TED Case Studies

Case Number: 412

Case Mnemonic: NAURU

Case Name: PHOSPHATE MINING IN NAURU

Case Author: Michael E. Pukrop, May, 1997

I. Identification

1. The Issue

The mining of phosphate on the island of Nauru, located in a remote corner of the Pacific Ocean, has devastated the island environmentally and has created financial, legal, and cultural problems for the islanders. The phosphate is used as a fertilizer around the world and the majority of it has been exported to Australia. The mineral is located among the ancient coral reefs found underground. Mining the phosphate, however, destroys the vegetation and soil of the island. Phosphate is the primary basis for the economy, and with the depletion of the mineral, Nauru is left with nothing to trade. Thus, the island faces virtual economic collapse. Today, Nauru's problems are becoming increasingly acute, as the phosphate on the island has been exhausted, and mining has virtually ceased. As such, the government of Nauru is looking into the question of responsibility for the ecological disaster raging on the island, and is looking into ways to rehabilitate the island.

2. Description

This section contains nine parts: history, phosphate, damage, people, culture, economics, legal issues, settlement, and the future.


HISTORY:

The story begins in 1908, when the Germans, then in control of Nauru, began to mine the large deposits of phosphate located there. The island fell into the hands of the Australians after their soldiers liberated Nauru in the early months of World War I. The League of Nations subsequently set up a mandate system than Australia, Great Britain, and New Zealand administered together. These three states then set up the British Phosphate Commissioners to deal with the mining operation. In 1942, the Germans seized and occupied Nauru. After World War II, Australia became the chief administrator of the United Nations Trusteeship that included Nauru until independence for the island was granted in early 1968.(1)


PHOSPHATE:

Nauru's phosphate can be described as a cash crop, because it is the only resource with which the island can sustain an economy. Nauru exports the majority of its phosphate to Australia, which uses it as a fertilizer because its soils are poor for agriculture.(2)

The type of phosphate found on Nauru and a few other Pacific islands, which is a combination of limestone and guano, is part of a larger grouping called phosphate rock. The majority of phosphate rock can be found in large beds of marine sedimentary rocks, but can be found in other areas. Much of the world's phosphate rock comes from the United States (Florida, North Carolina, and Tennessee) and Russia's Kola Peninsula. Smaller deposits are found throughout North Africa. Phosphate rock formed primarily from guano, such as that found on Nauru, plays a smaller role in terms of worldwide supply and demand. Nonetheless, the Nauru deposits, producing 2 million tons yearly, are important to local customers Australia and New Zealand in terms of providing phosphate fertilizer for croplands (especially wheat and barley) and pastures (cattle grazing).(3)

Phosphate mining on Nauru generally occurs in the interior, which is a central plateau commonly called "topside". The phosphate is actually a composite of two materials which have combined and solidified over the eons: decayed oceanic microorganisms and bird droppings. These elements intertwined with the coral and limestone that forms the island, and extraction of the phosphate left behind deep pits and tall pillars, some as high as 75 feet. This creates a moon-like scene, which contributes to the incultivable and uninhabitable atmosphere. Four-fifths, or 80%, of the island is a barren wasteland, with the residents living on a narrow strip along the coast.(4)


DAMAGE:

As a result of the mining, the vast majority of soil and vegetation has been stripped away. This prevents agriculture from taking place, and makes it very difficult for a viable ecosystem to establish itself and to flourish. In addition, the combination of a pillar and pit landscape on Nauru and the loss of vegetation creates a very hot interior, such that rising hot air prevents rain clouds from settling over the island. This contributes to frequent droughts, exacerbating an already difficult problem.(5)


PEOPLE:

The Nauruan people, living along a coastal strip, are generally descended from Polynesian, Micronesian, and Melanesian ancestry. About one-fifth of the population is from other island groups in the Pacific, and the remaining one-fifth are of Chinese or European descent, and are usually mine workers. The islanders speak a language called Nauruan, which is a distinct blend of Pacific speech components, although English is widely taught. The people generally practice Christianity.(6)

The mining that has taken place on Nauru for the past 90 years has had a physical toll on the native islanders. Because of the lack of soil and vegetation, the Nauruans have been forced to import nearly all of their food. The result of eating processed, fatty foods such as alcohol, potato chips, and canned meats, has been an increase in high blood pressure, diabetes, and obesity. These problems have led to a decrease in the life expectancy of the islanders, which is between 50 and 60 years.(7)


