2004 Events and media coverage of
Australia - East Timor Boundary Dispute

In January 2004, East Timor's government published  "The Essential Facts" about the boundary negotiations, and launched their web site shortly thereafter.

In early March 2004, 53 Members of the U.S. Congress wrote to John Howard urging Australia to negotiate quickly and fairly.

President Xanana Gusmão spoke out strongly on 6 April.

New movements were formed both in East Timor and Australia prior to the April talks. In Dili, large demonstrations were held in front of the Australian Embassy.

The second round of boundary negotiations, which were supposed to be the first substantive round, took place in Dili on 19-22 April, 2004. Although they made little progress, both sides were outspoken about their positions. Prime Minister Alkatiri opened the talks.  After they finished, his Timor Sea Office issued a press release.

Many Australian organizations issued statements and reports, including the Catholic Commission for Justice, Development and Peace (Melbourne), the International Commission of Jurists, the Green Party, Oxfam/CAA and the Australia Catholic Social Justice Commission.

In early June, Australian Prime Minister John Howard visited Washington. ETAN issued a press release, following on their demonstration at the Australian Embassy to the U.S. a few weeks earlier.

On 9 June, Prime Minister Mari Alkatiri delivered the keynote address at the Southeast Asia Oil Conference in Darwin, detailing East Timor's position and looking for a way to resolve the impasse.

In August, Foreign Ministers Alexander Downer and Jose Ramos-Horta met in Canberra, calling for a "creative solution" which would involve East Timor deferring its maritime boundary claim in return for a greater share of revenues and control over development.

In the lead-up to the Australian election in October, many protested the Howard Government's intransigence.

However, three rounds of negotiations in September and October in Canberra, Darwin and Dili failed to work out such a solution, as East Timor insisted on having a say in Sunrise development options, including a possible pipeline to East Timor.

As of November, the situation was again stalemated, with no talks scheduled until 2005. A the end of November, East Timorese Foreign Minister Jose Ramos-Horta threatened to ask the UN General Assembly to take Australia to the International Court of Justice.

The media has covered this issue extensively. Here is a sampling of articles.

For articles published during 2005, click here.

E. Timor, Australia to hold April sea border talks

PERTH, Feb 26 (Reuters) - East Timor and Australia, sparring over where to place sea boundaries that divide oil and gas reserves worth billions of dollars, will meet in April for a second round of negotiations, East Timor said on Thursday.

Both countries have agreed to a temporary revenue-sharing treaty for some oil and gas fields in the Timor Sea, which splits the revenue 90:10 in favour of East Timor.

But Dili says it will not be able to offer investors any certainty until a permanent boundary is in place.

"We and many others in this industry share the view that the resources of the Timor Sea can be optimally developed only when permanent maritime boundaries are in place," Jose Teixeira, East Timor's secretary of state for mineral resources and energy, told a gas conference in Western Australia on Thursday.

"This outcome, like no other, will give optimum certainty and stability for investments in the area,"

East Timor, which became independent in 2002 after years of often violent occupation by Indonesia, relies on oil and gas revenues to help rebuild its economy after a 1999 independence vote sparked a wave of violence that left it in ruins.

Teixeira estimated the Bayu-Undan liquefied natural gas (LNG) project alone could generate $100 million a year over two decades for the newly independent country from 2005.

Production of natural gas liquids at the field, operated by the third-largest U.S. oil firm, ConocoPhillips (COP), began earlier this month.

But many are sceptical of a quick solution on maritime boundaries and say the issue is as much about carving up revenues as drawing sea borders.

"Anyone who thinks this round of talks will create a breakthrough has got rocks in their head," said an international expert in oil and gas negotiations, who declined to be named.

The meeting is scheduled to be held in East Timor's capital, Dili, on April 19-23.

The other vital resource for East Timor in the disputed area is the A$6.6 billion Greater Sunrise project operated by Australian firm Woodside Petroleum (WPL).

The joint venture is still assessing whether to process the LNG at sea in a world-first floating facility, or bring it onshore to northern Australia.

East Timor, however, is lobbying hard to have a processing plant on its soil.

New oil and gas regions
Timor Sea: messy politics

Petroleum Economist, March 2004
By James Gavin

An increasingly bitter disagreement between Australia and East Timor over exploration rights dominates the headlines, but a couple of major gas projects are starting to hit their stride.

IT IS FIVE YEARS since East Timor gained independence from Indonesia, and oil and gas prospects in the Timor Sea are still mired in messy politics. A long-standing dispute with Australia over territorial rights to offshore oil and gas shows no signs of nearing resolution, to Dili’s increasing resentment.

In March 2003, the countries reached a partial agreement on the maritime borders demarcating a Joint Petroleum Development Area (JPDA). At first sight, the Timor Gap agreement seemed suited to East Timor, splitting royalties from the 62,000 square km concession area – which includes the Bayu-Undan fields, Elang, Kakatua, sections of Greater Sunrise and Kuda-Tasi and Jahal – on a 90:10 basis in its favour.

Maritime border disputed

But the two sides have still not agreed an exact demarcation of the maritime border and Dili has strongly disputed the legal frame-work of the JPDA. In particular, East Timor has criticised tough Australian negotiating tactics over disputed claims to gas reserves, which it says will force it to accept that long-promised revenues are unlikely to materialise for several more years at the earliest.

Greater Sunrise’s 7.68 trillion cubic feet (cf) of gas reserves are closer to East Timor than Australia, but they were granted to Australia under a treaty signed in 1989 with Indonesia – whose illegal 24-year occupation of the territory ended in 1999. The JPDA was designed to redress a perceived imbalance in that treaty, but the failure to reach agreement on maritime borders means cash-strapped East Timor is unable to exploit its Timor Sea reserves.

Australia stands accused of stalling on a final treaty in an attempt to maximise its revenues from the Greater Sunrise gasfield before depletion, at which point Timor would have received less than 20% of the revenues.

The two countries have spent the past year engaged in a highly public spat. In December, East Timor’s foreign minister, Jose Ramos Horta, called on Australia to expedite negotiations on the border, arguing it “had an international legal obligation to exercise restraint in regard to the exploitation of resources in disputed maritime areas”. He also said developers should refrain from new actions that would complicate the issue of how the resources would be distributed.

Australia, which claims production rights to the Laminaria, Corallina and Buffalo fields – which lie outside the JPDA – on the basis that these lie within its existing maritime boundary, has been accused of “unilaterally” exploiting them. The Timorese prime minister, Mari Alkatiri, has threatened to claim the $1.2bn in royalties that Canberra has drawn from the 50,000 barrels a day (b/d) oilfields operated by Woodside, BHP Billiton, Nexen Petroleum and Royal Dutch/Shell.

East Timor’s preferred solution to the border dispute is to draw a median line equidistant between the countries. Under international law, each side can claim boundaries 200 nautical miles from their coasts, but the distance between the countries at their nearest point is just 130 nautical miles.

Australia argues that its maritime border extends as far as its entire continental shelf and claims the 90:10 production distribution ratio compares favourably with the 50:50 split in the original treaty with Indonesia. And it is ready to tough it out in talks, stead­fastly refusing to offer Dili a timetable for agreeing a permanent boundary. Aware that East Timor urgently needs the revenue from the fields, Australia hopes its strategy of stalling will ultimately reap dividends.

Meanwhile, Canberra is preparing to offer new offshore blocks in the Timor Sea area that are within the maritime boundary claimed by East Timor. In February 2004, it awarded an exploration permit to Methanol Australia, 60 km west of its Tassie Shoal methanol pro­ject. Methanol Australia hopes the permit will supply gas for its Tassie Shoal methanol pro­ject and the Darwin LNG (liquefied natural gas) project. The NT03-3 permit covers 12,070 square km and lies outside the JPDA.

East Timor is looking to develop onshore acreage, although tenders for exploration contracts must wait for the passage of the National Petroleum Act, expected by mid-2004, which will allow East Timor to hold licensing rounds. A number of international players, including Australia’s Woodside, are keen to assess prospects, but must wait for the results of an independent survey commis­sioned by the government. PetroChina is due to present the results of an onshore mapping project in February, which will be followed by the appointment of a seismic contractor.

But the main project action remains firmly focused on the JPDA and wider Timor Sea area. Fortuitously for developers, East Timor’s revenue concerns are not impinging on pro­ject activity. January saw the flow of first gas from ConocoPhillips’ Bayu-Undan gas and liquids field. The two wells opened for produc­tion as part of commissioning and start-up for Wellhead Platform 1. Under the $1.8bn first stage of the project, Bayu-Undan is on schedule for first liquids production in April 2004. Full liquids output of 115,000 b/d of condensate is set for the end of the year.

The second stage, LNG development, costed at $1.5bn, will involve piping the residual gas to Darwin, in Australia’s Northern Territory, where it will be processed for export to Japan from first-half 2006. Tokyo Electric Power and Tokyo Gas will lift 3m tonnes a year of LNG over a 17-year period.

Bayu-Undan is estimated to hold 3.4 trillion cf of gas and 400m barrels of liquids. Full production of 1.1bn cf/d is expected during the third quarter. ConocoPhillips says most of its 2004 exploration and production spend of $1.3bn will go towards continued Bayu-Undan development, along with projects in Indonesia and China.

Greater Sunrise options

Dili is also sounding out the operators of the Greater Sunrise project to build an LNG terminal in East Timor – some 150 km from the fields, compared with the 500 km the gas must be piped to Darwin. The other option for Greater Sunrise is a floating LNG plant – favoured by three of the project partners Woodside, Shell and Japan’s Osaka Gas. But ConocoPhillips, which has a 30% interest in the fields, favours the link to its Darwin LNG plant, which is under construction.

Greater Sunrise (comprising the Sunrise and Troubador gasfields) is subject to a unitisation agreement between Australia and East Timor, under which 79.9% of the deposit – the part lying outside the JPDA – is attributed to Australia.

The difficult economics involved in off-shore developments has thwarted one Timor Sea oilfield development. Last month, Woodside said it would drop a proposed oil-field development at Kuda-Tasi and Jahal after unsatisfactory drilling results. First oil had been expected before year-end.

The project was deemed uneconomic after plans for a floating production, storage and offloading vessel to develop the field were shelved, and the failure to reach an agreement on a tie-back to a floating production unit at the Laminaria/Corallina oilfield.

Editorial: A Fair Deal for East Timor

The Age (Melbourne), March 30, 2004

If Australia and East Timor cannot agree on a maritime boundary, let the court decide.

East Timor's viability as a nation depends in large part upon its ability to exploit limited resources.

Despite massive international aid efforts since the departing Indonesian military and anti-independence militias laid waste to 70 per cent of the island's infrastructure, the East Timorese economy remains fragile.

Its limited agricultural base aside, the one bright spot on the economic horizon for the world's newest nation lies deep beneath the Timor Sea. The oil and natural gas reserves of the surrounding waters represent the future prosperity of this tiny country.

Those resources also represent the point at which Australian and East Timorese interests collide. Australia is well aware of the worth of the oil and gas riches in the Timor Sea.

It should not be forgotten that when Australia recognised Indonesian sovereignty over East Timor, it took the dubious course of entering into an agreement to develop a "zone of co-operation" with Indonesia for the exploitation of those resources, without any reference to the wishes of the East Timorese people.

A final delineation of the maritime boundary between Australia and East Timor will determine which nation controls those assets.

Dili believes this would be in its interests and claims Canberra is not moving quickly enough to complete the boundary, while in the meantime continuing to exploit the oil reserves to Australia's profit. Prime Minister Mari Alkatiri says international law demands that Australia "exercise restraint in respect of the exploitation of disputed maritime areas".

East Timor has threatened to take the matter before the International Court of Justice, despite Australia's position that it will not submit to the court's jurisdiction on matters of disputed maritime boundaries.

Australia has a moral obligation to continue to deal with its neighbour both fairly and transparently. If there is a genuine dispute that the parties cannot resolve bilaterally - and from the words of Dr Alkatiri that certainly appears to be the case - then it is in Australia's interests as much as East Timor's to have the matter independently arbitrated.

As a bare minimum, legislation currently before the Australian Parliament dealing with the exploitation of oil and gas reserves should be held over until the position is clarified.

If, as Australia claims, it has acted fairly towards its tiny neighbour, then it has nothing to fear from having the matter referred to the international court.

Ultimately, it is in Australia's interests to behave generously towards East Timor. Oil revenues from the Timor Sea for Australia are incidental compared to their importance and value to East Timor.

Yet from both economic and security perspectives, a viable neighbour is far preferable to a vulnerable one trapped in a cycle of poverty and dependence on foreign aid.

David and Goliath battle it out over East Timor's sea of riches;
Two nations - one rich, one poor - argue over billions of dollars in oil and gas

South China Morning Post, April 1, 2004
By Peter Kammerer Foreign Editor

The tussle between East Timor and Australia for oil and gas reserves under the Timor Sea is becoming markedly vocal and tactical.

For East Timor, as poor as it is new, the potential revenues represent the difference between poverty and prosperity for its 1 million people. Australia, the wealthiest nation in the region with 20 times the population, officially looks on the issue as a matter of sovereignty.

But East Timor activists accuse Australia of arrogance for its tough stand in negotiations on the disputed maritime boundary, under which the reserves - particularly in the Greater Sunrise field - are located.

They allege its withdrawal in March 2002 - two months before East Timor's independence from Indonesia - from the International Court of Justice and the International Tribunal for the Law of the Sea was a ploy to prevent an independent ruling on the dispute.

