May 31, 2001	atimes.com

Oceania PACIFIC BEAT Oil in troubled waters By Alan Boyd "Blessed is the man who expects nothing. He shall never be disappointed." - Alexander Pope SYDNEY - Desperation and anticipation are usually two sides of the same coin. For, as Shakespeare noted, the miserable have no other medicine than hope. But expectations honed on hardship are invariably cut down to size once the dust of adversity has dissipated, as East Timor's freedom fighters have found since their country gained its tortured independence from Indonesia two years ago. In this instance, the anticipation of a new life rested upon a yellowing commitment by Australia to sign over half the royalties for oil and gas deposits in the Timor Gap, a continental demarcation that defines the territorial and cultural divide between Southeast Asia and Oceania. It is doubtful that any country has greater need of an economic lifeline than Timor. Agriculture, responsible for 40 percent of gross domestic product during the Indonesian occupation, was almost wiped out during the last year of guerrilla skirmishes; the departure of Jakarta's defense force removed a further 20 percent of income. By the time the United Nations peacekeepers arrived in 1999, a once-proud nation had been brutalized back to the stone ages, its survival now resting on aid handouts and international goodwill. The oil treaty, signed with Indonesia in 1975, was top of the peace agenda even before the Indonesians had withdrawn, with economists calculating it would provide annual revenue of US$2 billion-$3 billion, enough cash to propel Timor into the ranks of major oil-exporting nations. Trouble was, this document - like so many resource agreements - was stuffed full of assumptions that don't hold up to close scrutiny. Firstly, that Timor would continue to be governed by territorial pacts that had been brokered between Indonesia and Australia as a precursor to the treaty's signing. And secondly, that the well of hope would not run prematurely dry. Based on the terms of the 1971-72 territorial covenants, Australia's sea boundary covers about 75 percent of the continental shelf in the Timor Sea, giving Canberra control over most potential oil and gas fields in the treaty area. While the royalties were split 50:50, the zone directly under Australian jurisdiction is thought to contain the most promising deposits, reflecting Canberra's greater economic leverage at the time of the negotiations. Timor's government-in-waiting could have declared the treaty void, as it was endorsed by the discredited former colonial power. Instead, it is holding out for a re-negotiation that could see as much as 90 percent of royalties flowing into Timorese hands. From a purely compassionate standpoint, Canberra could be expected to comply, especially as test drills have drastically reduced the expectant oil flow. Yields in neighboring areas have been disappointing, and it now seems that Timor could earn as little as $100 million a year, or slightly less than Indonesia's direct aid to the territory during the final occupation years. But the stakes have risen since some Timorese leaders, backed by members of the UN transitional authority, have sought to widen the exploration area by tackling the much more complex issue of sea boundaries, which have long been a sensitive point with Canberra. The existing border was a compromise between Indonesian nationalism and Australian xenophobia, fed in both cases by the 1960s independence movements in Asia and the social turmoil wrought by Chinese-backed communist insurgencies. Then, as now, Canberra reasoned that it needed a wide sea buffer against unwanted Asian intrusions, whether it be power-crazed dictators, illegal immigrants, or animals carrying infectious diseases. In agreeing to re-negotiate the maritime boundary, Canberra would not only cede control over almost all of the prime oil-bearing shelf to Timor. It would also risk losing the comfort zone established in 1972, as Indonesia would almost certainly demand that talks be reopened on its share of the border as well. At stake would be a more valuable tract of sea between the Timor and Arafura Seas that contains an estimated 15 trillion cubic feet of gas, double the reserves of Australia's biggest existing field in the North West Shelf. Technically, the Timor portion of the territorial accord is already in dispute as it breaches a basic statute of the UN Convention on the Law of the Sea that defines the boundary of overlapping sovereignty as the midway point between two exclusive economic zones. Canberra took a tough line on the boundaries issue when negotiations reopened in Dili this week (Monday), and is unlikely to give up its claim lightly. And when it comes to the final appraisal, Timor could find itself in much the same situation as Indonesia a generation earlier. Like it or not, the territory will need Australia's political and aid umbrella during the formative years of independence and probably for decades to come. Risking this patronage for short-term financial gain makes little economic sense, and pragmatism should prevail. ((c)2001 Asia Times Online Co, Ltd. All rights reserved. Please contact content@atimes.com for information on our sales and syndication policies.)

Front | China | Southeast Asia | Japan | Koreas | India/Pakistan | Central Asia/Russia | Oceania Business Briefs | Global Economy | Asian Crisis | Media/IT | Editorials | Letters | Search/Archive

back to the top ©2001 Asia Times Online Co., Ltd. Building B - 5th Floor, 102/1 Phra Arthit Road, Chanasangkhram, Bangkok 10200, Thailand