Using transmission lines with optimum performance has always been a challenge for power system engineers. Consequently, the factors which cause the performance reduction of transmission lines are very important. Many methods have been proposed for improving the performance of transmission lines. Among these methods, the application of Static Compensators (STATCOM) is new and promising. Although there has been extensive research in this area, the performance of STATCOM in unbalanced conditions has received small attention. In this research work, the performance of a STATCOM under unbalanced conditions is considered. This includes both load and source unbalance conditions, which will be addressed separately. In this way, definition of active and non-active powers play an important role in the compensation strategy. The main method used in this work is the decomposition of current vector in terms of voltage vector. It will be shown that with the existence of zero-sequence voltage (four-wire system), this method can be applied successfully. However, this method fails when negative sequence voltage exists. Finally, a new strategy in the presence of negative sequence voltage is proposed.