Once the boundary dispute has been resolved, the Timor Sea Treaty, which came into force a year ago, ensures East Timor will get 90 per cent of revenues and Australia the remainder.

East Timor's Prime Minister Mari Alkatiri claimed yesterday that Australia had broken international law on Monday by releasing for auction further oil and gas exploration acreage in the contested area. He said the move was contrary to the Greater Sunrise unitisation agreement, approved on the same day by the Australian parliament, but yet to be backed by East Timor.

"International law requires that Australia exercise restraint in disputed maritime areas," Mr Alkatiri said. "Australia's unilateral exploitation of our resources in the Timor Sea is inconsistent with the spirit and the letter of the Greater Sunrise International Unitisation Agreement."

The treaty gives Australia rights to 82 per cent of the field's revenues until the two countries can decide where their boundary lies. Oil experts estimate the deposits are worth US$ 5 billion.

Mr Alkatiri said the exploration acreage was about twice as close to East Timor as it was to Australia and on his country's side of the median line between the nations.

He claimed the bill passed on Monday explicitly stated that the part of the field to be developed lay in an area claimed by both countries and that Australia should refrain from unilateral exploitation in disputed areas.

Australia awarded exploration licences in the disputed area in February and last April. Mr Alkatiri claimed the country had derived more than US$ 1.5 billion in tax revenue from the Laminaria-Corallina fields, also in the contested area and in the western part of the Timor Sea.

He said East Timor had proposed monthly meetings to end the border dispute, but Australia had said it could meet only twice a year.

There was no reaction from Australia to the allegations.

But Australian international law expert Gillian Triggs said the country was not acting out of financial greed. Australia was being careful over discussions with East Timor so as not to jeopardise its sovereignty, she said, adding that under international law and on the basis of much of the case law, Australia had a claim to its continental shelf.

Australia's greedy oil deals in E Timor
Canberra's insistence on a bilateral resolution to sea border issue is not fair

Editorial, The Nation (Thailand), April 1, 2004

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 Alkatiri, 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? 

Bush's Sheriff

by John Pilger, New Statesman. April 01, 2004

Ten years ago, I filmed secretly in East Timor, a small country in south-east Asia whose brutal occupation was largely unknown to the outside world. The title of the film, Death of a Nation, was hardly an exaggeration. The Suharto military dictatorship in Indonesia, having invaded the Portuguese colony in 1975, caused the death of "at least" 200,000 East Timorese, according to a study by the foreign affairs committee of the Australian parliament. This represented a third of the population; proportionally, it was an act of genocide greater than the Jewish Holocaust. The governments of the United States, Britain and Australia were not only forewarned, but supported and equipped the invaders. Henry Kissinger personally gave General Suharto the go-ahead.

In East Timor, I found a landscape of graves and black crosses that spilled down valleys and crowded the eye, evidence that whole communities had been slaughtered by the Indonesian army. In a handwritten record compiled by a priest, 287 names were listed, including those of entire extended families, from the elderly to infants such as "Domingo Gomes, aged two . . . shot". For me, the most telling and shocking sequence in Death of a Nation had been filmed five years earlier on board an Australian air force plane. A party was in progress; champagne corks popped and there was much false laughter as two fawning men in suits toasted each other. One was Gareth Evans, then Australia's foreign minister. The other was Ali Alatas, his Indonesian equivalent and Suharto's mouthpiece. "This is an historically unique moment," waffled Evans, "that is truly, uniquely historical." Flying over the Timor Sea, they had just signed the Timor Gap Treaty, which allowed Australian and other foreign companies to exploit the seabed belonging to the land of black crosses and to their victims. The ultimate prize, as Evans put it, could be "zillions" of dollars.

From the day Suharto's paratroopers invaded, Australian governments eyed East Timor's natural wealth. Richard Woolcott, the Australian ambassador in Jakarta in 1975, who, like the British and American ambassadors, had been tipped off about the invasion, recommended that Canberra adopt "a pragmatic rather than a principled stand [which] is what national foreign policy is all about". Australia, he urged, might "more readily" negotiate a carve-up of the Timor Gap with the Indonesian dictatorship than with the captive East Timorese. With this in mind, he proposed that "we act in a way designed to minimise the public impact in Australia [of the invasion] and show private understanding to the Indonesians". There was not a word of concern for the fate of the Timorese.

The "historically unique" treaty signed by Gareth Evans with a genocidal regime was, wrote Professor Roger Clark, a world authority on international law, "the same as acquiring stuff from a thief. The fact is that [Australia and Indonesia] have neither historical, nor legal, nor moral claim to East Timor and its resources."

For more than 60 years, Australia's relations with its tiny, vulnerable neighbour have been distinguished by enduring betrayal, bullying and greed, the antithesis of the self-adulating Australian myth of "fair go". During the Second World War, more than 40,000 East Timorese were slaughtered by the Japanese for siding with and protecting Australian commandos, after the Australians suddenly withdrew. When, in the 1970s, General Suharto sought Australia's tacit approval of his long-planned invasion and annexation of Portuguese East Timor, he got it; the East Timorese were, it was argued in Canberra, too poor for a "viable" independence - forget the "zillions" of dollars in potential oil revenue.

In 1985, Australia became the first western country formally to recognise Indonesia's bloody conquest, which Evans infamously described as "irreversible". On a visit to Jakarta in February 1991 to finalise the Timor Gap Treaty, he said: "The truth of the matter is that the human rights situation [in East Timor] has, in our judgement, conspicuously improved, particularly under the present military arrangements." Nine months later, the Indonesian military killed or wounded more than 450 young mourners at the Santa Cruz cemetery in Dili, the capital. Evans described this as "an aberration, not an act of state policy". Soon after the massacre, the joint Australian-Indonesian board overseeing implementation of the treaty awarded 11 contracts to Australian oil and gas companies. Asked about the international principle of not recognising and exploiting territory taken by force, Evans said, "The world is a pretty unfair place."

Little has changed for the present Australian government of John Howard, whom George W Bush recently appointed America's "sheriff" in the South Pacific. This would have been an embarrassment to most prime ministers, but not to Howard. Indeed, Sheriff Howard and his perilously gormless deputy, Alexander Downer, the foreign minister, are on a "mission". It is to take charge of the "failed states" that make up what Washington calls an "arc of instability" in the Pacific region. Last year, Australian troops were despatched to the Solomon Islands: to "police the chaos", meaning to secure the country for Australian business. Something similar is under way in Papua New Guinea, where a regime of privatisation, deregulation and "free trade" is being directed by a team from Australia.

In Indonesia, the military has quietly regained the power it enjoyed under Suharto, and members of its bloodthirsty special forces unit, known as Kopassus, are once again being trained in Australia. These uniformed criminals (armed and equipped by Britain) are currently terrorising the people of the provinces of Aceh and West Papua, just as they tortured and murdered thousands in East Timor.

In 1999, when the East Timorese people demonstrated extraordinary bravery by voting overwhelmingly for independence in a UN plebiscite, they were betrayed once again by Australia. Both Howard and Downer had been told by Australian intelligence that the Indonesian military were planning to sabotage the vote with attacks using a murderous "militia". In Canberra, the sheriff and his deputy denied knowledge and did nothing. It was only when tens of thousands of ordinary Australians, long shamed by their country's brutal duplicity in East Timor, protested spontaneously in cities and towns across Australia, that the government agreed to lead a UN force enforcing the result of the plebiscite.

The self-congratulations for this "proud stand for peace", as Howard called it, apparently with a straight face, also served to cover his government's continuing theft of most of East Timor's seabed resources. Since 1999, Australia has received more than a billion dollars in taxes on oil extracted from a field fully situated in East Timorese territory; East Timor has received nothing from the same field.

According to international law, the sea boundary between countries close to each other is the median line, or halfway point. The Howard government rejects this, demanding that the old border, agreed illegally with Suharto, should apply. In keeping with the duties and ethics of a Bush-appointed sheriff, Howard has refused to recognise the jurisdiction of both the International Court of Justice and the Tribunal for the Law of the Sea. Instead, Australia today occupies the East Timorese seabed and is poised to rob the tiny nation of roughly $30bn over the next three decades. With the Australian senate's recent approval of a new treaty, Howard's and Downer's tactic is to pressure the East Timorese on the seabed issue by constantly threatening to pull out of negotiations, thus denying a stricken people money they urgently need for reconstruction. In this way, East Timor is proclaimed a "failed state" and becomes dependent on and controlled by Canberra.

Howard is doing much the same in Iraq. Of the token hangers-on who make up the Anglo-American "coalition of the willing", Spain, Honduras, Poland and the Netherlands are about to recall their troops. Only Australia remains true to the uber-sheriff in Washington. This begs the question: when will decent Australians again make their voices heard?

http://www.johnpilger.com

The Timor Gap

SBS-TV Dateline, aired April 21, 2004
The following is a transcript of a television program.

Now to East Timor, where for the last three days, teams from there and Australia have been in bitter negotiations over where our sea boundaries lie and who will control the oil and gas royalties within them, worth an estimated $30 billion. This has been an ongoing issue between the two countries, which to date has been handled reasonably amicably. But now there seems to have been a radical change of mood with anti-Australian sentiment rising by the day. Mark Davis spent the last few days in the capital, Dili, amongst the protesters, politicians and negotiators battling over the spoils.

REPORTER: MARK DAVIS

It's crunch time for East Timor, foreign aid is rapidly drying up and next month the UN will finally withdraw its security forces. President Xanana Gusmao knows better than most the crisis East Timor will soon be facing. For Gusmao this school in the hills above Dili is just one corner of the looming problem. There'll be barely enough to pay the teachers and virtually nothing to fix the still ruined classrooms.

XANANA GUSMAO, EAST TIMOR PRESIDENT (Translation): Today we are still begging. They give us money with a smile and say "Take it", We have no money.

There's a new bitterness here. The dream that East Timor's natural resources would rescue the countries as the aid disappeared is rapidly fading.

XANANA GUSMAO (Translation): You might have heard that we have oil, kerosene and gas in our sea that people want to steal. They are the resources that can help us to fix everything.

While various deals have been signed with Australia regarding the oilfields that lie between the two countries, Xanana has publicly barely uttered a critical word. Until very recently his Prime Minister has presented those deals to the public as not ideal, but at least reasonable. Xanana's venom on this day, a couple of weeks ago, was a bolt out of the blue.

XANANA GUSMAO (Translation): Australia is a rich country. A rich country which recognised our past integration. After that, Ali Alatas and Gareth Evans flew over East Timor drinking champagne and signing the agreement to steal our oil.

PROTESTER (Translation): You don't understand what I'm saying. This petrol zone is mine and that is yours. Understand?

For many of the activists here the Australians have always been plotting to steal East Timor's oil. The dramatic difference now is that their President and Prime Minister are joining in the chorus.

PROTESTER: Australia is cheating.

The Timor Sea Treaty signed between Australia and the new East Timorese Government in 1992 was condemned at the time by many of the organisers here. The treaty was seen as selling out East Timor's full maritime boundaries for a short-sighted gain. Although not said today, those deals were negotiated by Prime Minister Mari Alkatiri.

MARK DAVIS: Was that in retrospect a mistake?

MARI ALKATIRI, EAST TIMOR PRIME MINISTER: Yeah, because this is temporary agreement. That's why we can sign it before the maritime boundaries. If this only was a real show of goodwill and good faith from our side.

MARK DAVIS: Do you believe that good faith has not been returned, was to your expectation that Australia would have progressed on these other fronts.

MARI ALKATIRI: In the beginning it was various starting points in the negotiations. We knew we had one, two, three years to go. I still believe that Australia will realise that there's no way than to submit to the rule of law.

Sorting out a maritime boundary between the two nations was never going to be easy or fast. In 1972 Australia settled on a sea border with Indonesia. Portugal, which then controlled East Timor was not a party and hence the so-called Timor gap in the border. After the Indonesian invasion, Australia and Indonesia agreed, not on formal borders, but on a joint exploitation zone splitting profits 50/50.

After independence it was essentially this zone that Australia and East Timor negotiated over. It was agreed that 90% of oil profits would go to East Timor, still without defining any maritime border over an area much less than what East Timor claims is its rightful territory. Australia retained it's oil field west of the joint development zone and most of its Sunrise field to the east, 80% of it. Mario Carrascalão was a senior opposition figure who opposed East Timor signing the treaty.

MARIO CARRASCALÃO: Demonstrate against the government, second against the parliament and then in the third place against Australia.

MARK DAVIS: The Government in East Timor, demonstrate against this government?

MARIO CARRASCALÃO: Yes.

MARK DAVIS: Because why, because it was their deal.

MARIO CARRASCALÃO: Because they are the one that brought - signed the agreement and brought this through the parliament, and the parliament ratified it. And now, why should we blame Australia?

MARK DAVIS: So in your opinion the issue of the maritime boundary should have been settled before there was any discussion about sharing the oil resources.

MARIO CARRASCALÃO: No doubt about that and I also am aware that it was not so difficult but in order to have a good relationship with any other country here in the region, you have to take and give. Everybody had to realise that, that you cannot just force the position to be accepted by other sides. I believe we can reach a better agreement, a fair agreement to both sides.

Whether it was a good deal or a bad deal it was certainly Mari Alkatiri’s deal, and for the Australian negotiators at this week's maritime boundary talks, it's a deal that the Prime Minister is now trying to get out of. The dollars have started to flow to East Timor from the joint development area. But, a second agreement covering Australia's principle area of interest, Greater Sunrise, signed by Alkatiri last year has not been presented to his parliament for ratification. A frustrating blockage for Australia, which has already begun negotiating with companies to develop the field.

