Re: East Timor/United Nations

[Yoshie Furuhashi <furuhashi.1@xxxxxxx>]

Michael Keaney says:

> Yoshie, having gone upmarket with the FT and the Oil and Gas Journal:

Upmarket?  You're such a snob, Michael!  :->

> The "integrity" of Indonesia was its preferred option,
> rather than risk the fragmentation of a multi-ethnic state and thereby all
> its investments there, as well as lucrative arms contracts.

The USA initially thought the same thing with regard to Yugoslavia.
However, times change, and quick.  Indonesia is becoming ungovernable
by either the local despot (like Suharto) or the local democrat (like
Wahid), due to the continuing fallouts of the Asian financial crisis
that have added to decentralizing dynamics of ethnicized conflicts
(provinces against the central government).

*****   The Times (London)
April 2, 2001, Monday
SECTION: Business
HEADLINE: Ethnic violence threatens world energy security
BYLINE: Carl Mortished

Mortars fired at its Indonesian liquefied natural gas plant have
forced Exxon to shut it down

EXXONMOBIL's gasfield on the island of Sumatra was hit by mortar fire
last month. Live explosives landed inside the compound of a gas
control centre, but its staff escaped injury.

Exxon's operations in Aceh, the northern tip of Indonesia, are being
targeted in a guerrilla war waged by separatists against the
Indonesian state. An Exxon plane was fired upon, wounding two local
staff, company buses have been targeted with remote-controlled bombs
planted in the road and other vehicles have been hijacked.

There have been 28 attacks over the past month - firefights, bombings
and assaults on vehicles - but the mortar attack early last month was
particularly frightening, Bill Cumming, information officer for the
oil company in Indonesia, says. "The facility was not designed to
withstand military attack,'' he said. "If they had hit certain bits
of equipment, there would have been a catastrophic explosion."

The control unit collects natural gas from Exxon's wells and cleans
it for delivery to PT Arun NGL, a liquefied natural gas plant owned
by Pertamina, the Indonesian state energy company. The plant lowers
the gas temperature to minus 160C at which point it liquefies. It is
then loaded on ships destined for power stations in Japan, Korea and
Taiwan.

No one knows what might happen if an LNG plant were hit with
explosives. A study on a receiving terminal in Boston suggested that
the liquid fuel could spread for miles, freezing everything in its
path. Only then would it vaporise and ignite.

Exxon is not hanging around to find out what really happens. On March
9 the company announced it was shutting down its operations in Aceh
and pulling its staff out of the area. Last week the conflict
escalated, with the army accused of murdering three human-rights
workers on an official visit to the region.

It is a bitter blow for the Americans. The PT Arun NGL plant was a
"company maker" for Mobil, which discovered the Arun gasfield. At its
peak in the early 1990s, Arun was shipping 13 million tonnes of LNG
and the plant was delivering a quarter of Mobil's profits.

Since then, production has been on the wane but last year the company
loaded 117 cargoes, totalling some 6.5 million tonnes. Deutsche
Bank's analysts reckon that ExxonMobil would have earned Pounds 500
million this year from its Sumatra operation, until the shooting
began. "They must be devastated (the plant) has stopped," Paul
Sankey, oil analyst for Deutsche, says. "The plant is paid off. It's
a money machine."

This is no local difficulty. LNG is critical to the world's energy
security and Indonesia, racked by civil strife, is a big exporter.
TotalfinaElf, the French oil and gas company is a big investor in
Bontang, Indonesia's largest LNG plant, located on the eastern side
of the island of Borneo.

Exporting 20 million tonnes of LNG per year, worth some $ 7 million
(Pounds 4.9 million) per day in revenues, the plant is vital for
Indonesia's financial security. However, the state of Kalimantan is
no tropical paradise. Ethnic rivalry has led to a murderous campaign
by indigenous Dayak tribal people against immigrants. So far the
Bontang plant has escaped the mayhem.

East of Borneo, another troubled island is awaiting a big foreign
investment. Our own BP wants to develop Tangguh, a gasfield in Irian
Jaya. It is reputed to contain 18 trillion cu ft of reserves. An LNG
plant will convert the gas molecules into dollar bills for BP. The
market is likely to be China, where BP has just won a contract to
build an LNG receiving terminal in Guangdong. Unfortunately, Irian
Jaya is a political and social pressure cooker.

General Suharto, the former dictator, sought to dominate the remote
islands of Indonesia's archipelago by colonising them with settlers
from Java. The policy has brought open warfare to East Timor,
guerrilla fighting to Aceh and civil strife in Borneo.

Many believe that Irian Jaya could become the next East Timor, with
the local, Christian Papuan people turning on the Muslim settlers.
There have already been riots and killings and last June a tribal
conference demanded West Papuan independence. Like Aceh, the
resentment is about the perceived plundering by Jakarta of the
region's natural resources. The focus is the US mining company
Freeport McMoRan and its Grasberg mine, a massive copper and gold
deposit in the highlands. BP's Tangguh LNG project is unlikely to
escape notice.

Oil companies are obvious targets and BP is taking a political risk
with such high-profile investment in a troubled area. Exxon people
have received threats of death and extortion. The Free Aceh Movement
wants Exxon to pay a tax, claiming that revenue from the gasfields,
most of which accrues to the Indonesian government, is rightfully
theirs.

Exxon refuses to pay "any illegal fee or taxes" or to talk to the
rebels. "We have received calls from people claiming to be
separatists, but we have never initiated any contact with them,"
Cummings says. "Our partner is the Government of Indonesia and we
don't get involved in internal politics in any of the 200 countries
in which we operate."

