Australia’s Greedy Oil Deals in East Timor

Canberra’s insistence on a bilateral resolution to sea border issue is not fair.

As the world’s newest country, East Timor faced a steep learning curve when it gained independence in 2002. And among the first and harshest lessons it learned was that when it comes to international relations, there are no such things as true friends, only self interests. Dili’s relationship with Canberra is a case in point. Australia won deserved plaudits for the leading role it played in ending the Jakarta-inspired bloodshed on the half island in 1999 and for eventually ushering East Timor through to independence. But any thoughts Dili might have had about maintaining a “little brother” relationship with its much larger neighbour must surely have been knocked out over the past couple of years.

Australian Foreign Minister Alexander Downer made that all too clear in a conversation with East Timor Prime Minister Mari Alkatiri last year. “We are very tough,” Downer told Alkatari, according to a leaked transcript of their meeting. “We don’t care if you give information to the media. Let me give you a tutorial in politics – there’s not a chance [of you getting your wish],” he reportedly said. What the two were talking about was the gas fields that lie under the sea that separates East Timor from Australia and which are the island’s only real economic asset and its only hope of financial security. Downer’s bullying tone was not unusual – it has typified Australia’s negotiations on the gas fields.

Last year, the two governments sealed the Timor Sea Treaty giving East Timor 90 per cent of the revenues from a joint-development area, where one field, Bayu Undan, is ready for development. But Australia held up ratification of the deal until East Timor agreed to Canberra’s terms for sharing revenues from the much larger Greater Sunrise field, which holds 59 per cent of Timor’s petroleum reserves and is expected to generate US$8 billion (Bt320 billion) in revenue over the next four decades. With the threat that developers would pull out of Bayu Undan and deprive cash-strapped East Timor of much needed funds, Australia was able to obtain its demand for more than an 80 per-cent share of revenue from Greater Sunrise until the two countries settle where their maritime boundary should fall.

Australia wants to keep the maritime border agreed with Jakarta after Indonesia invaded East Timor in 1975, which would give it the lion’s share of the reserves. But that deal was a transparent pay-off from Jakarta for Canberra’s recognition of its illegal annexation of East Timor and Dili says the border should lie at the mid-point between the two countries, in line with standard international practice. Such recognition would put all of Greater Sunrise inside East Timor’s waters. Australia, however, refused to accept any decisions by independent arbitrators such as the InterNational Court of Justice, thus leaving tiny East Timor at the mercy of bilateral negotiations.

By repeatedly threatening to stall development of nearly all of Timor’s gas reserves Canberra eventually got what it wanted. And on Monday this week the Australian Parliament signed a treaty that gives Canberra interim rights to 82 per cent of the Greater Sunrise revenues until the two countries settle where their maritime boundary should fall. Crucially, however, it provides no timeframe for settling the border issue.

Canberra is essentially robbing East Timor – the poorest country in Southeast Asia – of billions of dollars, and perhaps even more distastefully, dressing it up as an act of generosity.

If Australia had really taken the high road it would have agreed to international arbitration of the border, dropped the numerous tax breaks that it insisted on for its developers and worked toward a fair and equal share of the spoils.

Australia likes to claim it has an “enlightened” approach to foreign affairs. It is this that justifies its condemnation of Southeast Asian dealings with the junta in Burma, Vietnam’s human rights record and Malaysian logging practices. Yet its harsh dealings with asylum seekers, its stalling over paying compensation for the epic Ok Tedi mining disaster in Papua New Guinea and now East Timor undermine whatever pretensions it has to a “principled-based” approach to international dealings.

Sadly, it also raises questions about Australia’s involvement in East Timor in 1999, one of Canberra’s biggest foreign-affairs successes in decades. Was it really just about gas and oil?