MARK DAVIS: Is this why the relationship has deteriorated quite recently because Australia is issuing licences for Greater Sunrise.

MARI ALKATIRI: I think the situation is only between the Prime Minister, Mari Alkatiri and the Government of Australia, not between the two people.

MARK DAVIS: I'm sure it's not. Both people have interest in what the boundaries are, both people's have interest in the proceeds of these fields. At that meeting, November 2002, you - Mr Downer did put very firmly that as far as he was concerned there was an agreement on Greater Sunrise. You appeared to agree with that, although you were firm on maritime borders, you didn't want to question the 80/20 split on Greater Sunrise, pending to Maritime boundary discussions.

But it's unlikely there'll be any agreements coming out of this week's maritime boundary discussions. At Alkatiri's side is Peter Galbraith his constant advisor through four years of oil and border negotiations. Their strategy has been a high-risk one, do the best deal possibly on the joint development area and leave the bigger fight over borders and rich oilfields until later in an international court if necessary.

MARK DAVIS: Is that part of the strategy to get enough assets to play a tougher hand later?

PETER GALBRAITH: Absolutely. The idea was to pocket as much of the revenues as possible and there are to leave East Timor in a position where it had a stronger hand for future negotiations about areas outside the JPDA, Buffalo, Corallina and Laminaria on the west, and Sunrise on the east.

Galbraith's and Alkatiri's strategy of dealing with broader boundaries later took a turn for the worse when Australia withdrew itself from the jurisdiction of the International court of justice.

PETER GALBRAITH: The fact is you never withdraw from the jurisdiction of the court unless you think your case is weak.

MARK DAVIS: Would you ever anticipate that Australia would withdraw from the subsection International Court of Justice jurisdiction.

PETER GALBRAITH: The Australians from time to time in the negotiations under the Timor Sea Treaty, said that they might do so, frankly I didn't believe it because I had an imagine of Australia as one of those countries like the Scandinavian countries that was very law-abiding, believing in the United Nations a kind of good Government country in the world and I thought what they did was completely out of character.

Relationships here have soured dramatically in recent months and will probably only get worse today as Alkatiri announces that East Timor will legally challenge any company that deals with Australia in the Greater Sunrise field.

MARK DAVIS: Any response?
Very strong opening sir, do you imagine there's much room for discussion after that speech.

MARI ALKATIRI: The room is too big.

MARK DAVIS: Too big? Yeah. There was a stunned silence, do you imagine there will be much discussion now?

MARI ALKATIRI: It's better to be transparent, to be clear, to be straight forward. This is the only way to convince the other side that we are here to negotiate, but in good faith.

MARK DAVIS: Is this a new stage in the discussions to be so frank, so forward.

MARI ALKATIRI: This is my style.

MARK DAVIS: Now that Australia has withdrawn from the International Court of Justice, what strategy do you have, what leverage do you have to persuade Australia to make any changes whatsoever to the agreement.

MARI ALKATIRI: Of course as leading figure in all this negotiation from East Timor's side I have my strategy. But, unfortunately I cannot disclose it.

Politics in East Timor is almost a one-party affair. Alkatiri's group enjoy an overwhelming majority and opposition voices can be lonely ones.

POLITICIAN, (Translation): Now everyone is calling Australia a thief. Australians are stealing oil, they’re thieves, but we’re not.

The debate on the maritime boundaries and the previous treaties that have been signed has become even more complicated by a bribery scandal that broke in March. In a statement of claim filed in the US, Oceanic Explorations which believes it holds an old title to the Timor Sea claims that Alkatiri received $2.5 million from ConocoPhillips to secure leases in the joint development area agreed to by East Timor and Australia. ConocoPhillips and Alkatiri both regard these allegations as baseless.

MARK DAVIS: These negotiations are now entering the most important stage for you being the maritime boundaries that are somewhat overshadowed by another controversy, which is another oil company has accused you of accepting bribes or you have been influenced to sign these papers.

MARI ALKATIRI: I already make clear my position, I denied everything and I'm not in a position to challenge them to come with facts. Unfortunately, I was not presented or defended in court. Very unfortunate. I would prefer them to accuse me and put me in a place to defend it to. It's important that I - they insist that it was made intentionally. Their lawyer made it intentionally and was based on an America laws. I can't do too much to attack them. I've been watching them through my lawyers, trying to get some opportunity to react. Now I challenge them publicly to come with facts and try to accuse me in the court or everywhere.

The Oceanic claim is not convincing in itself but it does provide some detail. It gives the names of two bank branches in Darwin and bank account numbers through which they claim the money was paid.

MARK DAVIS: It's a terrible slander if it's not true. There is a reasonable amount of information, bank accounts, payment details, dates.

MARI ALKATIRI: You have a bank account, you pay for your key to the school with cheques, or to a supermarket and you use cheques to pay something. Of course the bank account is open. The numbers remain open. But, those amounts are for money that were really talking about, is completely false. Please come with these facts. I know quite well how much money I had, maximum, in this bank account. I never had more than a few thousand, very few thousand.

Mario Carrascalão's son works for Petrotimor a subsidiary of Oceanic, but says there's no family interest in either company. He knows nothing of the charges but believes the allegations have affected the Government's recent behaviour.

MARK DAVIS: When did this talk about Australia being a thief and stealing, when did this start.

MARIO CARRASCALÃO: It is just, perhaps, one month ago, we start to see in the papers a statement made by Dr Mari Alkatiri saying that, they say that the Australian Government, always mention the Australian Government because Alkatiri try to make a difference between the Australian Government and people, they used it to make a statement. This is about a month ago. It's quite recent. Almost two years, they considered us the opposition, as the one who tried to sabotage everything in East Timor, by voting against this also. The country needs money.

MARK DAVIS: Why is it starting now, why is this quite aggressive talk about Australia starting now. Has anything changed?

MARIO CARRASCALÃO: I do not know what really happened, but if you - even because the allegations, some bribes, it was after that. This demonstration perhaps is a way, also to get the attention of the people from something. Something must be behind that. Everybody knows that the credibility of this Government, it's losing its credibility. Last meeting with the country in East Timor there was some problem, we realise that, so perhaps they wanted to show that they are carrying, taking care of the future of our people. Perhaps this is to create a new face, new image, who knows.

MARK DAVIS: Or a new enemy.

The Oceanic claim also makes an explosive accusation about the Australian embassy in East Timor, they claim that payments to many Timorese politicians were made inside the Australian embassy in Dili to relinquish their oil rights. The Australian Department of Foreign Affairs categorically denies the claim. The allegation concerning the Australian embassy did not include Alkatiri at all but it did include other parliamentary members.

MARK DAVIS: One of the accusations in those court documents is that the Australian embassy was involved in handing over...

MARI ALKATIRI: Do you believe?

MARK DAVIS: It's not for me. It sounds credible there's individual names. It's true it is a scandal of massive proportions it involves the Australian Government, embassy, politicians in East Timor...

MARI ALKATIRI: All of it is rubbish.

MARK DAVIS: It would negate all negotiations and agreements that had gone on. Have you asked the Australian Government for their response to those allegations, have you asked them for any information regarding those claims?

MARI ALKATIRI: No, not at all because I didn't believe. Because if they were really able to say that I received bribes, an amount of $2.5 million...

MARK DAVIS: Leaving that on the side.

MARI ALKATIRI: The same line, I know it's not true it's false. It's frivolous. Why could I believe other kind of allegations?

Oil, like it seems to everywhere, is building clouds of suspicion and distrust. With billions of dollars at stake, these now strains between Australia and East Timor aren't likely to be getting any better any time soon.

Rich Man, Poor Man

Transcript of ABC Television Four Corners program
Broadcast 10 May 2004

Four Corners investigates the increasingly rancorous fight between Australia and East Timor over the multi-billion dollar oil and gas bonanza that lies beneath the waters dividing them.

JONATHAN HOLMES, REPORTER: Three weeks ago, the Prime Minister of the Democratic Republic of Timor-Leste, Dr Mari Alkatiri, swept into the lobby of Dili's best hotel. He'd come to open negotiations to establish a permanent maritime border between his nation, the smallest and poorest in the region, and his richest and most powerful neighbour.

East Timor wants the matter settled within three years. Australia has said it might take 20. It's a David and Goliath contest, and Mari Alkatiri had brought a sling full of verbal stones to hurl at his opponents.

DR MARI ALKATIRI, PRIME MINISTER OF TIMOR-LESTE (ADDRESSING CONFERENCE): For us, a 20-year negotiation is not an option. Timor-Leste loses $1 million a day due to Australia's unlawful exploitation of resources in the disputed area. Timor-Leste cannot be deprived of its rights or territory because of a crime.

JONATHAN HOLMES: To open negotiations by publicly accusing your opponents of profiteering from a crime is, by diplomatic standards, like chucking a grenade. The Australian team returned fire with the curtest handshakes in their armoury. Back in Australia, their boss would be even less amused.

ALEXANDER DOWNER, FOREIGN MINISTER: I think they've made a very big mistake thinking that the best way to handle this negotiation is trying to shame Australia, is mounting abuse on our country, um...accusing us of being bullying and rich and so on, when you consider all we've done for East Timor.

JONATHAN HOLMES: But Mari Alkatiri is unapologetic. He claims his country is being cheated, and he's going to go on saying so - to his own people, to Australia, and to the world.

DR MARI ALKATIRI: I'm here to defend the interests of my people. Of course, there are many ways to do it, but I think that, uh, for a small country, a poor country to be listened to, uh...we need to voice loudly our voice, and that's what I'm trying to do.

JONATHAN HOLMES: Meanwhile, the Australian Embassy has been besieged by angry demonstrators.

PROTESTER (TRANSLATION): We know we have profitable resources, but we know that you are exploiting our oil and stealing it.

JONATHAN HOLMES: Four years ago, these people hailed Australia as their protector. Now they say that they'll be forced to play the beggar unless Australia stops behaving like a thief.

Just over an hour's flight to the south, the gleaming little city of Darwin dreams of future greatness. Across the harbour, in what was pristine wilderness just a few months ago, they're building a plant to liquefy natural gas for export to Japan.

CLARE MARTIN, NORTHERN TERRITORY CHIEF MINISTER: Four out of nine levels of the LNG tank has been constructed, and, uh, it really...in many ways it could double up a sports stadium. I don't know how it compares with Colonial, but it's big.

JONATHAN HOLMES: The gas will arrive through a seabed pipeline from a giant gas field deep beneath the Timor Sea, 500km north-west of Darwin. The Bayu-Undan field lies substantially closer to East Timor than it does to Australia. But just south of Timor lies the Timor Trough, 3km deep in places. Far easier, the oilmen claim, to run the pipeline across shallow seas to Darwin and its First World infrastructure. And far better for Australia too.

BRUCE FADELLI, PRESIDENT, NT CHAMBER OF COMMERCE: So far there's been a large influx in construction into the Northern Territory. That's about to gear up even further in June with the start of the laying of the pipeline, so it's been a welcome boost to the construction industry.

JONATHAN HOLMES: But the potential bonanza for Darwin lies in a vast, still undeveloped gas field called Greater Sunrise - three times the size of Bayu-Undan, and located still closer to East Timor. Territorians are fervently hoping that that gas will be piped to Darwin too.

BRUCE FADELLI: It's got the potential to create 80,000 jobs Australia wide - 20,000 in the Northern Territory - and the tax revenue benefit from all that investment is in the order of $22 billion over the 20-year life of the project.

JONATHAN HOLMES: The Timor Sea could transform Darwin into an industrial centre, and the Territory into a State. The town of Suai, just across the Timor Sea from Darwin, has no such grand ambitions. This is a different world.

On the whole length of East Timor's south coast, there is not one natural harbour. The fishermen of Suai have to use canoes that are light enough to come in with the surf. These are treacherous waters. The fishermen never travel far from the beach. Their catch is correspondingly modest. Their incomes are tiny, their horizons limited.

You have no thoughts about the oil and the gas out there in the sea there, about who it belongs to?

FISHERMAN (TRANSLATION): I'm sorry, we don't know these things. We don't know who it belongs to. But you can talk to us about fishing.

JONATHAN HOLMES: The women of Suai Loro take a still more modest share of the riches of the Timor Sea. Every morning they walk a kilometre from the village to collect water from the sea. And then, laboriously, they carry it back. Even the fresh water is brackish here. It's hard to eke a living from the salt-laden soil. So the women make their living from salt instead. If you earn a dollar a day in East Timor, you're comparatively rich. These women make much less.

It's taken hours to gather enough firewood for the job. It will take hours more for the water to boil away, leaving a detritus of sea salt. Early next morning in Suai market up on the hill the salt can be sold, or more likely bartered for a handful of rice or a parcel of greens.

KERYN CLARK, OXFAM COMMUNITY AID ABROAD: East Timor is one of the poorest countries in the world. It ranks as the poorest in Asia. Very high levels of maternal mortality, a high level of infant mortality, really poor nutritional practices, very poor food security. So, I think in terms of where I've worked, with often being in-conflict countries, I think really it does compare, unfortunately, with those countries such as Angola, Mozambique.

JONATHAN HOLMES: East Timor, of course, is not in conflict now. But for 24 years it was - until the final paroxysm in September 1999.

