British navigator became the first European to visit the island. Germany annexed it in 1888, and by the turn of the century, phosphate, a lucrative fertilizer, began to be mined. The island was placed under joint Australian, New Zealand, and British mandate after World War I. The Japanese occupied the island during World War II and forced 1,200 Nauruans—roughly two-thirds of the population—to relocate. In 1947, it became a UN trusteeship administered by Australia. By 1967, the phosphate mining industry finally was under the control of the islanders, and on Jan. 31, 1968, Nauru became one of the world's smallest independent republics. For a period of time, Nauru's phosphate made the tiny country's per capita income the highest in the world, after Saudi Arabia.

As its phosphate stores began to run out (by 2006, its reserves will be exhausted), the island was reduced to an environmental wasteland. Nauru appealed to the International Court of Justice to compensate for the damage from almost a century of phosphate strip-mining by foreign companies. In 1993, Australia offered Nauru an out-of-court settlement of 2.5 million Australian dollars annually for 20 years. New Zealand and the UK additionally agreed to pay a one-time settlement of $12 million each. Declining phosphate prices, the high cost of maintaining an international airline, and the government's financial mismanagement combined to make the economy collapse in the late 1990s. By the millennium Nauru was virtually bankrupt.

In 2000, the G7 nations put pressure on the country to review its banking system, which is used by Russian criminals for money laundering.

Since Sept. 2001, Nauru has accepted three boatloads of Asian refugees destined for Australia. Australia compensated the island with $20 million and other financial incentives for taking this refugee problem off its hands. The detention camps, which held more than 400 asylum seekers in 2003, are said to be extremely bleak and lack medical care.

Bernard Dowiyogo, elected in 2003 as president for the seventh time (nonsequentially), died in March 2003, and Ludwig Scotty, a senior cabinet minister, was elected in May 2003. In August, Scotty was sacked in a no-confidence vote, and René Harris was elected. But, given Nauru's tumultuous politics, by June 2004 Scotty had again regained the presidency.