The Federated States of Micronesia (Listeni/ˌmaɪkroʊˈniːʒə/; abbreviated FSM) is an independent sovereign island nation and a United States associated state consisting of four states – from west to east, Yap, Chuuk, Pohnpei and Kosrae – that are spread across the Western Pacific Ocean. Together, the states comprise around 607 islands (a combined land area of approximately 702 km2 or 271 sq mi) that cover a longitudinal distance of almost 2,700 km (1,678 mi) just north of the equator. They lie northeast of New Guinea, south of Guam and the Marianas, west of Nauru and the Marshall Islands, east of Palau and the Philippines, about 2,900 km (1,802 mi) north of eastern Australia and some 4,000 km (2,485 mi) southwest of the main islands of Hawaii. The ancestors of the Micronesians settled over four thousand years ago. A decentralized chieftain-based system eventually evolved into a more centralized economic and religious culture centered on Yap.
Nan Madol, consisting of a series of small artificial islands linked by a network of canals, is often called the Venice of the Pacific. It is located on the eastern periphery of the island of Pohnpei and used to be the ceremonial and political seat of the Saudeleur dynasty that united Pohnpei's estimated 25,000 people from about AD 500 until 1500, when the centralized system collapsed.
European explorers—first the Portuguese in search of the Spice Islands (Indonesia) and then the Spanish—reached the Carolines in the sixteenth century. The Spanish incorporated the archipelago to the Spanish East Indies and in the 19th century established a number of outposts and missions. In 1887, they founded the town of Santiago de la Ascension in what today is Kolonia on the island of Pohnpei.
Following defeat in the Spanish–American War, the Spanish sold the archipelago to Germany in 1899 under the German–Spanish Treaty of 1899. Germany incorporated it into German New Guinea.
During World War I, it was captured by Japan. Following the war, the League of Nations awarded a mandate for Japan to administer the islands as part of the South Pacific Mandate.
During World War II, a significant portion of the Japanese fleet was based in Truk Lagoon. In February 1944, Operation Hailstone, one of the most important naval battles of the war, took place at Truk, in which many Japanese support vessels and aircraft were destroyed.
Following World War II, it was administered by the United States under United Nations auspices in 1947 as part of the Trust Territory of the Pacific Islands pursuant to Security Council Resolution 21.
On May 10, 1979, four of the Trust Territory districts ratified a new constitution to become the Federated States of Micronesia. Palau, the Marshall Islands, and the Northern Mariana Islands chose not to participate. The FSM signed a Compact of Free Association with the United States, which entered into force on November 3, 1986, marking Micronesia's emergence from trusteeship to independence. Independence was formally concluded under international law in 1990, when the United Nations officially ended the Trusteeship status pursuant to Security Council Resolution 683. The Compact was renewed in 2004. Economic activity in the Federated States of Micronesia consists primarily of subsistence farming and fishing. The islands have few mineral deposits worth exploiting, except for high-grade phosphate. Long line fishing of tuna is also viable with foreign vessels from China operated in the 1990s. The potential for a tourist industry exists, but the remoteness of the location and a lack of adequate facilities hinder development. Financial assistance from the U.S. is the primary source of revenue, with the U.S. pledged to spend $1.3 billion in the islands in 1986–2001; the CIA World Factbook lists high dependence on U.S. aid as one of the main concerns of the FSM. Geographical isolation and a poorly developed infrastructure are major impediments to long-term growth.