East Timor struggles for oil with
Australia By Sonny Inbaraj and Mario
de Queiroz
DARWIN, Australia - East Timor, the
world's youngest republic, marked its second anniversary
on Thursday, although the poverty-stricken country may
have little to celebrate after initial hopes of quick
riches from undersea resources were dashed by
neighboring Australia in an ongoing row over oil rights.
Australia's thirst for petroleum poses a threat
to East Timor's independence, the fight for which has
marked its violent history for centuries, according to
an extensive report from the British-based
non-governmental humanitarian group Oxfam. The
Australian arm of the group, Community Aid Abroad,
warned that East Timor is at risk of becoming a "failed
state" if Australia hinders the new nation's capacity to
finance its long-term development by taking the lion's
share of revenue from oil and gas resources in the Timor
Sea. The reserves are estimated at 30 million barrels of
oil and 175 million barrels of natural gas, with
royalties calculated to reach US$21.3 billion.
Meanwhile, aid donors, on which East Timor's
budget heavily depends, are not predicting a gloomy
future for the world's newest country of 800,000 people.
At a conference in East Timor's capital Dili this week,
aid donors from international financial organizations
and foreign governments praised East Timor authorities
for reducing the budget deficit from $126 million in
2003 to $30 million this year.
The deficit's
downward revision was possible, the donors said, because
of "a great effort by the government and the planned
increase in revenues from oil and gas", due primarily to
hikes in international prices.
But East Timorese
government officials warn that oil revenues could be
much lower than expected, due to the maritime
territorial dispute with neighboring Australia.
In Australia, community groups and opposition
parties have condemned the Australian government for
what has been described as an attempt to steal millions
of dollars of revenues from petroleum projects in the
sea between the two countries.
"The vast oil and
gas reserves of the Timor Sea provide East Timor with a
window of opportunity for providing for its people and
future generations," said James Ensor, Oxfam Community
Aid Abroad's director of public policy. "However,
Australia is not displaying good faith in its current
negotiations with our neighbor," Ensor added.
While Australia has been a generous donor to
East Timor, Oxfam said that the smaller nation has
already paid back 10-fold in oil revenues the aid
received since 1999, when a multinational force led by
the United Nations forced Indonesia off the island, part
of the Java archipelago.
Five years ago,
Australia intervened in the militia war between
Indonesian special forces and Timorese guerrillas, using
hard cash and military firepower to eventually secure
independence for the eastern half of the island of
Timor. The UN took control of East Timor in 2000 and
2001, although the island formally remained a "territory
under Portuguese administration until completing the
process of decolonization", which ended with the formal
declaration of independence on May 20, 2002.
Now, just two years after independence, the
stance of the Australian government on the maritime
border negotiations with East Timor is limiting the
capacity of the latter to plan and finance its future
development, charges the Oxfam report, published on
Wednesday in London.
The new republic demands
that the maritime border be set 200 nautical miles off
its coastline, as stipulated by international law,
guaranteeing it control over the rich petroleum and
natural gas resources. But Australia, which makes a
similar claim, refuses. At the closest point between the
land masses, the sea is only 230 nautical miles wide,
resulting in overlapping claims.
Australia
argues that the maritime border should respect the
agreement it signed in 1989 with Indonesia's Suharto
dictatorship, considered at the time compensation from
Jakarta to Canberra for being the only government to
recognize Indonesia's sovereignty over the former
Portuguese colony that it occupied.
Canberra's
firm position in this matter has been reiterated in many
international forums. And Australian officials have
stressed that even if the petroleum and natural gas
reserves prove to be closer to East Timor than Australia
in the Timor Sea, it will stand by the validity of the
1989 accord.
Another crucial aspect of the oil
dispute is the heavy pressure being placed on the
Australian government and on the mission of the UN
Transitional Administration in East Timor (UNTAET) from
US-based Phillips Petroleum company and Australia's
Woodside Petroleum. Both transnationals have said they
could cancel or delay investment and exploitation plans
if the maritime border dispute is not resolved in the
next few months.
