Subject: AFR: A good deal for Timor after help from Horta

Australian Financial Review July 5, 2001

A good deal for Timor after help from Horta

Geoffrey Barker

If Mr Peter Galbraith expected diplomatic mulishness to improve the Timor Sea agreement, and to boost his own reputation, he has to be deeply disappointed by the agreement to be initiated in Dili today.

After more than a year's obduracy, including threats to block the extraction of Timor Sea gas and oil, Mr Galbraith negotiated an agreement with Australia that is virtually identical with what he could have concluded nine months ago.

Mr Galbraith, a former US diplomat and cabinet member for political affairs in the United Nations Transitional Adminstration in East Timor, was consistently hard-nosed and hostile towards Australia throughout the negotiations.

The agreed 90-10 revenue split between Australia and East Timor is, as Mr Galbraith said yesterday, a good deal for East Timor.

It will give the fledgling country an estimated $7 billion in revenue over 20 years from 2004.

But Mr Galbraith comprehensively failed in his efforts to redraw the seabed boundary between East Timor and Australia.

He also failed to win a share of tax revenues from the planned gas pipeline from the Timor Sea to Darwin.

And he had to drop plans to renegotiate existing production sharing contracts with oil companies.

Australian sources credit Nobel Peace Prize winner Mr Jose Ramos Horta, East Timor's cabinet member for foreign affairs, with forcing Mr Galbraith to drop demands which threatened the agreement.

Realising the importance to East Timor of a secure revenue base and close and constructive relations with Australia, Mr Horta insisted that the agreement be concluded.

He certainly did not want it delayed, perhaps for years, by protracted international litigation over the seabed boundary.

So delimitation of a permanent seabed boundary was deferred without prejudice to Australia's or East Timor's rights or entitlements.

Australia simply rejected Mr Galbraith's claims for a share of pipeline taxes because the pipeline passes only through Australian territory and because Australia does not rebate tax revenue to any foreign country.

The main sweeteners offered by Australia to wrap up the agreement were financially insignificant compared with the downstream benefits to Australia from the construction of the pipeline and planned methanol and liquefied natural gas plants in Darwin.

Australia increased East Timor's revenue share to 90-10 from 85-15 and agreed to provide East Timor with an extra $8 million a year from 2005.

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