In 2024, Australia and Nauru signed a treaty that promised AU $140 million in financial assistance to Nauru. The purpose of this agreement was to help Nauru strengthen its economy and security. However, the financial aid comes with strict conditions that give Australia significant control over Nauru’s key decisions. Under the treaty, Nauru must seek approval from Australia before engaging with other nations on critical infrastructure projects, including banking and development efforts.
This treaty has been compared to the Australia-Tuvalu Falepili Union Treaty, which was signed in 2023. That agreement created a special visa pathway allowing Tuvaluans to live and work in Australia, recognizing the challenges Tuvalu faces due to climate change. However, no such arrangement was made for Nauru, even though discussions about relocating Nauru’s population have taken place in the past.
In 1963, Australia proposed moving Nauru’s people to Curtis Island in Queensland, but the plan was rejected because it would have stripped Nauru of its sovereignty. A similar proposal was made in 2003 but was again dismissed. Nauru’s leadership has consistently rejected the idea of mass relocation, preferring to find ways to sustain its people on the island. Instead, Nauru has launched the Higher Ground Initiative, a major project aimed at relocating 90% of its population and infrastructure to higher land to protect them from rising sea levels and coastal erosion. To fund this effort, Nauru aims to raise AU $65 million.
Desperate Measures for Financial Stability
Nauru’s economy has long faced difficulties. Its once-rich phosphate reserves, which were the main source of income, have been almost completely depleted. As a result, Nauru now relies heavily on foreign aid, with 66% of its assistance coming from Australia.
Nauru was Haven of Money Launderers
To raise funds, Nauru has revived a controversial practice—selling citizenship. The government is offering Nauruan passports for over US $105,000, which allows visa-free travel to more than 89 destinations. While this scheme provides an independent revenue source, it comes with risks. In the past, Nauruan passports were sold to individuals linked to illegal activities, including alleged terrorists. Due to international pressure, the program was shut down in 2003, but its reintroduction raises concerns about security and the credibility of Nauru’s passports.
Another major source of income for Nauru is hosting Australia’s offshore detention centre. The Nauru Regional Processing Centre was first established in 2012 as part of Australia’s policy to hold asylum seekers in offshore facilities. However, the centre has been widely criticized for poor conditions, leading to serious mental and physical harm to detainees. The facility has been shut down and reopened multiple times, causing uncertainty for Nauru’s economy.
The company managing the centre, Canstruct, made a profit of AU $101 million in 2021, yet little of this money benefits ordinary Nauruans. Instead, the country continues to struggle with financial instability. The detention centre’s operation has also resulted in multiple legal challenges, with Australia being referred to the International Criminal Court six times for alleged human rights violations.
When the facility was temporarily shut down in 2008, Nauru’s government expressed concerns that 10% of its population would lose their jobs. However, the revenue generated from the centre has not led to long-term economic improvement for the country. Instead, Nauru remains financially dependent on Australia, reinforcing its vulnerability.
Geopolitical Influence and Banking Control
Nauru recently faced a banking crisis after Bendigo Bank exited, leaving the country without a major financial institution. In response, Nauru explored solutions with the Bank of China, but Australia, under the 2024 Treaty, pressured the Commonwealth Bank to step in instead. This move was seen as an effort to block China’s influence in the Pacific.
Australia’s involvement in Nauru’s banking sector is part of a larger pattern of control. Since 2018, nearly 800 diplomatic and security engagements have taken place in the Pacific, many focusing on defense and policing. These actions reflect Australia’s strategic interests rather than the priorities of Pacific nations.
Despite its small size, Nauru has shown independence before. It has switched diplomatic alliances between Taiwan and China for economic benefits and has taken strong stands in regional and climate negotiations. However, power imbalances make it difficult for Nauru to maintain full sovereignty in global affairs.
The 2024 Treaty deepens Nauru’s dependence on Australia. While financial aid is crucial, the conditions attached limit Nauru’s decision-making power. Instead of supporting true self-reliance, the treaty reinforces Australia’s influence, leaving Nauru with little choice but to comply.
