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Timor's tutorial in oil
politics
By Quinton Temby
PERTH - At an international conference on
regional security held in East Timor last year, the
frustration of many Timorese officials was obvious. It
was just over two years since East Timor had voted for
independence from Indonesia and been ravaged by its
scorched earth retribution. But the frustration wasn't
directed at Indonesia.
The problem was
Australia. East Timor's wealthiest neighbor had
positioned itself to be the main beneficiary of a treaty
to divide the rich oil and natural-gas reserves of the
Timor Sea. One East Timorese Foreign Ministry official
was so dismayed at Australia's stance that he dropped
his diplomatic guard in front of the other delegates to
implore the Australian representative to see that Timor
is poor, Australia is rich and that its division of the
reserves is "very unfair".
"It's hard to tell
our people that the colonization will never end, even if
we achieve our independence," he said. The Australian
representative, former diplomat and now academic Alan
Dupont, responded with what has become a familiar
"tutorial in politics" for East Timor: "Unfortunately,"
he said, "international relations is not based on
emotion or equity. It's based on hard-nosed reality."
But if the East Timorese had ever believed this,
they might never have won their independence. After 24
years of struggle against Indonesian occupation, East
Timor celebrated its formal independence on May 20 last
year. It formally became the newest nation in the world
and the poorest in Asia. The departing Indonesian
military and militia had left public facilities
destroyed, the electricity grid sabotaged and whole
villages burned. Since then East Timor has been in a
state of rehabilitation and repair, starting from a
poverty level equal to that of Rwanda and ending up with
an unhealthy reliance on foreign aid. But there is a
once-in-a-generation chance out of this poverty and
dependency with the Timor Sea oil and gas.
The
Timor Sea, however, is disputed territory. Australia
claims the seabed as part of its continental shelf,
which it says extends to the Timor Trough, just 50
nautical miles off the coast of East Timor. East Timor
challenges this claim - which would put all of the
reserves in Australian territory - pointing to the
principle of a midway line between the two nations.
Unable to agree on maritime boundaries, a controversial
Timor Sea Treaty to share the reserves was signed on
East Timor's first day of independence. But on the same
day, East Timor's prime minister, Mari Alkatiri,
announced that his country still claims its entitlement
to permanent maritime boundaries - boundaries which
would void the treaty just signed. As such, the
prizefight for resources between the region's richest
and poorest countries had become official.
On
one side of the dispute, with such a low level of
development it would be akin to sovereign suicide if
East Timor were to accept Australia's maritime claim,
forgoing its only significant source of income. On the
other side, Australia fears that East Timor's claim
would unsettle the adjacent Australia-Indonesia boundary
by making it look ungenerous. This boundary gives about
three-quarters of the seabed to Australia, in a deal in
which Indonesia's former foreign minister and
law-of-the-sea expert Dr Mochtar Kusumaatmadja said his
country had been "taken to the cleaners". The Australian
fear was conceded a few days after the Timor Sea Treaty
was signed when Foreign Minister Alexander Downer said
of the East Timorese, "As I have explained to them, our
maritime boundaries with Indonesia cover several
thousand kilometers. That is a very, very big issue for
us and we are not in the game of renegotiating them."
But the Australians had an even greater reason
to fear East Timor's boundary claim. Prior to the
signing of the treaty, a growing body of legal advice
was indicating that the new nation's maritime boundary
rights might encompass all of the resources which are
claimed by Australia under the Timor Sea Treaty. This
development culminated with the maneuverings of
Petrotimor, a US-based oil company vying for a stake in
the Timor Sea. The company had commissioned an opinion
on East Timor's potential maritime rights by two
authorities in the area: Vaughan Lowe, professor of
International Law at Oxford University, and Christopher
Carleton, head of the Law of the Sea Division at the UK
Hydrographic Office.
The Lowe opinion argued
that Australia's proposed treaty would prevent East
Timor from establishing its rightful maritime boundaries
in accordance with international law. This meant that
under the treaty, almost 60 percent of East Timor's
resources - some US$20 billion worth of oil and gas -
would go to Australia. Petrotimor urged the Timorese
government to reject the treaty and submit its boundary
dispute to the International Court of Justice in The
Hague. The company would fund the legal action, in
return for a 10 percent cut of the oil and gas revenue
if it was successful.
Justifiably, there was
skepticism of Petrotimor's speculative scheme. The
United Nations Transitional Administration in East Timor
dismissed the offer. The legal argument, however, was
taken seriously on both sides of the Timor Sea. Two days
before the offer was made public by Petrotimor in the
East Timorese capital Dili, Australia secretly exempted
itself from maritime boundary dispute resolution in the
International Tribunal for the Law of the Sea and the
International Court of Justice. According to an
Australian government National Interest Analysis, this
was done secretly because "public knowledge of the
proposed action could have led other countries to
preempt the declaration by commencing an action against
Australia in relation to sea-boundary delimitation". The
government's view was that "maritime boundary disputes
are best resolved through negotiation and not
litigation". Soon-to-be prime minister Alkatiri
described the Australian move as "an unfriendly act".
With the threat of international arbitration out
of the way and with pressure on East Timor to secure
revenue independent of foreign donors and the World
Bank, Australia has been able to ram through its
lopsided treaty. The disparity in the negotiating
resources of the two countries has been symbolically
stark. East Timor retained two young Western lawyers
funded by the United Nations; the Australians always had
an extensive, high-powered team of lawyers, advisors and
negotiators. On one occasion, on short notice they swept
into Dili under the command of Foreign Minister Downer,
a huddle of large white men in dark suits.
