AUSTRALIA-EAST TIMOR: OIL AND GOOD RELATIONS DON'T MIX

CANBERRA, (Nov. 29) IPS - Reconstructing a country as devastated as East Timor will be costly, but revenue from major oil and gas resources in the nearby sea may provide much of the money needed for such an undertaking -- that is, if Australia agrees to renegotiate an old agreement regarding the area.

Ahead of the next round of negotiations with the United Nations Transitional of East Timor (UNTAET), scheduled for around Christmas, Canberra has come under pressure to renegotiate its sea boundary with Dili, and to ensure that a greater share of the revenue from major oil and gas deposits there go to East Timor.

Large oil deposits have already been found in the area, with one spot in particular now in production. Estimates of the resources of the oilfield vary, but UNTAET figures that it could pump as much as $100 million to $200 million a year to the rather anaemic budget of East Timor.

"I believe everybody is waiting for some generosity from the Australians," Mario Carrascalao, the vice president of the Timorese political umbrella group, the National Council for Timorese Resistance (CNRT), said recently.

But Australia may yet act the scrooge. It seems determined to fight to keep the terms of a 1989 treaty, which says the most oil prospective area in the waters between East Timor and Australia would be a "Zone of Cooperation." This means that each nation would be entitled to 50 percent of the revenue from any oil and gas developments there.

Australia had signed the treaty with Indonesia, which was then still occupying East Timor. The agreement established boundaries between Indonesia and Australia, which as the only claimant states at the time enabled the oil developments to proceed with some legal certainty.

In the aftermath of Indonesia's withdrawal from East Timor, however, Jakarta ceded responsibility for the treaty to UNTAET.

Canberra, though, apparently assumed that the conditions and terms in the 1989 treaty would remain in force, even if it was already negotiating with UNTAET, and afterwards with the government of East Timor that is to be determined at elections scheduled for late next year.

It thus became furious when East Timorese leaders and UNTAET said the treaty is illegal and that a new one should be negotiated on the basis of the sea boundary following a midway point between the countries. This would then see the overwhelming majority of the oil resources under East Timorese control.

Australia, a major donor to East Timor, has since been claiming that a renegotiation would jeopardize relations between the two countries. Earlier this year, Canberra also confirmed its intention to claim the entire continental shelf in the area of the Timor Gap -- giving Australia the largest area and access to the oil resources -- rather than adopt a halfway point.

Timor Gap, also known as the Timor Sea, lies between Australia's Northern Territory and Timor.

UNTAET and East Timorese leaders are standing their ground. They say that if necessary, they would take their case to the International Court of Justice.

What Australia seems to have overlooked is that the United Nations never recognized the Indonesian annexation of East Timor, and thus does not recognize the current treaty, including any negotiated boundaries.

UNTAET has told Canberra that unless it negotiates a new treaty before the East Timor elections, there will not be any in place when a new East Timor government comes into place.

"The view of East Timor, which was shared by UNTAET, was that the Australian-Indonesian treaty was illegal because Indonesia didn't have the authority to make any decisions," the head of the UNTAET negotiating team, Peter Galbraith said during the last formal talks on the matter in mid-October.

A former U.S. ambassador to Croatia, Galbraith also warned that "an independent East Timor is not going to accept" the "invalid" treaty.

Noting the hundreds of millions of revenues expected from the area's oil deposits, he added, "This year the annual recurrent budget of East Timor is $45 million, so you can imagine what an enormous difference this resource can make to East Timor."

As it is, East Timor authorities are even struggling to allot funds to purchase schoolbooks.

Australian activists themselves say they are shocked at Canberra's attitude. James Arvanitakis, campaigns director of the Sydney-based watchdog group Aidwatch, says he is stunned that the Australian government has not welcomed the chance for East Timor to be economically independent.

He says, "Here's the chance for the new East Timorese government to set its own course rather than to rely on donor countries, the World Bank and the United Nations for funds and having them direct them on how to run the country."

"The revenues are at least twice their current budget," Arvanitakis points out, "and if anything Australia should be advising them about how to reap the benefits from the oil resources slowly rather than in a short space of time."

Yet a look at the past would reveal that Australia is only being consistent. For one of the prime motivations for Australia's support for the 1975 Indonesian invasion and subsequent annexation of East Timor was the prospect of discovering significant oil resources that were keenly sought after the oil price shocks during that era.

An August 1975 cable sent by the then Australian Ambassador to Indonesia, Richard Woolcott, to Canberra is also telling. This was three months prior to the Indonesian invasion of East Timor, and Woolcott was urging the Australian government to agree with Jakarta's plans to make East Timor part of Indonesia.

Wrote the diplomat: "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 noted, "I know I am recommending a pragmatic rather than a principled stand but that is what national interest and foreign policy is all about."

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