[PEN-L:27306] Timor: Oil and troubled waters

["Ulhas Joglekar" <joglekarulhas@xxxxxxxxxxx>]

Business Standard

Saturday, June 1, 2002

Where Money talks

Oil and troubled waters

East Timor is caught between the devil and the deep and will have to walk a
very tight line, says Sunanda K Datta-Ray

Watching East Timor's May 19 independence celebrations on TV, one could not
miss the banners and placards about the new and impoverished country's only
source of revenue.
In the view of some protesters, the Timor Sea treaty that Australia's Prime
Minister, John Howard, signed with President Jose Alexandre "Xanana" Gusmao
the very next day did not adequately compensate for 28 years of injustice.
The 62,000-sq-km Timor Gap, which the treaty covers, is the world's
seventh-largest bed of offshore oil and gas. It is valued at more than $40
billion. Ironically, had it not been for this wealth, East Timor might have
become independent in 1974 when the 400-year-old Portuguese colonial
administration collapsed after the anti-Salazar revolution.
But as Richard Woolcott, the Australian ambassador in Jakarta, wrote to
Canberra's department of minerals and energy at the time, a treaty to grab
the Timor Gap's undersea wealth "could be much more readily negotiated with
Indonesia than with Portugal or with independent Portuguese Timor".
In other words, Australia wanted Indonesia to swallow up East Timor. "I know
I am recommending a pragmatic rather than a principled stand," the
ambassador concluded, "but that is what national interest and foreign policy
is all about."
The additional factor of Communism helped. That was the time when the US,
heavily involved in Vietnam, saw Reds under every bed. It regarded Gusmao's
freedom movement as dangerously leftist and feared that an independent East
Timor might become a Chinese or Soviet dependency.
Gough Whitlam, who then headed Australia's Labour Party government, looked
the other way when Indonesia's military ruler, General Suharto, invaded and
occupied East Timor only three months after Woolcott's letter. More than
200,000 East Timorese are believed to have perished in war and famine during
the 24 years of Indonesian rule. At one time, Indonesia had 40,000 troops in
East Timor.
The US had helped Suharto to overthrow Sukarno who was thought to be too
pro-China and too non-aligned to suit Western strategic interests. With
Britain following in their wake, the Americans, therefore, gave the Suharto
regime every help and encouragement it needed to annex the former Portuguese
colony.
American money and weapons poured into Indonesia under a project codenamed
Iron Balance and the more staid Joint Combined Education and Training
programme. Australia trained the dreaded Indonesian elite corps, Kopassus,
commanded by General Suharto's son-in-law, General Prabowo Subianto.
Britain trained a selection of the Indonesian army's seniormost officers
(some under supposedly independent schemes organised by universities and
other institutions), while British Aerospace sold the machine guns used to
shoot down East Timorese protesters.
When 78.5 per cent of the voters opted for independence in a 1999 referendum
held under United Nations auspices, Kopassus spawned the militias called Red
and White Iron and Thorn to murder people and terrorise and destroy
villages.
No one knows how many men, women and children were butchered and their
bodies dumped into the sea. Three-quarters of the population were displaced,
70 per cent of East Timor's buildings were reduced to ruins and about
300,000 refugees fled to West Timor.
The May 20 treaty grants East Timor 90 per cent of the profit from oil and
gas exploited in a designated joint production area. That seems impressive,
especially when we are reminded that East Timor will earn $7 billion in the
next 17 years.
But the point is: how much more would this small, poor and defenceless
country of 850,000 people have earned if it had enjoyed full access to its
only natural resource? The treaty's small print and its long-term
consequences are what worried independence day protesters.
Considerable arm-twisting preceded the treaty's signing. At one time,
Canberra was trying to force Dili to accept a deal that it struck with
Jakarta in 1989. The American Phillips Petroleum consortium went back even
further to claim rights under a concession that Portugal is said to have
granted it in 1974.
The tax and legal framework that the treaty creates for Phillips and its
partners to extract gas from the Bayu-Undan and Sunrise fields for Japanese
customers is one area of uncertainty.
Another is the tussle between Phillips and the Royal Dutch/Shell Group over
developing rights in the sunrise field. Finally, and most ominous of all,
Australia is accused of fudging the maritime boundary between the two
countries in the Timor Gap to its advantage at a time when East Timor was an
Indonesian colony.
Since then, Canberra has enacted domestic legislation to deny the
jurisdiction of international courts over the chunk of East Timor's
fuel-rich territorial waters that it is believed to have seized. Australia's
resources minister, Nick Minchin, once hinted that aid might be cut off if
Dili did not play ball. The fuel is worth "zillions" of dollars, to quote
Gareth Evans, a former Australian foreign minister.
East Timor is caught between the devil and the deep. Though Megawati
Sukarnoputri put a good face on things and attended the independence
celebrations, Indonesia did not willingly relinquish control.
Australia is the new republic's best bet against a return of Indonesian
occupation but the price of its protection has not changed since Woolcott's
letter. Its not unlike Panama, which would not have become an independent
country if a bunch of Colombian politicians had not guaranteed the US
sovereign rights over the proposed canal zone in 1903 in return for enabling
them to secede. Xanana Gusmao will have to walk a very tight line.

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