(FOOTAGE OF BURNT-OUT, SEMI-DEMOLISHED BUILDINGS)

This is how the marketplace of Suai looked after the militia and the Indonesian military had finished with it. By the time the INTERFET peacekeepers from Australia and New Zealand arrived in Suai, the culprits had fled into West Timor. The young men who'd been hiding in the hills filtered back into the town to greet their new protectors. Then they went to the ruins of the church, where their wives, their children and their old people had sought the protection of the priests.

(MEN WAIL IN GRIEF)

Eyewitnesses say the militia used machetes to hack down the priests. The military tossed hand grenades into the church and used machine guns on those who ran out. The fleeing militia trucked corpses and survivors alike over the border to West Timor. Not all have returned. So no-one really knows how many were killed in Suai, but certainly hundreds.

The church has been repaired, the trauma has not and nor has much of the devastation.

KERYN CLARK: Many buildings haven't been rebuilt. There was also massive destruction of people's own assets, so their, um...for example, if they had ploughs or tools that they were working the land with, they've...they've gone. They lost a lot of their animals. They just really lost everything.

JONATHAN HOLMES: But at least East Timor did gain the independence it had fought for so stubbornly for 24 years. With the flags and fireworks two years ago came heartfelt thanks to its neighbour across the Timor Sea.

JOSE RAMOS-HORTA (ARCHIVAL FOOTAGE): John Howard, you are a friend of East Timor. Your support to our small nation is invaluable and we are delighted to welcome you among us tonight.

JOHN HOWARD (ARCHIVAL FOOTAGE): This is a very proud day for Australia but, more importantly, I know it is a very proud day for all of the people of East Timor. You deserve every moment of that warmth and pride.

ANGRY PROTESTER (TRANSLATION): We'll scream with all our strength, together as East Timorese. We will never be slaves again. Never again, never again! Long live the people of East Timor!

JONATHAN HOLMES: But now, in many Timorese eyes, Australia has been transformed from saviour to ogre. The argument is ultimately about oil and gas and money. But it's rooted in history and geography and the law of the sea. The Timorese believe it's crucial to their fledgling nation.

XANANA GUSMAO, PRESIDENT OF TIMOR-LESTE (TRANSLATION): It is a question of life or death, a question of being continually poor, continually begging, or to be self-sufficient.

JONATHAN HOLMES: To find the origins of the dispute, we must go back more than 30 years to when the Portuguese still ruled in Dili. Coup leader, General Suharto, was still consolidating his power in Jakarta. And Australia had become aware that beneath the seabed to its north might lie enormous wealth in oil and gas. In the late '60s, Australia and Indonesia began negotiating a permanent seabed boundary.

PROFESSOR GILLIAN TRIGGS, INTERNATIONAL LAW, MELBOURNE UNIVERSITY: The legal background at that time was that the World Court in the North Sea continental shelf cases had just determined that the continental shelf is the natural prolongation of the land territory and that a state has sovereign rights in relation to the continental shelf.

JONATHAN HOLMES: If sea levels were 200 metres lower than they are, the continent of Australia would stretch far to the north. Only the narrow width of the Timor Trough would separate Australia from Timor Island. Australia argued that the Trough marked the edge of its continental shelf and the Indonesians essentially agreed.

DR HASJIM DJALAL, FORMER INDONESIAN AMBASSADOR FOR MARITIME AFFAIRS: But that was the law then, you know. That was the existing Indonesian legislation and that was also, uh, the normal international legislation at that moment, so considering that one, I think it's somewhat fair at that time.

JONATHAN HOLMES: In 1972, the two neighbours agreed on a seabed border that followed the southern edge of the Timor Trough, much closer to Timor than to Australia. Opposite Portuguese East Timor, they left what came to be known as the Timor Gap. The Portuguese declined to negotiate with Australia to close the Gap. The law of the sea, they believed, would soon change in their favour.

But by 1974, after a coup in Lisbon, the Portuguese hold on East Timor was faltering. President Suharto's generals were advising him to annexe East Timor, by force, if necessary. Australia was trying to decide its own policy.

In August 1975, Richard Woolcott, Australia's ambassador in Jakarta, sent a secret cable to the Whitlam Government which contained a now notorious paragraph. Australia, he remarked, had an interest in acquiring as much seabed as possible.

AMBASSADOR RICHARD WOOLCOTT, CABLEGRAM TO CANBERRA, JAKARTA, 17 AUGUST 1975: This could be much more readily negotiated with Indonesia by closing the present gap than with Portugal or independent East Timor. I know I am recommending a pragmatic rather than a principled stand, but that is what national interest and foreign policy is all about.

CHARLES SCHEINER, INSTITUTE FOR RECONSTRUCTION MONITORING ANALYSIS: And that was Australian policy from that day until 24 years later - at tremendous cost of human life in East Timor.

ALEXANDER DOWNER, FOREIGN MINISTER: You can ask Whitlam and Fraser, but I think that is a complete myth. Um, that is, uh, selectively quoting one document. If that were true, then that would be a theme that ran through many documents and many public statements at the time. I don't think that that was something which would have been significantly in their contemplation. I'd be certain of that.

CHARLES SCHEINER (ADDRESSING PROTEST RALLY): The Government of Australia should be ashamed of what they've done.

JONATHAN HOLMES: But if you want proof that oil was the key to Australia's policy, say East Timor's supporters, look no further than the Timor Gap Treaty of 1989.

CHARLES SCHEINER (ADDRESSING PROTEST RALLY): And that treaty was illegal and the whole world knew it was illegal, but Australia and Indonesia wanted to take advantage of the dying and the killing and the suffering and the struggling that was going on East Timor.

JONATHAN HOLMES: The treaty was famously signed by Gareth Evans and Ali Alatas in a plane circling above the Timor Sea. It hadn't proved easy, in the end, to close the Timor Gap. The Indonesians had changed their tune, now arguing that the Timor Trough was a geological irrelevance. For years, neither side would give way.

DR HASJIM DJALAL, FORMER INDONESIAN AMBASSADOR FOR MARITIME AFFAIRS: But in the end we come to the realisation, despite our disagreement in settling this geological quarrel and dispute, we need to do something, and one way of doing it which is justified under international law is to develop a joint development.

JONATHAN HOLMES: The treaty closed the Timor Gap not by drawing a line, but by carving out a joint development zone. Royalties from oil and gas found within it would be split 50/50. The northern border of the zone followed the edge of the Timor Trough. Its southern border marked the halfway point between Australia and East Timor, the so-called 'Median Line'.

ALEXANDER DOWNER: The Australian Government at that time did strike a compromise with the Indonesians, uh, and the Indonesians with Australia, in creating a joint development area and that was a pretty sensible sort of a compromise.

JONATHAN HOLMES: But to Fretilin's fighters in the mountains and its leaders in exile, the treaty was simply a sell-out. The UN had never recognised Indonesia as the lawful ruler of East Timor, but now Australia clearly did.

DR MARI ALKATIRI, PRIME MINISTER OF TIMOR-LESTE: We immediately understood why, uh, at that time, Australia decided to recognise the illegal occupation and they...their reasons are the resources in the Timor Sea.

JONATHAN HOLMES: The treaty gave the green light to serious exploration in the Timor Sea. Quite quickly, the oil companies struck viable deposits. The Corallina and Laminaria fields began production in 1999. Fortunately for Australia, both fields lay just south of its border with Indonesia and just west of the new joint development zone. So the royalties flowed entirely to Australia.

That same year, the East Timorese finally got to decide their own future. Chaos and brutality followed. Australia's leadership of the UN intervention force cost the Australian taxpayer a pretty penny. But the Treasury was already recouping at least some of those costs from the royalties from the Laminaria field, which lay much closer to East Timor than to Australia. Even as its soldiers were winning the gratitude of East Timor by securing its land borders, Australia was pushing hard for the continuation of the Timor Gap Treaty in the Timor Sea. But it found itself then, as it finds itself now, up against a feisty opponent.

PETER GALBRAITH, FORMER UNTAET NEGOTIATOR: It was the desire of the East Timorese and of the United Nations to negotiate about borders and we made that clear.

PETER GALBRAITH (ARCHIVAL FOOTAGE): East Timor is the legal owner of this territory.

JONATHAN HOLMES: Four years ago, Peter Galbraith, at the time an American diplomat, was UN boss Sergio de Mello's choice as the man to take on Australia.

PETER GALBRAITH: He smelt a rat in the Timor Gap Treaty. He thought that the 50/50 split was something that Indonesia had agreed to because it had gotten something in return - namely recognition of the annexation of East Timor - but that under international law, that wouldn't be the right deal for East Timor.

JONATHAN HOLMES: Right from the start, claims Galbraith, he made it clear that East Timor claimed total sovereignty over an area much bigger than the joint development zone.

PETER GALBRAITH: It would be wider to the east and to the west, and it would extend down to the midpoint between the two countries. We showed them maps in October 2000 here in Dili at the start of the first formal round of negotiations on the Timor Sea Treaty. We showed them maps as to what we thought was the correct line and we tried hard to get that line.

JONATHAN HOLMES: But Australian negotiators adamantly refused to discuss permanent borders or anything outside the zone, until there was a sovereign East Timorese government to talk to.

PETER GALBRAITH: And so we had no choice. We had to negotiate about arrangements for this area, which is only part of Timor-Leste's maritime space, to see what kind of deal we could get relating to petroleum in that area alone.

JONATHAN HOLMES: On the face of it, they got a pretty good deal. In July 2001, Mari Alkatiri, representing East Timor's unelected leadership, and Peter Galbraith, for the UN, signed a provisional agreement with Australia which would later form the basis of a new Timor Sea Treaty. Instead of 50%, East Timor would get 90% of tax revenues from oil and gas in the joint development area. The Australians now claim it was a generous concession, which recognised the gross disparity of wealth between the two sides without entirely surrendering Australia's legal position.

ALEXANDER DOWNER, FOREIGN MINISTER: We obviously had a robust negotiation, but in the end we decided that we'd give them 90% of the government revenue on the basis of generosity. I think when a country is generous to another country, to turn around then and accuse them of bad faith is probably not a brilliant negotiating tactic.

JONATHAN HOLMES: The East Timorese, even then, saw it differently.

XANANA GUSMAO, PRESIDENT OF TIMOR-LESTE (TRANSLATION): We can't understand Mr Downer, Mr John Howard saying they are being generous to us, we can't. According to international experts and international law, if the maritime border is the median line between the two coastlines, we are the one being generous with Australia. We are giving 10% of what belongs to us to Australia.

JONATHAN HOLMES: Peter Galbraith, now a private consultant, has been brought back to Dili by Mari Alkatiri, to lead the East Timorese team in its border negotiations. But he's been making the same argument all along, based on the UN Convention on the Law of the Sea, which, since 1982, his team maintains, has changed the law entirely.

PETER GALBRAITH (ADDRESSING MEETING): Nuno will outline the legal case.

DR NUNO ANTUNES, MARITIME LAW ADVISER, TIMOR-LESTE: Equidistance or very slight variations of equidistance - over 60 cases.

If two states lie less than 400 nautical miles apart, they claim, as Australia and East Timor do, the border should be drawn halfway between them, regardless of the shape of the seabed.

PETER GALBRAITH (ADDRESSING MEETING): How many cases support their argument?

DR NUNO ANTUNES: I only know of one, which is the Australian case.

PETER GALBRAITH: In fact the court, in a number of cases, including one between Libya and Malta, explicitly said that where states are less than 400 nautical miles apart, the underlying features are of no relevance whatsoever.

JONATHAN HOLMES: When Australia assigned 90% of the royalties to East Timor back in 2001, says Peter Galbraith, it was because it knew its legal case was fatally weak.

PETER GALBRAITH: They know full well that under international law a court would put the boundary at the median point between the two countries and that would mean that 100% of the resource in the area that was the subject of the Timor Sea Treaty would come to East Timor.

ALEXANDER DOWNER: Well, he would. I mean, he is the negotiator for East Timor. And, I mean, you couldn't call Mr Galbraith an objective analyst or observer in this case.

PROFESSOR GILLIAN TRIGGS: I think Australia has a credible case to put.

JONATHAN HOLMES: Professor Gillian Triggs, who's been a commercial consultant to Timor Sea oil companies and advised regional governments on maritime law, believes Australia's claims still have validity.

PROFESSOR GILLIAN TRIGGS: But I think it also has to be understood that the 1982 convention still privileges those states that have a continental shelf. In other words, if you actually have a shelf, then you're entitled to the full extent of that shelf.

JONATHAN HOLMES: But the Timor Sea Agreement had its advantages for everyone. Crucially, it gave ConocoPhillips and their partners the security to pour billions into the big new gas field at Bayu-Undan, which lies entirely within the joint development area. The LNG plant and the pipeline to Darwin went ahead, bringing jobs and investment in their wake. By 2007, East Timor should be receiving tens of millions of dollars a year in royalties from Bayu-Undan.

But even back in 2001, there were plenty who believed that the secretive negotiations had sold East Timor short. Outsiders were beginning to realise what the negotiators had known all along - that East Timor might well be entitled to total sovereignty, not just over the joint development area, but over tracts of the Timor Sea at either side. The argument is that the lines which define the eastern and western edges of the joint development area are not where they should be. They closely follow lines of equidistance between East Timor and Indonesia. In other words, every point on those lines is an equal distance from the nearest point of land on either side.

But according to Dr Nuno Antunes, a respected maritime law expert who's on East Timor's negotiating team, equidistant lines in this case don't produce a fair result - and international law demands fairness.