CULTURE:

The traditional culture of the Nauruans has also been affected by the mining of phosphate. German settlers in the late 1800s prohibited native dancing, and native myth suffered as well. The Germans did not want to promote the inter-clan warfare that was occurring at that time. As a result, the settlers requested in 1888 that Nauru be placed within a German Protectorate. The discovery of phosphate on the island in 1899 and its subsequent exploitation also played a large role in curbing the expression of the Nauruan culture because of domination by other countries.(8)

Even today, Nauru has not escaped the proliferation of technology around the world, as satellite dishes are commonplace. The traditional past is all but gone. Mining also took away the skills of the islanders. With the loss of agricultural land, in combination with new-found wealth, farming and fishing ceased, and food had to be imported. In addition, much of the manual labor needed to mine the phosphate is done by imported workers, mainly from Asia and Oceania. The discovery of phosphate, and especially its exploitative mining, has irreversibly destroyed the Nauruan people's culture and traditional way of life.(9)


ECONOMICS:

With the independence of Nauru from Australia, the native inhabitants began to experience the financial benefits of phosphate mining for the first time. They became rich virtually overnight, creating one of the world's highest per capita incomes, and thus a welfare state came into being.(10) Prior to independence, however, the British Phosphate Commissioners controlled the mining operation, and the Nauruans today contend that their former colonists cheated them out of millions of dollars, as the product was sold below market value.(11)

Since independence in 1968, the Nauru government has earned about $A100-$A120 million yearly by exporting the phosphate. Those who own land receive a lump sum prior to mining, and then royalties are earmarked for a trust fund, which is to begin paying out once mining ends between 1995 and 2000. Individuals involved do receive a financial statement, but aggregate island accounts of financial dealings do not exist. The Nauru government figures are sketchy, if not entirely secret. The trust fund also has an investment component, but information on returns of those investments is also held privately by the government.(12)

Such secrecy has the islanders concerned about the outcome of the trust fund, and especially its ability to pay out. While the Nauruans do own some foreign real estate, such as office buildings and golf courses, the bulk of their investments lies with the trust fund. The people of Nauru do indeed have cause to worry about the fate of their money. This is because of irresponsibility on the part of the government, coming in the form of investments that have gone awry and failed, and others by which the government was simply swindled.(13)


LEGAL ISSUES:

As a result of the environmental degradation discussed above (and to a lesser extent, the financial crisis), the Republic of Nauru filed suit with the International Court of Justice against Australia in June, 1989. The stated goal was that Nauru desired compensation from Australia for the environmental damage that resulted from the mining of the phosphate that took place prior to Nauru's independence in 1968. One side of the story has it that the former colonial powers were irresponsible in the mining of the mineral, and that Australia, as the primary trustee power, did a miserable effort at preparing the island for independence. The Australians contended, however, that the leader of Nauru, Hammer DeRoburt, incompetently mismanaged the affairs of the phosphate export funds while at the same time acting disinterested in the welfare and fate of his own people. In addition, the Australians began the legal battle by recognizing the Court's legitimacy, yet contested its jurisdiction. The Australians then defended themselves vigorously, taking the position that agreements made at the time of independence nullified any future claims. A 1988 Nauruan commission, however, disputed this claim, actually putting a price on pre-independence mining at $A72 million.(14)

The involvement of the International Court of Justice is significant in that while it does not have formal powers of enforcement, it nonetheless has a certain moral weight. In addition, any ruling would likely set an international precedent concerning natural resources and the profiting of them by colonial powers at the expense of developing states.(15)

The Court, in a 1992 preliminary hearing, however, dismissed the Australian position that Nauru was mostly responsible since two- thirds of the mining occurred after independence. The Court stated that the argument did not end with independence, and that the "agreements" made prior to independence did not absolve Australia of any blame. In addition, Nauru did not violate any time limitations in its filing of the claim to the Court. In terms of the other two colonial powers, Britain and New Zealand, the Court stated that Australia could stand alone, but that any ruling may have implications for those states.(16)


SETTLEMENT:

