- The Washington Times - Thursday, August 26, 2004

SYDNEY, Australia — Not so long ago, Australians were being feted for helping tiny East Timor, their northern neighbor, gain independence from Indonesia.

But a tug of war over riches lying at the bottom of the Timor Sea that divides the two countries has quickly changed the tone of the relationship. East Timor has branded Canberra a thief, complaining that a deal on harvesting the undersea energy riches greatly favored Australia.

But after a rough patch, it looks as if the two countries could be back on an even keel — if things go according to plan.

The trouble centers on vast oil and gas deposits in the seabed that researchers estimate will be worth billions of dollars when developed. The 15-year-old boundary — drawn up long before East Timor was a country — gives the bulk of the seabed to Australia.

East Timor, whose annual budget is less than $71 million, thinks that the wealth and royalties lying at the bottom of the sea could total $20 billion in the next 30 years. The money could transform the infant country from a beggar nation — Australia will provide $27.5 million in aid in its next budget — into a fiscally viable country.

East Timor says Australia collects $7 in oil and gas revenues for every dollar it gives to its poor neighbor in aid.

East Timor “cannot be deprived of its rights or territory because of a crime,” Prime Minister Mari Alkatiri said at a press conference in the capital of Dili in April.

On a trip to Lisbon that same month, East Timorese President Xanana Gusmao sharply attacked Australia’s attitude, saying the struggle over oil and gas rights mirrored East Timor’s long and bloody campaign to break free from Indonesia.

Australia negotiated the seabed deal with Indonesia in 1989, 13 years before East Timor won its independence from Jakarta, and insists that its claim is legitimate. The accord, in which Canberra recognized Indonesia’s claim to East Timor, long has been viewed with resentment in Dili.

Under that deal and in line with international laws at the time, Australia’s continental shelf, whose edge is marked by the so-called Timor Trough, became the boundary. In some places, the line runs as close as 9.3 miles from East Timor’s coast.

East Timor wants the middle of the 62-mile-wide sea lying between the two neighbors to be the border — which would put an estimated 90 percent of the oil and gas reserves on East Timor’s side.

Australian officials have showed no enthusiasm for changing the terms of the 1989 deal.

“It’s an argument that Mexico, being a poor country, might try with the U.S. to take over Texas, with rather more historic claims than East Timor has with us,” Australian Foreign Minister Alexander Downer told the Australian newspaper.

East Timor gets 90 percent of the revenues from the seabed directly across from it in an area known as the Timor Gap.

American energy giant ConocoPhillips and its partners have begun work there in a gas field known as Bayu-Undan. By 2007, East Timor should be receiving tens of millions of dollars in royalties.

But Dili wants to adjust other parts of the boundary line, in particular the areas west and east of the Timor Gap. East Timorese officials argue that the lines that define the two sides were unfairly drawn.

If the border is moved slightly farther to the west, then East Timor would get all of the revenues from the Laminaria oil fields, predicted to be about $225 million a year for the next few years.

If the border is adjusted a little farther east, East Timor would lay claim to much of the more lucrative Greater Sunrise field, which also is under the Australian seabed.

Australia and East Timor signed the Timor Sea Treaty in 2002, using the earlier boundary agreement with Indonesia. Under that agreement, yet to be ratified by East Timor, only 18 percent of Sunrise revenues would go to the fledgling nation.

Australian oil company Woodside Petroleum, which heads the consortium planning to develop the Sunrise field, has made it clear that it will not begin work until the revenue arrangements are settled.

Researchers say the relocation of these lines could mean a difference of $8 billion dollars in revenues for the poor country.

Australian scholars say their country’s legal standing in the dispute is solid.

“The fact is that the coordinates were impeccably and fairly drawn out 32 years ago. So unless Australia also believes there is a dispute, there is really no dispute about these lines,” said Gillian Triggs, director of the University of Melbourne’s Institute for Comparative and International Law.

A meeting earlier this month between the foreign ministers of the two countries in Canberra resulted in Australia offering billions of dollars more in extra revenue from the gas extracted from the joint development zone in return for a commitment from East Timor not to challenge the existing boundary.

Although no dollar amount has been set, East Timorese officials appeared open to the compromise.

“I think we can meet halfway in the basic approach, and now we just need to work out the details,” East Timorese Foreign Minister Jose Ramos Horta told reporters.

Former U.S. diplomat Peter Galbraith, who has served as a tough negotiator for East Timor in the past, has argued that Australia should abide by the 1982 U.N. Convention of the Sea. That agreement states that if two states lie fewer than 400 nautical miles apart, as Australia and East Timor do, the border should be drawn halfway between them, regardless of the shape of the seabed.

Ms. Triggs disagreed.

“There is no rule to say you must have a median line if the two countries do not have a common continental shelf. Geologically, Australia is on one [shelf], and East Timor is on another,” she said.

But more serious than any disputed economic benefits for Australia is the problem posed by having such a desperately poor country on its doorstep, said George Quinn, the head of the South East Asian Center at Australian National University.

“By taking a hard line, Australia is in danger of creating a state that will be strategically and politically a risk and could well post security problems by becoming a base for international crime,” Mr. Quinn said.

Mr. Gusmao made the same argument in Lisbon, saying East Timor is in danger of becoming a “failed state” like Haiti if Australia does not relent, causing far greater problems for all the states in the region.

But, Mr. Quinn said, “with a little cooperation from Australia, East Timor could become another Brunei — whose entire wealth is generated from oil revenues and is now a good member of [the Association of Southeast Asian Nations].”

The next round of talks on the seabed dispute is scheduled for next month, and the two sides have said they hope to nail down a deal by the end of the year.

Mr. Downer said, “It would be good if we can have a Christmas present … for all the people of East Timor and a slightly smaller Christmas present for the people of Australia.”

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