DR NUNO ANTUNES: For example, this line here, which is the line to the west of the JPDA, is completely influenced by one single point here, which is on the Indonesian coast, and why? Because if you...if you notice, this point is very close to the boundary and is very prominent, and it has an undue impact that international lawyers identified as, uh, a special circumstance, and that special circumstance should be object of relief - i.e., in a way that would turn the boundary to this side.

JONATHAN HOLMES: Similar though different arguments apply to the eastern border of the joint development area, says Dr Antunes.

DR NUNO ANTUNES: And that would be my opinion why these lines have to be opened to accommodate to a further extent the rights of Timor-Leste.

PROFESSOR GILLIAN TRIGGS, INTERNATIONAL LAW, MELBOURNE UNIVERSITY: On the, um, authorities that I've read, that part of the coastline to the western side of East Timor is a relatively smooth coastline and is one from which an equidistant line can properly be drawn, but there is always another view, and indeed, if so, then that should be discussed and negotiated.

JONATHAN HOLMES: Even a small adjustment to the lateral lines could make a dramatic difference to East Timor. If a maritime boundary were agreed only slightly to the west, East Timor would gain all the royalties from the Laminaria oilfields - perhaps another $300 million a year for the next few years. Far more lucrative is the massive Greater Sunrise field to the east. Based on the current line, 20% of the field lies inside the development area, and 80% under the Australian seabed. The Timor Sea Treaty agrees to divide the royalties accordingly. But shift the line just a few kilometres eastward, and those proportions might be reversed - putting billions of extra dollars East Timor's way over the next 30 years.

JOSE TEIXEIRA, SECRETARY OF STATE FOR INVESTMENT, TIMOR-LESTE: We don't take the view that these resources belong to us in this generation. These resources belong to future generations of Timorese. We are committed to sustainable development of this country. We are committed to a permanent petroleum fund that will utilise these resources in a sustainable manner, not just for us, but for our children, our grandchildren, our grandchildren's children. That's what it's all about.

JONATHAN HOLMES: East Timor's total budget today - for education, for health care, for infrastructure, for security - is around $100 million - that's a good bit less than the Australian Sports Commission's. But even that much money is hard to find. From people as poor as this, there's precious little tax to be raised. International donors' funds are already drying up. The revenue from Bayu-Undan will enable East Timor to subsist for the next 20 years. But $8 or $10 billion extra, wisely used, could theoretically provide financial security and real development for the long term.

XANANA GUSMAO, PRESIDENT OF TIMOR-LESTE (TRANSLATION): We know we can develop this land, give our people a better life, and we feel that this opportunity is being taken away from us. And on top of that, it's something that belongs to us.

ALEXANDER DOWNER, FOREIGN MINISTER: If there is an issue of economic disparity between Australia and East Timor, that should be addressed through aid programs, which it is, um...and other mechanisms. That should not be addressed through shifting boundaries and changing international law.

JONATHAN HOLMES: That professed regard for international law rings somewhat hollow in some ears, because in March 2002, just weeks before East Timor gained its independence, Australia announced it would no longer accept the jurisdiction of the International Court of Justice on matters relating to its maritime borders.

CHARLES SCHEINER, INSTITUTE FOR RECONSTRUCTION MONITORING ANALYSIS: Australia claims to be a democratic country. It claims to be a law-abiding member of the world community. Uh, they've...Australia has withdrawn from the courts. Can I commit a crime, then withdraw from the court and say, "No, the court had no jurisdiction"? My neighbours wouldn't be very happy about that.

ALEXANDER DOWNER: We have said that we would rather negotiate all of our arrangements with other countries, not just with East Timor, but with Indonesia. And remember, we have to think about our other relationships when we think about this relationship. We will determine all of those on a bilateral basis. Not having courts and arbiters and, you know, people over there in the Hague deciding on our relationship.

PETER GALBRAITH, LEAD NEGOTIATOR, TIMOR-LESTE: Australia's decision to withdraw from the International Court of Justice reduced East Timor's opportunities to get a fair maritime boundary in accordance with international law. There's no question about it.

JONATHAN HOLMES: The eve of Independence, in May 2002. Behind the scenes, the new nation's leaders are under huge pressure. The oil companies and the international donors, as well as Australia, were insistent that their first action must be to sign and then ratify the Timor Sea Treaty.

A chorus of voices at home and abroad had been urging the new Prime Minister not to trust Australia, not to sign, to hold out. But he ignored them. A rival oil company has even filed suit in the USA recently, alleging that ConocoPhillips, the operator of Bayu-Undan, paid millions of dollars to Mari Alkatiri for his signature.

DR MARI ALKATIRI: I never received any single coin from anybody.

PETER GALBRAITH: Those kinds of allegations are, um...crap.

JONATHAN HOLMES: Alkatiri says his country desperately needed the money from Bayu-Undan and he believed the Treaty would give him the leverage to pressure Australia into negotiating new permanent borders. When Alexander Downer next came to Dili a year later, it looked as though Alkatiri had succeeded.

DR MARI ALKATIRI (ADDRESSING PRESS CONFERENCE): It's formally recognised already that there are overlapping claims in the zone. That's why we're going to initiate a new process of negotiation on maritime boundaries. We will do it.

ALEXANDER DOWNER (ADDRESSING PRESS CONFERENCE): We have lively negotiations, Australia and East Timor, because we're lively and interesting and entertaining people. So, um...we'll look forward to that. (Laughs)

JONATHAN HOLMES: But Australia's been in no hurry. Two years after independence, the first substantive negotiating session's just been held. At Australia's insistence, six months will pass before the next one. In East Timor, they plant and harvest a rice crop in less time than that. From the paddy fields of Suai to the government in Dili, a sense of impatience and even betrayal has been growing.

MARIA AMARAL (TRANSLATION): That's why I'm asking the Australian Government to resolve the oil issue quickly - so that our young ones will be able to work and look after their younger siblings and we will be able to send our children overseas to study.

JOSE TEIXEIRA, SECRETARY OF STATE FOR INVESTMENT, TIMOR-LESTE: It's become quite clearly evident, particularly in the latter part of last year, that in fact what was always intended to be an interim provisional treaty was in fact going to be used to extract a permanent benefit.

JONATHAN HOLMES: East Timor claims Australia is in flagrant breach of international law by continuing to take the revenue from the oilfields of Laminaria. They're in an area, they say, which even Australia has recognised is in dispute. Yet in a few years, there'll be no oil left.

PETER GALBRAITH: I don't expect the Australians to come to some quick conclusion. I don't expect them to change their position, but I think they should be in the same position as East Timor - that is, nobody gets the resource until we can agree who gets the resource, and that's exactly what has been required under international law.

JONATHAN HOLMES: Even Professor Triggs acknowledges that there's a case for putting the royalties from Laminaria into a trust account until the matter's resolved.

PROFESSOR GILLIAN TRIGGS: It's not for me to tell the Government what to do, but I think that if there is any credibility to the East Timorese argument on shifting that line further to the west, and if that were to be determined on any objective assessment of the law and of the geographical features that you mention, then there's a very good argument for putting the funds in escrow for a period.

JONATHAN HOLMES: But the Government doesn't appear to accept that East Timor's claims have sufficient credibility to justify any such action.

ALEXANDER DOWNER: Well, our response is that we're there in the Australian area, in the Australian maritime area, and that we will treat them - those areas - as such. I do make this point. I don't think that the tactic of strident rhetoric and denunciation of Australia - accusations of greed and ill faith and so on - I don't think that tactic in the end, which is a big surprise to us after all we've done for East Timor, I don't think that is going to prove to be very successful.

JONATHAN HOLMES: It's true that East Timor has been blatantly playing to the gallery. It claims it has no other choice.

DR MARI ALKATIRI (ADDRESSING CONFERENCE): In addition to blocking a judicial resolution of our maritime dispute, Australia is unilaterally taking the resources from the disputed area.

RADIO ANNOUNCER (TRANSLATION): Australia should respect the people and help us for the future. It shouldn't exploit a small, poor country. We are poor because our resources are in the sea. We are not able to exploit them.

JONATHAN HOLMES: But Mari Alkatiri does have one more card, and he's played that too. Investment in the all-important Greater Sunrise field can't go ahead until the East Timorese Parliament ratifies yet another complex treaty governing how it's to be taxed and the revenue divided. Dr Alkatiri's government signed the so-called Unitisation Agreement last year. But in the current sour climate, he claims, even his own party, Fretilin, would vote against ratification.

ALEXANDER DOWNER: I think their idea here is that they think that they'll get more concessions out of us by delaying ratification of the Unitisation Agreement and, um...

JONATHAN HOLMES: Will they?

ALEXANDER DOWNER: I think, um... I think not, no. We've reached agreement on unitisation. The best strategy for them is to build good will.

JONATHAN HOLMES: But Sunrise can't go ahead, can it, unless that's ratified?

ALEXANDER DOWNER: It won't go ahead, no.

JONATHAN HOLMES: When the border negotiations finally began three weeks ago - months later than East Timor would have liked - the diplomatic niceties were observed. But only just. The talks themselves, from East Timor's point of view, were little short of a disaster.

PETER GALBRAITH, LEAD NEGOTIATOR, TIMOR-LESTE: I don't think these negotiations are going any place at all because the Australian side has refused to talk about the key issue, which is - where are the lateral lines? And why is that the key issue? Because that's where the money is. The location of those lines means the difference between $4 billion for East Timor and $12 billion for East Timor. The Australian position is that that is not on the table. That's not a matter that's subject to negotiation.

ALEXANDER DOWNER: We will talk about anything, but we have our own claims, remember? I mean, I know they have their claims. I know they have their claims and I know they have their arguments, and I've seen in the media the fairly strident things that they've had to say, including denouncing my country. I've seen all that and I know all that. But, remember, we have our claims. And we want to stick with our international legal principles, principles that have served us in relation to negotiations with Indonesia, with Papua New Guinea, with New Zealand.

JONATHAN HOLMES: It's Indonesia, as always, that really matters to Australia. The next government in Jakarta may be still harder to deal with than the current one. Australia is determined that East Timor's border claims should not provide another source of friction with its biggest neighbour or, worse still, call into question its longest maritime border.

ALEXANDER DOWNER: Some of the claims they're making in relation to the lateral boundaries will make those lateral boundaries closer to Indonesia than to East Timor. Well, that, of course, isn't a proposition...that isn't a legal proposition that is going to stack up. And that's going to get them into a lot of difficulties with Indonesia.

JONATHAN HOLMES: Indonesia will argue that its seabed boundaries with East Timor should follow the lines of equidistance. Any concession by Australia on lateral boundaries would involve concessions by the Indonesians too. They're unlikely to be cooperative.

DR HASJIM DJALAL, FORMER INDONESIAN AMBASSADOR FOR MARITIME AFFAIRS: I cannot see the reason on what basis that line north-south on this side should be changed. I don't find any justification, and I think East Timor would have difficulty in arguing it.

PETER GALBRAITH: That is a matter to be negotiated both with Indonesia and with Australia, and, of course, East Timor wants to negotiate with both countries. But there's real urgency to the negotiations with Australia and there is no urgency with negotiations with Indonesia. Why is there urgency to the negotiations with Australia? Because, as we speak, Australia is pumping petroleum out of the area that is under dispute, the Government is getting $1 million a day, and so that already, since 1999, $1.5 billion is gone. Every day that we delay is $1 million less for this country.

DR MARI ALKATIRI: I think that it is time for the Australian Government to listen to its own people. The people is voicing loudly on this issue and it's better to listen to their own people.

JONATHAN HOLMES: The Timorese seem to believe that the Australian public will be as sympathetic to their cause this time around as it was four years ago. But their loyal supporters in Australia are finding the going tough.

MAN (ADDRESSING RALLY): Today is the formation of the Timor Sea Justice Coalition in Darwin, and this is our first action. Ironically, the enemy has changed from being Indonesia to Australia...

JONATHAN HOLMES: Massacres are one thing, maritime borders quite another. So far, the issue has hardly set Australia alight. The Howard Government seems confident that most Australians will applaud it for hanging tough.

ALEXANDER DOWNER: We will do what we believe to be right, but, of course, in our interests, we are on Australia's side. I'm the Australian Foreign Minister. The obligation on me is to negotiate for the 20 million people in Australia.

PETER GALBRAITH: All we ask is that Australia stop taking the resource until we have an agreement, or that Australia negotiate seriously and rapidly about all the issues, including the lateral boundaries, or that Australia agree to an impartial decision by an international court of Australia's choosing. Any one of those three.

JONATHAN HOLMES: A rapid resolution seems unlikely. There have been harsh words and bitter feelings on both sides. There's no mood at present for pragmatic compromise. It's undeniable that the relationship has soured. Most Australians still feel proud of what their nation did to help its tiny neighbour. But for an Australian in East Timor these days, gratitude is hard to find.

East Timor Oil Claim Could Hit US$6 Billion

Courier-Mail [Queensland] May 31, 2004
by Nigel Wilson

AUSTRALIA could face a compensation claim from East Timor for up to $US6 billion ($8.4 billion) because Australia did not halt production in the disputed oil fields of the Timor Sea.

Foreign Minister Alexander Downer was warned of East Timor's potential claim more than four years ago.

But Mr Downer refused to order a halt to production in the Laminaria/Corallina fields in the Timor Sea, 500km north west of Darwin.

Mr Downer confirmed at the weekend he had a meeting in his Adelaide electorate office around March 2000 with Mari Alkatiri, now East Timor's Prime Minister, and Peter Galbraith, then minister for the Timor Sea in the United Nations Temporary Administration in East Timor. Mr Galbraith, a former US diplomat and now a member of a Washington-based international relations think tank, leads the East Timor team negotiating a maritime boundary with Australia.