In April, Woodside Petroleum
declared that it will scrap its $5 billion oil and gas
development in the Timor Sea unless Dili's parliament
ratifies the International Unitization Agreement (IUA),
a deal between the two countries to share the proceeds
from the Timor Sea's oil reserves.
Officially,
these firms are staying out of the controversy, but
behind the scenes they prefer Australia, which keeps 30
percent of oil and natural gas profits, compared to the
40 percent that East Timor holds on to.
East
Timor is the poorest country in East Asia, and its only
possibility for development seems to be the fossil fuels
that lie beneath the seabed that Australia refuses to
hand over, according to Oxfam.
Donors meeting in
Dili, however, applauded East Timor's parliament for
approving a commercial code and company law aimed at
spurring private investment, and praised the government
for improving access to health services and electricity.
"Your progress has been impressive, though the
remaining challenges remain formidable," said
Jemal-ud-din Kassum, the World Bank's vice president for
the East Asia-Pacific region.
In its report to
donors released on Wednesday, the World Bank said East
Timor's economy was set to grow by 1 percent this year
after contracting 2 percent in 2003.
But harsh
realities still remain in East Timor despite the rosy
donors' report. The figures are staggering: 41 percent
of East Timor's 760,000 inhabitants live in extreme
poverty, 51 percent are illiterate, one in 10 children
dies before reaching age five and around half of the
working-age population is unemployed.
East
Timor's poverty keeps it heavily dependent upon
international aid for support. At the same time,
Victoria Markwick-Smith, a special adviser to East
Timor's government, is wary that donor fatigue is fast
setting in among the aid community in East Timor. "With
the tensions in Iraq and conflicts elsewhere, funds
meant for East Timor are being channeled elsewhere," she
said.
Few would deny that the relatively
inexperienced East Timorese government led by Prime
Minister Mari Alkatiri has, indeed, made impressive
strides in just two years.
For 25 years, East
Timor was occupied by Indonesia. The Timorese in a
UN-sponsored referendum opted for independence in late
August 1999, but when the ballot results were announced
in September, Indonesian military-sponsored militias
went on an orgy of terror and razed Dili. Jakarta's
"scorched earth" withdrawal destroyed East Timor's
entire infrastructure.
"The outside world has to
realize that we started from a minus zero position after
the Indonesian military and their militias reduced the
country to a smoking rubble," Markwick-Smith told Inter
Press Service.
The prime minister himself has
appealed to donors not to overlook his country and help
it overcome its teething problems. "We seek perfection
and excellence, but in the context of the real world we
develop our capacities step-by-step," Alkatiri said.
Markwick-Smith defended East Timor's slow pace
and urged donors to be more sympathetic to the country.
"Donors should realize that the East Timorese have a
different pace of working," she said. "They don't
operate with deadlines, project parameters and other
constraints imposed by donors."
But the only way
for East Timor to wean itself from international aid
money, is to quickly realize the profits from oil and
gas projects in the Timor Sea. That, however, seems to
be an uphill struggle with Australia flexing its muscles
as the region's bully.
Australia and East Timor
began talks in April to establish a permanent maritime
boundary in the oil-rich Timor Sea and divide up control
of the multi-million dollar Greater Sunrise oil field.
Australia has already won an 82 percent slice of
the estimated $7 billion Greater Sunrise royalties
through a previous deal, but this is yet to be ratified
by the East Timorese parliament.
East Timor
wants the new seabed boundary no further than halfway
between the two countries, but Australia has refused to
budge, saying that this concession would cause it to
lose potentially millions of dollars in royalties.
"The Australian government is saying on the one
hand that East Timor has to stop its dependency on aid
and get on its own two feet, but on the other hand, [it
is saying] we are going to take the resource that gives
you the revenues to build schools, to build hospitals,
to pave roads, to have security," said Australia's
Greens Senator Bob Brown.
"A resolution of this
dispute sooner rather than later would go a long way to
helping the region's poorest nation deliver basic
services to its people," added Brown.
