Subject: Australia opens talks with East Timorese leaders over oil

Australia opens talks with East Timorese leaders over oil

SYDNEY, Oct 13 (AFP) - Australia has begun talks with East Timorese leaders over the Timor Gap treaty under which Australia and Indonesia share oil revenue from the Timor Sea, officials said Wednesday.

The oil-rich Timor Gap lies off Timor's south coast in what is expected to be the newly independent East Timor's territorial waters and could provide the impoverished nation with its most important revenue source.

Reports from Jakarta said Indonesia had frozen the Timor Gap treaty because of a serious downturn in relations between the two countries over East Timor.

An Australian-led international peacekeeping force is trying to restore stability in the territory ravaged by an Indonesian-backed terror campaign since it opted for independence in its August 30 ballot.

Australia's leading of the force and its criticism of human rights abuses in the territory have prompted fierce accusations of betrayal in Indonesia.

Canberra was the only industrialised country to recognise Indonesia's annexation of East Timor in 1976.

The official Indonesian news agency Antara quoted Indonesian Navy chief Admiral Achmad Sutjipto as saying naval operations with Australia to monitor the waters of the Timor Gap had been suspended.

Australian Foreign Minister Alexander Downer said Canberra had been implementing a transition strategy for the oil treaty through talks with the United Nations and East Timorese representatives.

Downer told parliament on Tuesday that a senior East Timorese independence official had confirmed East Timor's desire to move forward on future treaty arrangements.

Resistance leader Xanana Gusmao, who is staying in Australia prior to his return within weeks to East Timor, told a business audience on Monday that oil would be among his country's major exports.

Downer said: "We see this as consistent with an early and smooth transition providing a solid basis for continued long term investment in the Timor Gap.

"We are happy with the way the discussions are proceeding. We do think that the Indonesian government will be very cooperative in the process of the transition and equally all the signs are very positive."

The Indonesian government said on September 7 that it was fully prepared to cancel the treaty signed in 1989 with Australia over oil and gas extraction rights in the sea between Timor and Australia.

"That treaty was between the government of Indonesia and Australia, but because East Timor will in the future no longer be Indonesian territory, for legal reasons, that treaty can no longer be implemented," Mines and Energy Minister Kuntoro Mangkusubroto said.

The area in the Timor Sea covered by the treaty is believed to hold hydrocarbon reserves worth some eight billion US dollars but only around 1.1 million dollars worth of oil and gas was exploited last year, industry sources said.

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