The Chagos Archipelago was depopulated by the British in 1965. The native Chagossians were exiled into the Maldives, Mauritius, and Seychelles. During the 1970s, a military installation was built to house British and American forces in deterring the Soviets in the Indian Ocean. The U.S. Navy routinely deployed ships and submarines to the territory on a rotational basis.
The BIOT functioned as the largest military pressence of the U.S. and the U.K. in the Indian Ocean. The territory for the first time was opened to Australian forces conducted anti-submarine operations against reports of alleged Soviet submarines. B-52 Intercontinental bombers were deployed to the airbase for long-range bombing missions against Soviet allies in the Middle East.
When China entered the war on the side of the Soviet Union, U.S. Air Force bombers deployed to the territory since the start of World War III began long-range bombings against Chinese military bases and industrial sites. North Korea was also targeted in addition to the bombers already deployed in Guam. The Royal Navy used Diego Garcia as a staging point to the Liberation of Hong Kong, stopping by at allied India, Singapore, Malaysia, and Brunei before landing an amphibious task force to reclaim Hong Kong. Throughout the war, the territory was unscathed.
Diego Garcia was apparently targeted by the World Revolution Army which tried to use a cargo ship armed with Soviet cruise missiles on September 11, 2001. However, the ship was sunk by U.S. Navy F-18 and Royal Air Force Panavia Tornados. Like its role in the Third World War, the territory was once again used by the USAF in bombing WRA and Al-Qaeda positions in Central Asia and the Middle East.
In 2008, the United Kingdom declared the British Indian Ocean Territory a nature reserve, prohibiting fishing and exploiting of its natural resources.
As of 2017, the Chagossians are still fighting over the dispute and currently demanding compensation for their exile.
The islands was predicted to be economically sufficient in terms of fruits, coconuts, wood, wildlife, fish, molluscs, crustaceans, and cephalopods. The depopulation of the Chagos, as well as the U.K.'s ban on exploitation, prevented this from being used to the full extent. Tourism, which would have made the Chagos popular, is strictly banned by the Foreign Office.
The military base employs civilian contractors on the island of Diego Garcia, namely Filipinos, Indians, Australians, and Nepalis, providing a source of income for other countries. Both the U.S. Dollar and the U.K. Pound Sterling is used as the legal tender.