Perhaps the smallest country in the world is the Republic of Sealand, a man-made island in the English Channel. Originally called Roughs Tower, Sealand is only 1/4 acre, 0.0004 mi2 in area, but expands to 1.5 square miles if you include the 0.7 mile sea-claim. The country was built, in international waters, by the British during WWII, and given semi-legitimate nation status through two diplomatic accidents over the next 20 years. This nation status would be a joke except that the precedent it establishes could start WW III.
The Republic of Sealand. King Roy and Queen Joan wave their greetings. Note, gun, flag, and helipad.
The British constructed Fort Roughs to serve as a bulwark against German U-Boats that were sinking supply ships. The tower-fort is topped with a deck and a helipad platform. There is one gun still working, see photo, a remnant of WWII service. Hollow concrete tubes extend to the Rough Sands sand bar; these provide storage and housing for as many as 300 troops. After the war, Rough Tower went unused and was officially abandoned in 1956. It was occupied (salvaged, conquered) in December, 1966 by radio-pirates trying to break the BBC monopoly. One of the radio-pirates, a former British Major, Paddy Roy Bates, declared the fort-island a monarchy with Roy as King and his wife Joan as Queen. Sealand, declared itself an independent nation September 2, 1967. Aristocratic titles are for sale at a price.
The first of the diplomatic accidents underlying Sealand’s semi-legitimate claim to nation status is that, when the responsible British officials were asked whether they intended to remove the radio squatters, the official response was that England abandoned ownership and responsibility. If England abandoned ownership, so the argument goes, then anyone who took over would take possession “res derelicta and terra nullius”. From a legal point of view, it constituted extra-national territory and they could declare island-nation status plus (some) sea rights. Needless to say, the British navy didn’t see it that way, and as soon as independence was declared, they attacked the island-tower-nation. Bates returned warning shots and the navy brought a case against him in Crown court, Essex. The result: The Bates’s won effective recognition as the fort sat in international waters. This claim stood until 1978 when Sealand was successfully “invaded” by German pirates. The Bates family managed to “liberate” (take back) Sealand with the help of a Bond-movie helicopter stunt pilot, capturing a German pirate in the process. The king negotiated with the German government for the pirate’s release, and thus claim de-facto German recognition. Sealand participates in some international games (ultimate frisbee, mostly), and issues passports, stamps, and currency that is not accepted anywhere. Still, the British deliver mail as if it were a country, and no nation has formally contested Sealand’s statehood since. 
Man made Chinese Islands in the South Pacific
Sealand was something of a joke until 18 months ago when China began to create a string of much-larger copies in the South China Sea. Like Sealand they are in international waters, in this case among the uninhabited, Spratly and Parasel chains of coral reefs between Vietnam, the Philippines, Indonesia and Brunei. The Chinese built retainer walls around several of the reefs and have been filling the interior with sand and coral from the sea-bed. They’ve since added military housing, desalination plants, docks, and an airstrip.
If these islands are accepted as new nations, or (more likely) as extensions of China, and we accept China’s claim to 200 mile sea rights, this project would give China exclusive control over vast oil, mineral, and fishery wealth, as well as control over the South China sea shipping and air lanes, extending into existing sea rights of Vietnam, Indonesia, Brunei, and the Philippines — about 2,000,000 km2. The governments of Vietnam and The Philippines have complained, but China has ignored them and warned the US to stay out.
The new islands would seem to violate several international laws, but as the incursion doesn’t direct affect us, it seems we should avoid getting involved in a neighbor’s dispute. I’ve written previously on what makes a country, and have argued that it’s a combination of (1) having a defined land and population and (2) having enough of a government and military to maintain and defend itself as a nation. And (3) not doing anything so offensive to attract the complete disdain of other nations. So far there is no civilian population, but there is a military one, and as soon as the Chinese stop building, the islands will meet all of the above criteria, except perhaps #3.
Sealand is a recurring character in the Japanese manga, Hitalia. Sealand is the smallest character, but has a dream of ruling the world one day.
Still, it’s in our interest to avoid WW III, and as the islands multiply, so does the chance of the sort of accident that started the Spanish-American War. All it would take is a ship taken or sunk near the islands, or a plane shot down under suspicious circumstances, and the war that started will not be a small or quick. I therefore have a modest suggestion based on Sealand: allow the islands conditional nation status, but as an aristocracy and require the sale of titles of nobility like Sealand does, or the sale of senate seats (like the Illinois Governor tried to do). With enough power in private hands a war could be averted. Peace is possible.
Robert E. Buxbaum, June 21, 2015. Sealand has actually tried selling the whole country in 2007. If you want to buy a title: lord, lady, baron, etc. Go to: sealandgov.org.