Four-wheel-drives slammed to a halt outside East Timor's
main government building as the Australians charged into
the cabinet room.
Behind the closed doors
Australia's foreign minister was patronizing and
arrogant. According to a leaked transcript of the
negotiating session, Downer said, "If I was in your
position I would focus on revenue for your new and poor
country and how to [progress] without compromising your
integrity. To call us a big bully is a grotesque
simplification of Australia. We had a cozy economic
agreement with Indonesia; we bailed East Timor out with
no economic benefit."
By this point in time
Prime Minister Alkatiri was almost resigned to the fact
that Australia had no intention of agreeing to maritime
boundaries. So he tried to increase East Timor's share
of the oil and gas. In rejecting this move, Downer
threatened to tear up the treaty. "We don't have to
exploit the resources, they can stay there for 20, 40,
50 years," he said. Later, Downer warned, "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."
For the Timorese, however, their entire
history since Indonesia's invasion in 1975 has been a
tutorial in Australia's morally dismal politics. It was
Australia's then ambassador to Indonesia, Richard
Woolcott, who encouraged his government to support the
invasion at least in part because it would be easier to
negotiate maritime boundaries with Indonesia. This would
be, he coyly said in a cable that was leaked, in the
interests of the Department of Minerals and Energy.
After years of wrangling, the Timor Gap Treaty,
in effect appropriating East Timor's oil and gas, was
signed between Australia and Indonesia in 1989. For
supporters of East Timor the agreement marks a historic
low point in Australian foreign policy. For Xanana
Gusmao, East Timor's guerrilla leader and future
president, the agreement was a "total betrayal".
Speaking to Australian radio from his mountain hideout
in 1991 he said: "Australia has been an accomplice in
the genocide perpetrated by the occupation forces,
because the interests which Australia wanted to secure
with the annexation of East Timor to Indonesia are so
evident. The best proof is the Timor Gap agreement."
This is the "cozy economic agreement" to which
the Australian foreign minister referred when he was
trying to force East Timor to accept the new Timor Sea
Treaty as its replacement. Although Australia has
characterized the new treaty as a generous gift to East
Timor, it's basically the same agreement as before,
though not as cozy. The major change is that within a
Joint Petroleum Development Area (which excludes most of
the disputed petroleum) East Timor will receive 90
percent of the revenue. With Conoco Phillips' Bayu Undan
gas-field development, which began production last year,
this will be worth about $3 billion over 15 years to
East Timor, allowing the government to function after
donors withdraw and, it is hoped, avoid going into debt.
Falling mostly outside of the joint development
area are the largest fields, known collectively as
Greater Sunrise and operated by Woodside Australian
Energy. Eighty-two percent of the revenue from these
fields will go to Australia. Although they won't be
developed for several years, it was a successful
Australian strategy, promoted by Woodside and its
partner Shell, to hold up the supposedly interim treaty
for months - putting the Bayu Undan development at risk
- until its division of Greater Sunrise was clinched.
Inevitably, all this sharing in the Timor Sea
has been restricted to the petroleum reserves on East
Timor's side of the midpoint between the two countries.
The rich reserves that lie on Australia's side are not
under dispute.
Australia's legacy of
exploitation, bound to Indonesia's torturous occupation,
is well known in East Timor. Much was forgiven, however,
in September 1999 when Australia led a United Nations
peacekeeping force to usher out Indonesian military and
militia that had destroyed the place in retribution for
its vote for independence. But this humanitarian
intervention has since been degraded by the suspicion
that the Australian government has used it to secure its
theft of what amounts to more than half of East Timor's
natural wealth.
If petroleum wasn't a motivation
for coming to East Timor's aid in 1999, Australia has
since been caught calling on a payback for the
peacekeepers, when its foreign minister complained
during negotiations that Australia had "bailed East
Timor out with no economic benefit". But perhaps there
was a benefit. In November 1999, with peacekeepers on
the ground and Timor still smoldering, Australia
received its first big windfall from the Timor Sea as
billions of dollars of oil began pumping out of
Woodside's highly disputed Laminaria and Corallina
reserves.
At this time East Timor must have been
the most devastated nation on Earth. Seventy percent of
its infrastructure had been destroyed and most of its
people had been driven from their homes. According to
the United Nations Development Program, East Timor had
the lowest income per head in the world. Nevertheless,
from 1999 to 2002 the Australian government took an
estimated $1.2 billion in revenue from
Laminaria-Corallina. For the same period Australia gave
East Timor $200 million in aid.
Australia's
hardball treatment of East Timor has embittered its
relationship with its tiny neighbor. But publicly, East
Timor has remained diplomatic and optimistic. The Timor
Sea Treaty finally came into force on April 2, with
Prime Minister Alkatiri saying that "as a temporary
revenue-sharing arrangement, the treaty represents a
good interim measure until maritime boundaries are
agreed".
But it's in Australia's interests to
delay a boundary agreement until the Timor Sea reserves
have been drained. This way, Australia can continue to
give millions in aid with one hand and take billions in
oil with the other.
Quinton Temby was
a freelance correspondent for Deutsche Welle and Radio
Australia during East Timor's first year of
independence.
(©2003 Quinton Temby.)
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