East Timor politicians, including Dr Alkatiri, and the new nation's President, Xanana Gusmao, have attacked Australia for being greedy by refusing to accept a maritime boundary based on the mid-point between the two countries, about 350km north of Darwin.

They argue such a change would give East Timor access to upwards of $US30 billion in potential revenue from oil and gas reserves, making it independent of Australian and international aid.

Australia, instead, insists the boundary should be the edge of the continental shelf which is as close as 50km from the East Timor coast.

At the time of the Adelaide meeting with Mr Downer, Laminaria/Corallina, owned by Woodside Petroleum, BHP Billiton Petroleum and Shell Development, was the nation's biggest producing oil field, pumping at a rate of around 170,000 barrels a day.

Speaking from Washington, Mr Galbraith said that apart from the continental shelf argument, Australia was refusing to countenance a reworking of the shape of the existing joint petroleum development area, set up in the 2002 Timor Sea treaty, so the east and west boundaries could be set further apart.

This would give control of Laminaria/Corallina to East Timor.

"Australia is unique in the world in allowing development to continue where there is a dispute over boundaries and there are overlapping claims," he said.

"We told Mr Downer at the Mayo meeting (Mayo is Mr Downer's electorate) that Australia should not allow production from Laminaria/Corallina to continue and that, if it did, East Timor would seek compensation after the boundary talks were settled.

"We estimate the Australian government has been receiving revenue at around $US1 million a day from the oil field and the commercial returns will be about twice this," he said.

Mr Galbraith estimated the total East Timor claim over the oil field could be as much as $US6 billion since the Adelaide meeting.

"That's a potential claim Australian taxpayers should be aware of," he said.

Generous Aid Equals Greater Security

The Age (Melbourne), May 31, 2004   Opinion
By Pamela Bone

Australia gives to poor countries with one hand and takes back with the other.

Next time you are tempted to think of foreign aid as a bottomless pit, consider this: for every $7 the poor world receives in aid from the rich world, it pays back $90 in debt repayments. It makes a mockery, doesn't it, of complaints about the corruption and incompetence of those countries that we, in our magnanimity, are striving to help.

The reasons some countries are luxuriously rich and others pitifully poor have to do with history, geography, politics, religion, colonialism, culture, climate and other very complex matters, such as luck.

But no matter who or what is responsible for today's gross global inequality, it has to be fixed. Because as others, including Tim Costello, have pointed out on this page recently, you can't win a war on terrorism without a war on poverty.

Alexander Downer, also writing on this page, believes Australians should be proud of our 2004-05 overseas aid commitment, which he says reflects our "generous spirit".

Well, let's have a look at it.

For the first time our aid program has risen above $2 billion, and this does sound impressive. The increase is about 10 per cent in real terms over last year's budget. "Development co-operation" to Papua New Guinea has been increased by 27 per cent in real terms, and to the Solomon Islands by a whopping 425 per cent.

But to put this in perspective: the agreed UN target for aid from developed countries is 0.7 per cent of gross national income. During the term of the Howard Government, our aid as a proportion of GNI has dropped from 0.32 per cent to 0.25 per cent. Aid to Africa, the most desperately needy part of the world, has been cut by nearly half; and funds to UN agencies, the most effective of poverty-reduction organisations, have dropped by 52.4 per cent.

The Government makes "no apology" for focusing assistance on our own region, Downer says. It needn't. Australians can be proud of the efforts that have been made to restore law and order to the Solomons and PNG.

But in that case, what are we doing to our close neighbour East Timor? This is a country that is trying very hard to do the right thing by "responsible" country standards. It has a "no loans" policy. It doesn't want to be forever dependent on foreign aid. It wants to be able to use its own resources to develop.

Yet Australia is reaping $1 million a day in oil and gas in a disputed area of the Timor Sea that is much closer to East Timor than it is to Australia. How can Australians feel proud when we have received nearly 10 times as much revenue from Timor Sea oil and gas as we have given in aid to East Timor?

What might make more of us feel prouder would be to cede sovereignty over the disputed area and give East Timor half a chance to feed and educate its people.

This is not the only case where we give with one hand, take away with the other. We give aid to Indonesia, the Philippines, Vietnam, Bangladesh, Sri Lanka and others while demanding debt repayments from them.

The objection to debt forgiveness is that it's good discipline for countries to be made to pay their debts. Yet there are more constructive and less punitive approaches that can be taken: Germany, which is owed around a billion euros by Indonesia, has forgiven large amounts of debt on the condition half the forgone repayments are used for education and environmental projects.

British Finance Minister Gordon Brown recently described poor country debt as "the single greatest cause of poverty and injustice across the globe". In many cases the debts have been paid over and over (Nigeria borrowed $5 billion, repaid $16 billion and still owes $32 billion) yet health and education programs have to be cut to service them.

We can afford to write off much more debt. We can also afford to give more aid to Africa: ordinary Australians recognise this is where the need is greatest, and give considerably more to aid agencies supporting programs in Africa than does our Government.

Even if charity is focused close to home, it doesn't have to end there. In February the Netherlands, with a similar-sized economy, pledged eight times the amount Australia did to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

The main problem with our overseas aid is that, despite this year's increase, it is far too small. This applies on a local level or a global level: if you don't spend on creating decent societies, you have to spend on policing and law and order.

That is, what you can't bring yourself to do out of justice you must do for security.

One would think the Howard Government, so imbued with conservative values, would recognise the value of the old maxim that an ounce of prevention is worth a pound of cure.

Pamela Bone is an associate editor of The Age. Email: pbone@theage.com.au

The Economist, 3 June 2004

SYDNEY -- FOR East Timor, the second anniversary of independence, on May 20th, was not a happy time. The occasion was overshadowed by a bitter dispute with its rich neighbour, Australia, over access to big oil and gas reserves beneath the Timor Sea that divides the two countries, resources which East Timor says would make the difference between economic self-sufficiency and “begging” for aid to survive.

After pressure from East Timor, talks with Australia opened in Dili, the East Timorese capital, on April 19th aimed at establishing a permanent sea boundary, and thus the division of resources worth tens of billions of dollars. The atmosphere was prickly. Alexander Downer, Australia's foreign minister, later accused East Timor of having made “a very big mistake” by “trying to shame Australia, accusing us of [being] bullying and rich and so on, when you consider all we've done for East Timor.” Xanana Gusmão, East Timor's president, replies: “We are not shaming Australia. We are only telling the truth.”

Australia did indeed play the leading role in the multinational force that oversaw East Timor's transition to independence, after much bloodshed, five years ago. That helped assuage the guilt many Australians felt over their country's acquiescence in almost 25 years of Indonesia's occupation of the former Portuguese colony. But after independence in May 2002, East Timor seemed to recede from the Australian government's radar screen, to be replaced by global terror and chaos in the Solomon Islands.

East Timor, meanwhile, has languished as one of the world's poorest nations. A recent report by Oxfam Australia, an aid agency, said that one in ten East Timorese children was likely to die before the age of five. It claims that Australia has already received ten times more from Timor Sea oil and gas revenue than it has given East Timor in aid since 1999. Canberra's stand on the boundary talks—the agency argues—could “push East Timor to the brink of becoming a failed state”. Mr Downer said the report was “emotional claptrap which is being pumped up by left-wing NGOs.”

Some of the disputed resources lie in a zone known as the Timor Gap that Australia and Indonesia excluded when they delineated their seabed boundary in 1972. Seventeen years later the two countries signed a deal to divide government revenues from this zone evenly between them. Mr Gusmão now describes that deal as “illegal and illegitimate” because of Indonesia's occupation of East Timor at the time. At independence, Australia signed an interim treaty with East Timor, giving the new nation 90% of revenues from within the “joint development area”, as the gap is now called, and Australia 10%.

This arrangement covers the Bayu-Undan gas field, due to start production this year. But it excludes most of Greater Sunrise, a more lucrative gas field that lies mostly outside the area, and all of the Laminaria-Corallina oil field, from which Australia has been taking all revenues since it started pumping in 1999. East Timor suggests putting the money into an escrow account until the dispute is resolved.

In the talks that opened in April, East Timor is asking Australia to agree to a permanent median line between them, which, it argues, would accord with international law. Such a line would place almost all of the known oil and gas fields in East Timorese waters; Dili's negotiators say this would mean a difference of between $2.8 billion and $8.6 billion in revenues for East Timor. Australia, however, withdrew from the International Court of Justice's jurisdiction on maritime boundary questions shortly before East Timor's independence, so the issue cannot be referred to arbitration. Mr Gusmão says of this: “Australia behaved in bad faith.”

East Timor now wants monthly meetings, with a view to a quick resolution; Australia has put the next lot off until September, proposing only two rounds a year. At such a pace, a lot of the oil will be gone before the dispute is settled.

Deep Division
For East Timor, Energy Riches Lie Just Out of Reach

Poor, Fledgling Nation Seeks To Redraw Undersea Map;
Australia Stakes Its Claim A Cloud Over Greater Sunrise

By TIMOTHY MAPES and PATRICK BARTA
The Wall Street Journal June 10, 2004, PAGE ONE

DILI, East Timor -- Tiny East Timor fought for nearly a quarter of a century to free itself from Indonesian invaders. Now it faces a struggle with this region's other giant, Australia, over lucrative oil fields critical to its economic survival.

When East Timor became the world's newest country just over two years ago, it needed immediate international life support. Almost a quarter of its population had died during a brutal 24-year civil war. Rampaging Indonesian forces burned about 80% of the territory's government buildings and infrastructure after its 800,000 people voted for independence in 1999.

Massive injections of foreign aid have kept the country afloat since then, allowing rebuilding to begin. But with almost no local industry -- the country booked just $6 million in exports last year -- East Timor is pinning its economic hopes on large oil and natural gas fields that lie off the island's south coast.

But that plan has hit a surprising obstacle: Australia. Though it led the United Nations peacekeeping force that restored order after the 1999 violence, and has been one of East Timor's biggest aid donors ever since, Australia lays claim to most of the Timor Sea's energy fields.

It cites a treaty it signed with the former Indonesian military dictatorship some three decades ago. That treaty also gives Australia control over the Timor Sea's biggest prize: a vast, underwater natural-gas field called Greater Sunrise. It holds an estimated $30 billion in oil and natural gas -- enough to transform East Timor's future. Sixty percent of the tiny country's residents live on less than $2 a day, according to the World Bank.

East Timor believes it has a strong claim to the Greater Sunrise field, which lies just 95 miles south of its coastline and 250 miles north of Australia. Many of the foreign charities that helped keep East Timor's fight for independence alive during the Indonesian occupation are now promoting its case against Australia.

"It is, quite literally, a matter of life and death," said Mari Alkatiri, East Timor's prime minister, sitting in a low, white colonial building facing the sea. Outside, battered taxis puttered up and down Dili's quiet and dusty streets, trying to encourage the city's few pedestrians to take a $1 ride.

Currently, more than 10% of East Timorese children die before they reach the age of five due to illnesses like diarrhea and malaria, according to Oxfam Australia, one of East Timor's most active charities. That rate is roughly three times the level of other Asian countries. Oxfam recently released a statement arguing that Australia's position on the Timor Sea oil fields is obstructing East Timor's efforts to reduce infant mortality and lift itself out of poverty.

A rugged tropical nation about the size of Connecticut, East Timor languished for three centuries as a generally forsaken Portuguese colony. The territory declared independence on Nov. 28, 1975, only to be invaded by Indonesia nine days later. Indonesian rule brought a massive military presence -- aimed at defeating Timorese guerrilla fighters who took to the hills -- and Indonesian civil servants who filled most of the top government jobs. In a 1999 referendum supervised by the United Nations, the territory's people voted almost four to one in favor of independence.

Despite East Timor's woes, Australia insists that it has already been sympathetic to the country and refuses to go further by giving up territory it has held for more than 30 years. Australia also insists it won't be swayed by East Timor's efforts to try to win over public opinion by showcasing its poverty and characterizing Australia as a bully.

"We were very generous given the role we played in helping to free the Timorese and give them their own country," says Alexander Downer, Australia's foreign minister. "We weren't asking for a kick in the teeth for our generosity." He says redrawing Australia's boundaries to accommodate East Timor would be like the U.S. volunteering to cede Texas to Mexico, just because Mexico is less wealthy and would benefit from added territory.

Much is also at stake for the oil and natural gas companies that have investments in the region. The four companies involved in the Greater Sunrise field -- Royal Dutch/Shell Group, ConocoPhillips, Japan's Osaka Gas Co. and Woodside Petroleum Ltd. of Australia -- have spent some $150 million so far in exploration and development costs related to the field.

While the companies aren't likely to produce significant amounts of natural gas until 2009 or 2010, even that target date could be put in jeopardy if the dispute drags on much longer. "We need markets [for the gas], and to get markets, we need certainty" about the boundaries, says Rob Millhouse, a spokesman for Woodside, the field's operator.

Some natural gas from the region is already flowing. Rushing to get some initial projects off the ground, East Timor agreed with Australia in 2002 to set up a joint development zone in one section of the waters between the two countries.

Under that treaty, East Timor will get 90% of the revenue from projects within the joint development zone, while Australia will get 10% -- a significant shift from a 50-50 split that Australia and Indonesia planned before East Timor broke free. In February, Houston-based ConocoPhillips began tapping natural gas and liquid condensates from a $1.8 billion venture in the zone.

