CANBERRA - The signing on Thursday of an agreement that guarantees East Timor a greater share of income from oil development in the sea between its territory and Australia dramatically increases prospects of economic independence for the fledgling nation.
Following bruising negotiations, the Australian government relented from its initial insistence that the revenues from the 75,000-square kilometer zone between Australia and East Timor, known as the Timor Gap, be divided evenly.
The Timor Sea Arrangement had earlier been thrashed out in Canberra by East Timorese cabinet members Jose Ramos-Horta and Mari Alkatiri and United Nations Transitional Authority in East Timor (UNTAET) representative, Peter Galbraith.
At the signing in the East Timorese capital of Dili on Thursday, Alkatiri welcomed the agreement as signalling the start of a new relationship between Australia and East Timor. While Galbraith had been seeking to finalize a seabed boundary that would have favored East Timor, Est Timor’s Foreign Affairs Minister Ramos Horta agreed to defer the issue for the 30-year life of the treaty.
The Australian government claims that over the 20 years of the agreement, from 2004 East Timor could receive more as much as US$7 billion in revenue from existing and future developments in the area.
Galbraith said earlier this week the agreement is not as generous as Australia claims. “Not only is it [Australia] getting some of the oil and gas production north of the mid-point, which it would not normally get, but it also will receive the benefits of the downstream activities that will take place in the Northern Territory of Australia,” he said.
Under the new treaty, income from oil and gas developments will be split between the oil companies and Australia and East Timor after deducting the costs of production of the oil firms. The treaty then provides that revenue will be shared by the two countries evenly for the next three years. After 2004, East Timor will gain 90 percent of the total income. Australia had been seeking an 85/15 split.
However, Tim Anderson, a research officer with the Sydney-based group Aidwatch, cautions against over-optimistic views that East Timor will gain significant income without putting further pressure on the oil companies. “What we would like to see examined is how the costs of production are determined and accounted for. After 10 years of the treaty’s operation, it should be possible to assess whether the cost accounting system is working,” he says.
The new treaty has been welcomed by the Australian Council for Overseas Aid (ACFOA) policy director Jim Redden as ensuring that East Timor has “an independent source of revenue for about 10 years as they work toward self-reliance”.
“An over-reliance on foreign aid and loans can all too often lead to a developing country becoming trapped in the debt-poverty cycle,” he argues. Australia’s interest in gaining control over the oil resources was a major reason for giving tacit backing to the Indonesian invasion of East Timor in 1975. In August of that year, three months prior to the Indonesian invasion of East Timor, the Australian ambassador to Indonesia, Richard Woolcott, sent a cable to Canberra urging acquiescence with Indonesia’s plans to annex East Timor.
“It would seem to me that this department [of Minerals and Energy] might well have an interest in closing the present gap in the agreed sea border and this could be much more readily negotiated with Indonesia than with Portugal; or independent Portuguese Timor,” he wrote. “I know I am recommending a pragmatic rather than a principled stand but that is what national interest and foreign policy is all about,” Woolcott added.
Australia remained largely mute about the invasion and the subsequent widespread human rights abuses. Later, Australia became one of the few countries to recognize Indonesia’s claim to East Timor. In 1989, then Australian foreign minister Gareth Evans and the Indonesian foreign minister in the Suharto government, Ali Alatas, raised champagne glasses to celebrate the signing of the treaty dividing the Timor Gap between the countries, as they flew over beleaguered East Timor.
Under the 1989 treaty, a “zone of cooperation” was established covering the most oil prospective area, with each nation entitled to 50 percent of the revenue from any oil and gas developments. Subsequently, large deposits have been discovered, with one field currently in production.
In the aftermath of Indonesia’s withdrawal from East Timor in late 1999 after the territory’s pro-independence vote, Indonesia ceded responsibility for the treaty to UNTAET. The Australian government had expected the 1989 treaty would simply continue under UNTAET. However, East Timorese leaders and UNTAET were adamant the treaty was unfair and illegal in international law and insisted it be renegotiated.
Meanwhile, officials say that although the new treaty is a welcome resource, it does not mean East Timor will not need all the help it can get from outsiders. Indeed, the Australian shadow minister for foreign affairs, Laurie Brereton, worries that the talk of potentially large sums from oil revenues may distract the international community from the need to provide immediate funding for reconstruction of the infrastructure shattered by the Indonesian-supported militias.
“Petroleum and gas revenues from the Timor Gap will not begin to come on stream for several years, and strong Australian support for East Timor will be required for many years to come,” he said.
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