Exxon's orthodox "no politics" policy is the typically blinkered
approach taken by multinationals in unstable countries. It is the
same problem that has afflicted Shell in Nigeria, Rio Tinto in Papua
New Guinea and almost every oil or mineral explorer across the globe.
It is spreading to new areas.

LNG was once an exotic commodity, expensive and difficult to justify
against cheap coal. A liquefaction plant can cost $ 1 billion and a
fleet of four tankers, specially designed with pressure vessels to
hold the frozen gas, might cost another billion. The world is
changing in LNG's favour. Gas prices are rising and both China and
India want to convert dirty, coal-based power stations to gas. Asia
currently consumes about 72 million tonnes of LNG per year while the
potential supply from Indonesia, Malaysia, Australia and as far west
as Qatar and Oman is 86 million tonnes. Within five years, Deutsche
Bank forecasts demand to rise to 100 million tonnes.

Asia needs LNG suppliers. The shutdown of PT Arun has sent the
Japanese and Koreans scurrying to Petronas, the Malaysian state
energy company, to fill the gap. The summer should not be a problem,
but if Arun remains shut into the winter, buyers may have to look to
the Middle East for replacement tonnes.

The multinationals are not sitting idle. In addition to BP's Tangguh,
Shell has plans for a $ 10 billion LNG plant on the Russian-occupied
island of Sakhalin, a short sea voyage to Korea and northern China.
Plans are also in place to expand Australia's North West Shelf LNG
project.

But the gas from these projects will not be shipped until the middle
of the decade. By then we can expect demand from emerging markets
like China and India to have soared.

An even bigger energy customer is likely to be combing the
Asia/Pacific markets in the near future. In California the price of
gas has reached absurd levels as the state staggers from brownout to
blackout. El Paso Corporation said last month that it would import
five million tonnes of LNG from Australia in 2005.

In an attempt to avoid prohibitive Californian planning laws, El Paso
will build its receiving terminal in Mexico and pipe gas into the US.
"Economically, it makes sense, despite the distance," Sankey says.
"The gas price in California has reached the equivalent of a $ 500
barrel of oil." Shell also has its eye on a Mexican beachhead to the
US market.

Energy is a top priority for George W. Bush, so the State
Department's eye could soon light on small places in Asia with big
reserves of gas. When Aceh, Borneo, Irian Jaya or even Eastern
Siberia becomes critical for the energy security of China, Japan and
the US, the world needs to take note. The indigenous people of Aceh
have already noticed.   *****

How do you restore a good investment climate here?  Think like
Machiavelli's Prince.  Support the Indonesian government & crush
separatist rebels?  If so, who is to do the job?  Wahid appears
incompetent, & businessmen complain of corruptions of the government.
Which successor to pick?  Any likely candidate?  What will be the
rebels' response to strong-arm tactics?  What's an alternative?  Make
deals with the rebels, fragmenting Indonesia & managing its pieces?
Unilaterally?  Multilaterally?  Hedge your bets?  It's not a matter
of principle.  It's a matter of expediency: what works?

> And Galbraith's efforts to secure revenues for the East Timorese have
> extracted a great deal more than the Australians were originally prepared to
> go for. John Howard originally argued for the continuing "validity" of the
> original Timor Gap Treaty. The succinct summary of the treaty provided below
> shows what was at stake for the Australian government:
>
> http://www.caa.org.au/publications/briefing/timor_gap_treaty/treaty.html
>
> If you want the full version:
>
> http://www.mastiffassociation.org/docs/nation/austr/timgt.htm
>
> Like I said in my original post, East Timor is being fully incorporated into
> the global capitalist system. That's not a bad deal for the USA -- by
> definition, it never is. But it's a damn sight better than the alternative
> originally sanctioned by the US, UK and Australia that was the original
> preferred option of those noted exponents of humanitarian intervention.

Empire may be good for the East Timorese elite.  This is ET Foreign
Minister Jose Ramos-Horta speaking like Hardt & Negri:

*****   AAP NEWSFEED
May 29, 2001, Tuesday
SECTION: Nationwide General News; Australian General News
HEADLINE: Asia: Globalisation was good for East Timor, says Ramos-Horta
By Ben Packham

MELBOURNE, May 29 AAP - Globalisation was good for East Timor, but it
would have to be properly managed to ensure it did not ravage the
fledgling nation, East Timor Foreign Minister Jose Ramos-Horta said
tonight.

Dr Ramos-Horta said East Timor might never have achieved independence
if the negative impacts of globalisation had not destabilised
Indonesia in 1997 and 1998.

He added that mass communication, a product of globalisation, had
enabled thousands to lobby the world's political and financial
leaders on East Timor's behalf.

Speaking at Melbourne's Victoria University tonight, Dr Ramos-Horta
said globalisation, a phenomenon thought by many to enslave
developing nations, could also set them free.

"The globalised world made Indonesia vulnerable to internal and
external pressure," Dr Ramos-Horta said.

"In reality, Indonesia was not defeated militarily in East Timor.

"It was the global forces of good, compelled, mobilised by the
internet age, the electronic media, that persuaded Indonesia that it
was its highest national interest ... to withdraw from East Timor.

"(That) was unthinkable 10 years ago."...

Dr Ramos-Horta said the plan was to develop a "blueprint" for East
Timor's economic development with input from the World Bank, the
United Nations Development Program, specialist economists and
development experts....   *****

Yoshie