But the treaty didn't resolve the status of Greater Sunrise, which lies mostly outside the zone. As a new state, East Timor insists it has a right to negotiate a new sea boundary with Australia. Moreover, it argues that the 1982 United Nations Convention on the Law of the Sea supports the use of a midpoint boundary in cases where territorial claims overlap, as they do in the Timor Sea.

By drawing a midpoint line, all of the area's major energy deposits would sit on East Timor's side, including Greater Sunrise.

Some international observers believe East Timor has a strong case, despite considerable ambiguity in international law on these kinds of boundary disputes. "There's a substantial body of modern maritime law that supports East Timor's position on this issue," says Elisabeth Huybens, the head of the World Bank's office in Dili.

If East Timor can enlarge its maritime boundaries to include Greater Sunrise and other nearby fields, she says it could triple its spending on health, education, roads and other badly needed infrastructure. Currently, the East Timor government's entire annual budget amounts to just $75 million; about 40% comes from foreign aid.

Preliminary discussions over the issue began last year, and an initial round of negotiations was held in April. But so far the talks have been bogged down, with East Timor accusing Australia of dragging its feet to force it to accept a weaker deal, even as Australia continues to receive revenue from disputed areas.

While East Timor wants to discuss the issue every month, Australia has only agreed to meet twice a year. At the same time, Australia is getting an estimated $1.5 billion in royalties from projects in other parts of the sea that East Timor claims, and is selling new licenses to companies that want to search for more oil and natural gas in disputed areas.

As the dispute began to heat up in 2002, Australia also withdrew from an arbitration system for maritime disputes at the International Court of Justice. East Timor denounced the move as an "unfriendly act" and complains it now has no legal recourse if negotiations fail.

Australia counters that its 1970s boundary with Indonesia -- which extends along the continental shelf off Australia's coast -- would hold up under current international law. Foreign Minister Downer argues that debating Australia's boundaries could expose it to disputes with other countries, including Indonesia.

Since the 1970s, some international courts have favored boundaries that lie at the midpoint between countries whose claims overlap, absent compelling reasons to do otherwise. But courts have also been reluctant to dramatically overhaul boundaries that have been in place for many years, such as the Australia-Indonesia boundary.

In a meeting on the matter between Messrs. Alkatiri and Downer in November 2002, Australia took an extremely hard line, according to minutes of the exchange that appeared after the meeting on an Australian independent news Web site, called crikey.com.au. "We are very tough. We will not care if you give information to the media. Let me give you a tutorial in politics -- not a chance," Mr. Downer warned, according to the minutes.

Mr. Downer said the minutes were released by East Timor officials and reflected their views. He otherwise declined to comment on them. But he added, "If in the end they think they're going to get us to agree, they might find they're wrong.... We're not offering any concessions."

As the fight unfolds, life in East Timor remains unusually harsh. In Mota Kiik, a village an hour outside of the capital Dili, about 300 young students sit quietly in a makeshift primary school, jury-rigged from the remains of a burnt-out agricultural laboratory. The facility, surrounded by pumpkin fields and dense green foliage, has no electricity or working toilets. Only two teachers supervise eight classrooms.

"The government can't afford to give us anything," says Thomas Soares, the school's 26-year old principal. In some rooms, 8-to-10-year-old students sit on the floor because they have no desks. A wall covered in black paint serves as a chalkboard.

Mota Kiik is better off than many other villages. Schools and medical clinics become scarcer farther away from Dili. In the fishing village of Behau, about an hour's drive east from the city, few of its 150 children receive any education or medical care at all. No teacher has ever come to work in a one-room schoolhouse built five years ago by a Canadian charity. Only a handful of older kids are able to walk six miles under the equatorial sun to reach facilities in the next town.

"Can you please ask the government to send us a teacher? We will pay him ourselves," says Mario da Cunha, a 32-year old fisherman. Surrounded by a group of preteens, many with eye infections and runny noses, he frets that his village's isolation is destroying its hope for the future. "If we don't get a teacher, our kids will grow up knowing nothing," he says.

The World Bank and the International Monetary Fund are working with East Timor to set up a special fund for its share of the expected oil revenue to direct money to the schools and other dire needs. Another aim of the fund is to avoid the government corruption that has plagued some countries with sudden inflows of energy wealth, including neighboring Indonesia.

Some East Timor politicians, including Prime Minister Alkatiri, have already been accused of accepting bribes related to the oil business. In a March lawsuit filed in U.S. district court in Washington, Oceanic Exploration Corp. of Englewood, Colo., accused ConocoPhillips of paying more than $2.5 million to Mr. Alkatiri and other East Timorese officials, as well as to Australian officials.

In its filing, Oceanic claimed its Portuguese unit, Petrotimor Companhia de Petroleos SARL, was awarded development rights in the region by Portugal before the 1975 Indonesian invasion. It accused ConocoPhillips and the governments of Australia, Indonesia and East Timor of conspiring to illegally seize those rights.

Mr. Alkatiri denies the charges, as does ConocoPhillips. Mr. Alkatiri says he uses an Australian bank account mentioned in Oceanic's filing to pay for his children's school fees, but says it has never contained more than $6,000 of his own money. ConocoPhillips says it will vigorously defend itself in U.S. court, and notes that similar claims by Oceanic have already been dismissed by an Australian judge.

In East Timor's makeshift presidential palace -- a tiny bungalow behind a burnt-out government office -- President Xanana Gusmao says his people do not intend to give up this fight. A neatly-bearded 57-year-old who led East Timor's guerrilla army through years of jungle fighting against Indonesia, Mr. Gusmao now has a largely ceremonial role in government but is widely viewed as East Timor's founding father.

"In 1975, when East Timor was invaded by Indonesia, we were told that it was a fact and we had to accept it," says Mr. Gusmao. "Nevertheless, we did not accept it, and we fought and we won."

Write to Timothy Mapes at tim.mapes@wsj.com and Patrick Barta at patrick.barta@wsj.com

Letters in response to previous article:

The Wall Street Journal, June 25, 2004

Australia's Sovereign Rights

Criticism of Australia's motives in relation to settlement of permanent maritime boundaries with East Timor in your June 10 article, "For East Timor, Energy Riches Lie Just Out of Reach," is offensive and disingenuous.

In recent years, no country has done more than Australia to assist the people of East Timor. Our role in East Timor's transition to independence and its subsequent stabilisation has been crucial. We currently provide some 440 troops and 21 police. Since 1999 we have delivered humanitarian aid, development assistance and defence cooperation valued at a total of more than $270 million.

Australia is committed to negotiating permanent maritime boundaries with East Timor. The first round of negotiations was held in April and a second round will take place later in the year. Certainly there are competing claims -- that is what these complex negotiations are to resolve.

Under the Timor Sea Treaty, Australia has already agreed to a very generous interim arrangement that splits petroleum revenues from the Joint Petroleum Development Area (JPDA) 90:10 in favour of East Timor. Under previous arrangements with Indonesia the split was 50:50.

Among the myths propagated on this issue is the claim that international law dictates a median line between the two countries as the only solution for a permanent maritime boundary. In fact, natural prolongation of the continental shelf, on which Australia bases its claims, remains a valid source of seabed jurisdiction under international law.

Another myth is that a median-line approach would give East Timor all or most of the oil and gas resources in the Timor Sea. This is also incorrect. Such an approach could well leave East Timor without any share, for instance, of the Bayu-Undan gas field, rather than the generous 90% share East Timor currently enjoys. Moreover, a median line approach would not give East Timor any materially larger share of the fields -- such as Greater Sunrise and Laminaria -- that lie wholly or predominantly outside the JPDA and within sole Australian seabed jurisdiction.

To cede territory merely on the basis that a neighbour is poorer would reduce international law to a farce. Under such absurdity, we could see the Texas oil fields ceded to Mexico.

It is clearly in Australia's national interest that East Timor becomes a stable and self-sufficient neighbour. East Timor currently stands to derive enormous economic benefits from the Timor Sea resources. However, those resources are not all East Timor's. Australia makes no apology for protecting its sovereign rights.

Alexander Downer
Minister for Foreign Affairs
Canberra

Letter from José Ramos-Horta, Timor-Leste Minister for Foreign Affairs and Co-operation

Wall Street Journal July 5, 2004

The letter from my good friend, Australian Foreign Minister Alexander Downer (Australia's Sovereign Rights, June 25) contains numerous errors of fact that are unfair to Timor-Leste (East Timor) and cannot go unchallenged. In ostensibly dispelling "myths" about the dispute between Timor-Leste and Australia in the Timor Sea, he has instead created them.

Timor-Leste is not asking for charity in resolving sovereign rights in the Timor Sea, as Mr Downer would have us believe. Timor-Leste is simply seeking its right as a sovereign state to a maritime boundary settlement based on accepted international legal principles and the rule of law.

A fair settlement is in the interest of both nations, and indeed potential foreign investors in petroleum resources. This will give Timor-Leste rights to the resources that lie on its side of a median line between our two nations, allowing Timor-Leste to develop without being dependent on foreign aid.

Mr Downer claims disingenuously that Timor-Leste is asking Australia to cede territory on the basis that it is poor. As Mr. Downer well knows the dispute between Timor-Leste and Australia is not a question of ceding territory, but of setting maritime boundaries for the first time. The area of the Timor Sea between Australia and Timor-Leste is not covered by a permanent boundary between our two nations and is claimed by both countries. Australia has signed the International Unitization Agreement that acknowledges these important facts.

Timor-Leste's position is not in any way based on its poverty, but rather on international law. As Mr. Downer knows, Timor-Leste's legal position is supported by the overwhelming majority of international legal academics, including members of his own department.

Mr. Downer claims that Timor-Leste is reducing international law to a farce. Yet it is Australia that is exploiting disputed resources without first establishing who owns them. It is Australia that withdrew from international dispute resolution mechanisms for maritime boundaries just two months before Timor-Leste's independence was celebrated, thereby denying this avenue of justice to us. And it is Australia that is refusing to enter into serious negotiations by claiming it lacks the resources to meet more than twice a year. We have the UNDP in Timor-Leste to build public sector capacity, but perhaps it is also needed in Australia.

Timor-Leste, like any sovereign nation, is entitled to an exclusive economic zone (EEZ), as is our neighbor Australia. When these entitlements overlap, as they do in the Timor Sea, a boundary has to be drawn between the states involved. In such instances, it is universally accepted that a median line would be the boundary. Natural features such as a continental shelf are in these circumstances considered irrelevant.

We believe our position is so strong that we are willing to submit to international adjudication. Contrary to Mr Downer's amusing rhetoric, Timor-Leste is not seeking to annex Australian `territory' on the basis that it is poor. We are indeed a very poor nation, but poor nations are entitled to their rights under international law, and this means having this dispute settled equitably, fairly and promptly.

I call on my friend Alexander Downer to bring an end to this farcical situation and restore the rule of law in the Timor Sea.

José Ramos-Horta
Dili, Timor-Leste

EAST TIMOR
Oil Futures

Far Eastern Economic Review
June 17, 2004
By John McBeth/DILI

The promise of onshore oil-and-gas reserves is drawing oil majors into fresh exploration

WHILE ALL EYES FOCUS on the available resources in the Timor Sea, international oil-and-gas experts are taking a long second look at the possibility of new commercial discoveries on East Timor itself, where oil-and-gas leakages have been noted for decades along the southern coast. They like what they're seeing. Says Einar Risa, the Norwegian executive director of the Dili-based Timor Sea Designated Authority, "We find it highly interesting."

In the next few months, the East Timor government hopes to win parliamentary approval for the country's first petroleum law, which will lay down a framework for issuing licences and contracts for the exploration, development and production of oil and gas. Risa expects that will lead, in turn, to a comprehensive seismic programme covering areas onshore and as far offshore as the Timor Trench, about 40 kilometres off the coast. Woodside Petroleum, the main partner in the offshore Greater Sunrise field, PetroChina, Malaysian state oil company Petronas, Cooper Energy, Santos and Brazil's PetroBraz have all shown interest in onshore exploration. Woodside has access to seismic data compiled before Indonesia's annexation of the then-Portuguese colony in 1975, and PetroChina recently completed a gravity and magnetic survey, looking to confirm previous indications of geological anomalies.

Alfredo Pires and Francisco da Costa Monteiro, natural-resources advisers to President Xanana Gusmao, count about 30 different areas along the south coast, from Suai, on the West Timor border, to a point near the eastern tip of the half- island state, where there are oil seepages and signs of natural gas. "There is no doubt there is oil and gas onshore," says East Timor's Energy Secretary, Jose Texeira, "but we don't know how much." Geir Ytreland, an oil consultant and Norwegian government adviser to East Timor's Energy and Natural Resources Directorate, notes that the foreland basin, which covers the southern onshore and offshore parts of the island, is similar to the geology found in the Timor Sea proper. "The prospects [for finding commercial quantities of oil and gas] look very, very good," he told the REVIEW. "Personally, I'm very excited."

Risa, a grey-haired veteran of oil ventures around the world, is equally upbeat. "By going through the substantial material available and looking at that in relation to the increasing data we are getting from the Joint Petroleum Development Area [in which most of the offshore fields are located], we are in the process of drawing internal conclusions about the whole area," he says.

POWER SHORTAGES

About 20 wells have been drilled onshore in the last 100 years, beginning with discoveries that helped fire steam boilers around the rice-growing district of Viqueque in the early 1900s. Later, when Japanese troops invaded Timor during World War II, they scooped out about 100 barrels of light crude a day from a series of holes they dug on the foreshore and converted it to fuel on the spot.