The proceedings of the International Court of Justice continued, but the Republic of Nauru and Australia pursued negotiations outside the realm of the Court in 1992 and 1993. An agreement was in effect between the two countries on August 20, 1993. Part of the provisions of the agreement hold that Australia will award $A107 million to Nauru as compensation for the environmental damage. In addition, Nauru waived the right to make any further claim to issues arising from either the administration of the island during the mandate/trusteeship era, or phosphate mining itself. This is to the advantage of not only Australia, but to Great Britain and New Zealand as well. Those two states were not part of the above Court ruling.(17)


THE FUTURE:

With a final legal settlement, the attention of the islanders then turned to the future rehabilitation of their island in light of the cessation of the mining operations there. What to do is an enduring question. The Nauruans live on a strip of land along the coast, and with the population expanding, they need more living space. In 1968, at the time of independence, the population was about 2,000, but since that time it has increased to over 6,000. What the island also needs is new construction, most notably a hospital, schools, and government buildings. This development, however, can only occur in one place: the central plateau of the island, which currently is a barren wasteland of limestone and coral.(18) This wasteland is of little value to the inhabitants of Nauru because it has been damaged through mining and is greatly exposed to the elements.

One solution is to crush the pillars and import topsoil, humus, and other nutrients, thus beginning the long process of rebuilding the ecosystem. The cost is estimated at over $A200 million and could take more that 30 years. Creating an area for agriculture is paramount, and the island, for reasons of at least minimal self- sufficiency, must consider a water filter, fish and pig farms, tree plantations, and even hydroponics.(19) Another option is much more drastic. It calls for the total removal of the population to another island. This solution is possible because the present island of Nauru is quite damaged, and there are no other economically viable industries save for the phosphate, which is now gone. This hopeless situation leads many to believe that evacuating the Nauruans to some other Pacific island (where exactly is as yet undetermined) is the only choice.(20)

3. Related TED Cases

COPPER Case <>BRAGOLD Case <>LEONE Case <>SOLOMON Case
GUANO Case <>IRIAN Case <>YELLOW Case<>GHANGOLD Case
BAUXITE Case <>PAPUA Case <>VENGOLD Case <>ZAMBCOPP Case

KEYWORD CLUSTERS:

a. Trade Product: Phosphate

b. Bio-geography: Tropical

c. Environmental Problem: Mining

II. Legal Clusters

The case between Nauru and Australia was quite complicated, with each side accusing the other with different allegations. For example, Nauru contended that it was set back with the $A21 million price tag for taking over the mining of the phosphate. Australia contended that Nauru must take responsibility for the resulting environmental damage, as nearly two-thirds of the mining actually took place after independence. An Australian legal advisor to Nauru, however, stated that Australia still had accountability as it had granted independence with the understanding that mining would continue to the benefit of Australia.(21)

5. Discourse and Status: DISagreement and COMPlete

The Republic of Nauru and Australia settled their responsibility case outside of the International Court of Justice (where preliminary rulings had taken place) and agreed to a settlement on August 20, 1993. Australia granted $A107 million to Nauru as compensation for the environmental damage incurred to the island.

6. Forum and Scope: OCEANIA and BI-LATeral

7. Decision Breadth: 2 (NAURU and AUSTRALIA)

8. Legal Standing: TREATY

III. Geographic Clusters

9. Geographic Locations:

The island of Nauru is located in the Pacific Ocean, about 500 kilometers north-northeast of Papua New Guinea. It has a total land area of 21 square kilometers, and a total coastline of 30 kilometers. Its comparative area is about one tenth the size of the District of Columbia.(22) The island was formed as a result of guano deposits (from sea faring birds) mixing and solidifying with a limestone and coral base. A ring of sand is on the coasts, and the island is surrounded by a reef.

a. Geographic Domain: Oceania (Asia)

b. Geographic Site: Australia

c. Geographic Impact: Nauru

10. Sub-National Factors: NO

11. Type of Habitat: TROPical

IV. Trade Clusters

12. Type of Measure: EXPort Ban

13. Direct v. Indirect Impacts: DIRect

14. Relation of Trade Measure to Environmental Impact:

a. Directly Related to Product: YES PHOSPHATES

b. Indirectly Related to Product: NO

c. Not Related to Product: NO

d. Related to Process: YES HABITat Loss

15. Trade Product Identification: PHOSPHATES

16. Economic Data:

The island's 10,000 people enjoy one of the developing world's highest per capita incomes, at around $US10,000. The Nauruan government earns about $A100-$A120 million per year on phosphate exports.

17. Degree of Competitive Impact: HIGH

The location of phosphates on Nauru has been beneficial to the islanders in monetary terms, but the mining has unfortunately totally destroyed the ecosystem. With the end of phosphate mining, Nauru has nothing else to maintain its economy or standard of living.

18. Industry Sector: STONE

19. Exporter and Importer: NAURU and AUSTRALIA

V. Environment Clusters

20. Environmental Problem Type: HABITat Loss

21. Name, Type, and Diversity of Species

22. Resource Impact and Effect: HIGH and PRODuct

23. Urgency and Lifetime of Problem: High and 30 years

24. Substitutes: ARTificial products

VI. Other Factors

25. Culture: YES

The money earned from the exporting of phosphates has destroyed the traditional and cultural way of life for the Nauruans. They no longer practice agriculture or fishing, relying instead on prepackaged imported fatty foods, thus decreasing life expectancy.

26. Trans-Boundary Issues: NO

27. Rights: YES

The Nauruans believe that because of the extensive phosphate mining on the island, their rights have been violated. Two reasons exist for this belief. The first deals with the loss of land, as much of the island is no longer cultivable or livable. The second reason deals with the deteriorating health among the islanders, especially in terms of diet and medical problems.

28. Relevant Literature:

Anderson, Ian. "Can Nauru clean up after the colonialists?" New Scientist vol. 135, no. 1830. July 18, 1992: pp. 12-13.

Anderson, Jack, and Michael Binstein. "Greed is sinking tiny Pacific nation." The Washington Post. January 1, 1996: p. 14.

Malik, Michael. "Ruined republic." Far Eastern Economic Review. vol. 144, no. 26. June 29, 1989: pp. 23-24.

Mason, Brian. "Phosphate Rock." Encyclopedia Americana. vol. 21. 1993: p. 963.

Shenon, Philip. "A Pacific Island Nation Is Stripped of Everything." The New York Times. December 10, 1995: p. 3.

--- --. "Australia-Republic of Nauru: Settlement of the Case in the International Court of Justice Concerning Certain Phosphate Lands in Nauru." International Legal Materials. vol. 32, no. 6. November 1993: pp. 1471-1479.

-----. "Nauru." The New Encyclopedia Britannica. vol. 8, micropaedia. 1995: p. 562.

-----. "The World Factbook." Central Intelligence Agency. 1994: pp. 276-277.

NOTES:

(1)Ian Anderson, "Can Nauru clean up after the colonialists?" New Sicentist: (vol. 135, no. 1830. July 18, 1992). p. 12.

(2)Anderson, p. 12.

(3)Mason, Brian. "Phosphate Rock." Encyclopedia Americana: (vol. 21. 1993). p. 963.

(4)Anderson, p. 12; and: Michael Malik. "Ruined Republic." Far Eastern Economic Review: (vol. 144, no. 26. June 29, 1989). pp. 23-24; and: Philip Shenon. "A Pacific Island Nation Is Stripped of Everything." The New York Times: (December 10, 1995). p. 3.

(5)Anderson, p. 13.

(6)-----. "Nauru." The New Encyclopaedia Britannica: (vol. 8, micrtopaedia, 1995). p. 562.

(7)Malik, p. 23.; and Shenon, p. 3.

(8)The New Encyclopaedia Britannica, p. 562.

(9)Shenon, p. 3; and Jack Anderson, and Michael Binstein. "Greed is sinking tiny Pacific nation." The Washington Post: (January 1, 1996). p. 14.

(10)Anderson and Binstein, p. 23.

(11)Malik, p. 23.

(12)Malik, pp. 23-24.

(13)Anderson, p. 12.; and Malik, pp. 23-24.; and Shenon, p. 3.

(14)Malik, p. 23.

(15)Anderson, p. 12.

(16)Anderson, p. 13.

(17)-----. "Australia-Republic of Nauru: Settlement of the Case in the International Court of Justice Concerning Certain Phosphate Lands in Nauru." International Legal Materials: (vol. 32, no. 6. November, 1993). pp. 1471-1472.

(18)Malik, p. 23.

(19)Anderson, p. 13.

(20)Shenon, p. 3.

(21)Anderson, p. 12.

(22)-----. "The World Factbook." Central Intelligence Agency: (1994). p. 276.

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