Australian-owned Timor Oil drilled a handful of wells in the Suai area in the late 1960s and early 1970s, but Ytreland says advances in seismic technology over the past 30 years mean today's geologists can put together a much more revealing picture of oil-bearing geological traps lying beneath East Timor.

Likewise, wells drilled in recent years in deep waters off West Africa and Brazil show that the Timor Trench, which varies in depth from 1,500-3,000 metres, should pose no problems for exploration companies.

While it would be nice to find substantial new reserves to boost export receipts, Risa would be just as happy if explorers discover enough to fuel a string of small power stations and perhaps some light industry. That would help to reduce East Timor's dependence on diesel and invigorate some of the towns that have remained listless shells since Indonesian-backed militiamen laid waste to the former province when it voted for independence in 1999.

Dili's 10-12 megawatt power plant, which goes off- line at midnight and comes on again at dawn, accounts for about half of the installed generating capacity. Bacau, the second biggest city on the northern coast, has been without power now for four months. Los Palos, in the east, has been blacked out for seven or eight months. With no effective billing arrangements, there just isn't the money to pay for fuel supplies.

Oil in troubled waters – funding a Basic Income for East Timor

Online Opinion ( http://www.onlineopinion.com.au/)
David Casassas, Daniel Raventós and Julie Wark
July 2, 2004

Australia looked good for a while. In Catalonia, where sympathies for small oppressed nations are deeply rooted in direct experience, not many people are aware of the less savoury aspects of the history of Australia’s relations with Indonesia. An example is Australia’s recognition of the Indonesian occupation of East Timor in its haste to sign the Timor Gap Agreement, giving it access to East Timor’s natural resources. What came through here in recent years was Australia’s role in the International Force for East Timor and the $100 million spent on aid programs in one of the world’s poorest countries. Now people are starting to wonder how Australia could hold out a little balm with one hand while illegally greasing the other to the extent of $2 billion from oil and natural gas fields in disputed areas.

In withdrawing from the International Tribunal for the Law of the Sea and unilaterally issuing licences, Australia has shown a greedy contempt for international law. With its delaying tactics in the negotiations, putting East Timor over a barrel and trying to force it to agree to the worst possible deal, Australia looks more like the playground bully than the generous and concerned neighbour that Alexander Downer claims it is.

Everything is so topsy-turvy Down Under that East Timor is now, albeit unwillingly, Australia’s biggest donor country.

The legal issues at stake have been amply discussed in Australia. East Timor’s ranking, along with Chad and Niger, as one of the world’s poorest nations (and one of the most ill-treated) is well-known too. What is missing from all the discussion about Australia withholding the oil and gas revenues that East Timor so desperately needs is what East Timor might do with this input into its economy. There is vague talk of improved health services, roads and so on but the fact is that access to this revenue would offer the East Timorese government one option that would usher in what José Ramos Horta has called “East Timor’s time to prosper”. We refer to Basic Income. This is a payment made by the State as a right of citizenship, to each full citizen or resident of the society, regardless of whether he or she wishes to engage in paid employment, or is rich or poor, and which is paid independently of his or her other sources of income, and irrespective of his or her cohabitation arrangements in the domestic sphere.

In December 2002, the Brazilian Senate approved a law that was passed in the Chamber of Deputies in December 2003 for the gradual introduction of a Basic Income as of January 2005. Basic Income is seen here as constituting an essential measure for economies that are characterised by great inequalities of income and wealth and where huge sectors of the population live in conditions of utmost poverty. The proposal is especially valid for countries like Brazil or East Timor which, after many years of dictatorial regimes, have undertaken the commitment to resolve their most pressing social and economic problems through improving the mechanisms of democracy and offering better conditions for the possibility of full citizenship.

The East Timor Constitution enshrines these principles and demonstrates a belief that, in order to build a just and democratic society, it is necessary to stimulate values of equality and social cohesion without denying the inclination of the members of our species towards improving their own personal conditions of existence. In such contexts, so the Constitution of East Timor suggests, opportunistic leanings can give way to attempts to achieve more just conditions of existence and the organisation of social relations that give real meaning to the concepts of freedom and democracy. In brief, the Constitution offers a vision of community that is deeply entrenched in the values of East Timorese society, while also being totally compatible with ethical principles that are present, one way or another, and more or less happily, in all cultures.

East Timor is essentially an agrarian economy, with 90 per cent of the population based in the rural area (before the massive displacement of 1999) and 75 per cent engaged in agriculture (primarily subsistence agriculture). It is at present one of the poorest countries in the world, with an estimated Gross Domestic Product per capita of US$215-230 in 1999. This means that at least 50 per cent of the population receives well below the internationally-established threshold of absolute poverty: one US dollar a day.

In the nascent East Timor, introducing a Basic Income would not mean so much adapting an existing system to accommodate a Basic Income, as starting from scratch with clear, simple and accountable economic criteria. It would help to maintain the existing strength of community values and solidarity in East Timor, and this should make it possible to introduce modest but comprehensive local reforms throughout the country, so that the ripple effects would eventually be felt at national level. For example in terms of the self-sufficiency of food production, this could help break down the deeply entrenched and deadening dualism in the economy between the modern non-Timorese sector and the rural subsistence economy. Other possibilities include dealing with environmental damage on the national scale through local initiatives, improving marketing and transportation systems nationwide and redressing the marginalised position of women.

Such a policy would function as a system of micro-credits for everyone, without external interference and avoiding the pitfalls of the micro-credit system of distribution that, in fact, benefits only a minute percentage of the population. Although the United States Congress has theoretically prioritised helping the world’s poorest people, the aid allocated for this is just US$2 billion. The individual credits have a ceiling of US$300 in the poorest countries, but this US$300 is one-off and has to be repaid.

In East Timor the highest government officials earn only some US$700 a month. A Basic Income of, say, US$40 a month would represent for the very poorest family with, for example, six dependents, a stable monthly income of US$320. In a hamlet of 20 similar families this Basic Income would bring in US$6,400 per month, enough to finance a hand tractor, livestock, and a small transport business at the community level in a very short time. Small isolated communities would again be linked together in market networks and people could begin to move out of the overcrowded towns back to the countryside, establishing stable food production beyond the subsistence level.

Assuming a total population of 800,000, this would represent an overall sum of US$384 million per annum, while Australia’s illegal takings from the oil and gas reserves in the Timor Sea presently amount to US$365 million.

The population census conducted in 2000 by the United Nations Transitional Administration in East Timor (UNTAET) estimated that 41.1 per cent of the population was less than 14 years of age. Another Basic Income scheme could be, for example, a Basic Income of US$40 for those over 14 years (US$226,176,000 per annum) and US$30 for those under 14 years (US$118,368,000 per annum), which would represent a total of US$344,544,000 for the Treasury, less than what Australia is taking in the Timor Sea reserves. Different figures and combinations could be considered.

Still more impressive is what these figures represent in comparison with what East Timor is now spending on food imports: US$237 million per annum. This is about 62 per cent of an overall Basic Income of US$40. Social and economic life before the invasion was based on agriculture with a significant community-based component. The pilot project of rice cultivation with buffaloes in the isolated community of Uatulari (a problem zone because of the high degree of militia activity), financed by the Regional Government of Catalonia (US$142,680 in total), has proved that even the most difficult areas can achieve self-sufficiency in rice in a very short time with a modest financial input. In other words, the saving of US$237 million per annum in food imports could eventually cover about two thirds of a substantial Basic Income.

To look at the figures another way, a Basic Income of US$40 per month for everyone in a hamlet of 20 eight-member families represents US$76,600 per annum compared with the annual average of US$47,560 that the much bigger community of Uatulari has received from the Catalan Government over the last three years, a contribution that has completely transformed economic and social life in Uatulari.

Furthermore, given the nature of East Timorese society, stable food production means restoring the social fabric that was destroyed with the killing of livestock and general havoc of the occupation years and especially the months after the 1999 referendum, as Uatulari has also demonstrated. This “social capital” is a necessary though not sufficient condition for resettling the 280,000 people who were displaced from East Timor during the militia violence, including militia members themselves.

Another aspect is that there was a massive migration to the capital, Dili, in 1999, a problem of population imbalance that is yet to be solved. In particular, there are many unemployed, traumatised and disaffected youth with a great capacity for violence, who are especially susceptible to the attempts of diehard former militia and pro-Indonesia elements to create instability. Another group that needs urgent consideration is that comprised by the former FALINTIL guerrilla fighters, men (and some women) who renounced their youth, and any educational and employment possibilities they may have had, in order to fight for their country’s independence. These people, their widows and dependents, account for some 40,000 people today. They are the country’s heroes and yet are economically, and therefore socially, excluded. In short, a revived economy on the basis of a Basic Income would favour many processes of reconciliation besides improving the democratic processes that the East Timor government so desires to make a reality.

We are also asking whether the Australian government will continue to deny East Timor this option of real socioeconomic development on a nationwide scale and to deny itself the long-term advantages of having a stable and self-sufficient neighbour. Finally, we are wondering whether it really wants to keep projecting this unflattering image of the nasty old man who snatches sweets from a child, or the future from the children of East Timor.

Article edited by Merrindahl Andrew.

David Casassas is Secretary of the Xarxa Renda Bàsica Section of the Basic Income European Network.
Daniel Raventós is President of the Xarxa Renda Bàsica Section of the Basic Income European Network.
Julie Wark works with the Xarxa Renda Bàsica Section of the Basic Income European Network.

EAST TIMOR OIL
Canberra's Sea of Troubles

Far Eastern Economic Review  (PDF with graphics)
July 08, 2004
By John McBeth/DILI, EAST TIMOR

A dispute between Australia and East Timor over oil-and-gas wealth in the Timor Sea has cast doubts on Canberra's interpretation of the Law of the Sea as well as its sense of fairness

PETER GALBRAITH IS NOT popular with Australia's Department of Foreign Affairs and Trade. Sharp-minded, egotistical and as combative as East Timor Prime Minister Mari Alkatiri, the ethnic Yemeni Muslim who hired him, the former American diplomat is the hired gun for the fledgling nation in its David-and-Goliath struggle with Australia over a share of the oil-and-gas riches in the Timor Sea.

Reuters, CANBERRA: East Timor is unlikely to meet a year-end deadline for approval of a pact governing a disputed $5 billion Timor Sea gas project, the nation's leader said on Monday.

Prime Minister Mari Alkatiri said the Greater Sunrise gas field's fate now rested with Australia, because he would not send a temporary treaty to his parliament for ratification until Australia showed goodwill in negotiating the broader issue of a permanent maritime boundary between the countries.

Australia's Woodside Petroleum, the operator of Greater Sunrise, said last week it would pull its staff from the project and consider selling its 33.4 per cent stake unless East Timor ratified a revenue-splitting pact with Australia by year-end.

"If we were to send the treaty now to the parliament, I am 100 per cent sure it would be rejected. When Australia is showing goodwill and respect. . . then I will be prepared to do it," Alkatiri said in a telephone interview from the East Timor capital Dili.

"The ball is in Australia's hands. Woodside has to really get a clear position on this from Australia, not from us, because we are not going to give up resources that we think are ours."

Australia and East Timor approved a temporary revenue sharing treaty last year for some oil and gas fields, which splits revenue 90:10 in favour of East Timor from a shared 62,000 sqkm region until a permanent border is agreed.

A separate deal is needed to cover Greater Sunrise, because 20 per cent of the field lies in the treaty area, while the rest sits in waters that are claimed by both Australia and East Timor.

Australia's parliament ratified the interim pact governing development of the field in March, but heated maritime border talks have seen East Timor delay its approval.

The last round of talks, in October, collapsed. Australia declared it was up to East Timor to make the next move.

Australia also warned that East Timor's refusal to ratify the Greater Sunrise pact put the development, worth an estimated $A22 ($NZ24.55) billion-$A25 ($NZ27.90) billion in revenues, at risk.

"Despite Australia's best efforts, East Timor's refusal to bring into force the Greater Sunrise. . . agreement means that current plans to develop Greater Sunrise for the benefit of both countries are now in doubt," a spokesman for Australia's Foreign Minister Alexander Downer said late last week.

But Alkatiri said Australia had been unwilling to negotiate.

He said East Timor wanted now to postpone the border talks and instead negotiate an agreement with Australia to jointly explore and exploit billions of dollars worth of resources in the Timor Sea.

East Timor, which won independence from Indonesia in 2002, has vowed to use money from the oil and gas resources to alleviate poverty, create jobs and improve education.

Half its 760,000 population is illiterate, 41 per cent lives below the poverty line, and one in 10 children dies before the age of five, according to a report by the charity Oxfam published in May.

The Greater Sunrise project lies 450km northwest of the northern Australian city of Darwin and 150km south of East Timor.

The joint venture wants to sell most of the LNG to Asia, but also wants to tap the energy-hungry US West Coast market.

ConocoPhillips has a 30 per cent stake in Greater Sunrise, Royal Dutch/Shell has 26.56 per cent and the balance is held by Japan's Osaka Gas Co. Ltd.

Woodside is 34 per cent-owned by Shell.

The Timor-Leste Institute for Development Monitoring and Analysis (La’o Hamutuk)
Institutu Timor-Leste ba Analiza no Monitor ba Dezenvolvimentu
Rua D. Alberto Ricardo, Bebora, Dili, Timor-Leste
P.O. Box 340, Dili, Timor-Leste
Tel: +670-3321040 or +670-77234330
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