Comment

by G A McKee

New realities

The shock waves generated by Ambassador Galbraith's speech will most likely still be reverberating through the corridors of the Australian Department of Foreign Affairs (DAFT) and Department of Industry, Science & Resources (DISR). The original architects of the Timor Gap Treaty - who still inhabit these departments - will have difficulty coming to terms with the new realities created by East Timor's status as an independent nation. The irony will not be lost on those who remember former Australian Foreign Minister Gareth Evans insisting only a few years ago that "new realities" dictated Indonesia's sovereignty over East Timor was "irreversible".

The oil industry - as represented by APPEA - should be pleased with East Timor's recognition of the need for an improved fiscal regime in the Timor Gap, one which will encourage more exploration and the development of smaller fields. The oil industry is quite aware that the existing Timor Gap offshore fiscal regime is onerous by word standards. In Galbraith's words "The East Timorese leadership promise a new framework that will be modern, stable and more business-friendly".

Alarmism

It was earlier predicted that "alarmism" would be used by the Australian Coalition government to pressure the East Timorese side into being more "co-operative". Professor Gillian Triggs - an international law expert from Melbourne University - hinted at this hardball approach in the final paragraph of her recent work on the Timor Gap petroleum issue, entitled "Legal and Commercial Risks of Investment in the Timor Gap". Referring to a desired continuation of the status quo, Professor Triggs said "This more productive arrangement, however, may have to wait until UNTAET has departed, and resource exploitation has been brought to a standstill".

The East Timorese seem to have now indicated that they will not be intimidated by those who - disingenuously - claim the moral high ground of legal and fiscal responsibility. Students who wish to read Professor Trigg's paper (probably the closest representation of the Coalition government's legal and political position) can download it from http://www.law.unimelb.edu.au/mjil/contents/2triggs.html

Ambassador Galbraith and Dr. Alkatiri on 9 April 2001 at the APPEA conference appear to have deliberately undermined the perception that the East Timorese can be stampeded into an early compromise through fear of petroleum projects grinding to halt in a legal vacuum. This may have been considered necessary to force the Coalition government to talk about the substantive issue, which is a settlement of maritime boundaries in the Timor Gap. If one side refuses to discuss the substantive issues, how can there be dialogue? If maritime boundaries are non-negotiable, how can negotiations proceed?

What is the Australian position?

What must be remembered is that there is no singular "Australian" position as such. It depends who within the government one speaks to. The present Howard/Downer coalition government would appear to adopt the reported position of the government departments, DFAT and DSIR. This position is presumably articulated in the public domain by Professor Triggs. It clings to the principles of "natural prolongation", whereby Australia claims a seabed boundary at the bathymetric axis of the Timor Trough, very close to the southern coast of East Timor. Therefore any revenue to East Timor from petroleum projects in Zone A is seen as representing Australian "generosity".

However, we must remember that the East Timorese position - based on UNCLOS and the concept of maritime boundaries drawn from lines of equidistance - is acceded to by the alternative government of Australia, the Australian Labor Party. Additionally, as reported earlier, the recent bi-partisan Senate enquiry supports the East Timorese position. Most observers believe that Australian public opinion supports East Timor's interests. It is quite possible now that the oil industry - reassured by common interests with East Timor - may want to see a less onerous and more streamlined fiscal regime in the Timor Gap. From this perspective, the Coalition government's line might well be a minority Australian view.

Widening the Gap

The issue of "widening the Timor Gap" was raised by Galbraith, and this will also raise Commonwealth government alarm bells, for Australian jurisdiction over the Laminaria/Corallina petroleum reserves to the west, and Greater Sunrise to the east, is called into question. Whether this is a negotiating strategy or a serious claim remains to be seen. Academic maps depicting scenario's for East Timor's southward 'coastal projection' under the rules of UNCLOS show that the existing Timor Gap is too narrow. Portugal never agreed to the current width of the 'Gap' when this was negotiated between Indonesia and Australia in 1971 and 1972. This fact is recognised by Australia, and is taken into account in the original 1972 seabed treaty made with Indonesia. This treaty states (in Article 3) that "the Government of the Commonwealth of Australia and the Government of the Republic of Indonesia shall consult each other with a view to agreeing on such adjustment or adjustments, if any, as may be necessary in those portions of the boundary lines between points A15 and A16 and between points A17 and A18". Laminaria/Corallina lies between A17 and A18, and Greater Sunrise straddles point A16.

Reaction from the Northern Territory government

The recent involvement of the NT government 'bully boys' has been predicted for quite some time, and Galbraith in all likelihood was all too aware of this scenario. The Commonwealth government's political tactic will probably be to personalise the issue in an attempt to discredit and isolate Galbraith. That is, to isolate him from both his East Timorese and US counterparts. This is already being attempted. The NT government's dishonest and underhand attacks on Galbraith may only serve to strengthen East Timorese resolve. Calling Galbraith - by inference - "crazy" is typical of such tactics [refer SMH: East Timor eyes off oil's billions, reg.easttimor Tue, 17 Apr 2001]. According to this report "A spokesman for Mr Manzie said Mr Galbraith appeared to have told East Timorese leaders they could afford to fight a legal battle for 25 years to get all the resources in the Timor Gap". This piece of misinformation emanating from the Northern Territory government is itself an insult to the entire East Timorese leadership who are portrayed as mere puppets manipulated by Galbraith. It must be remembered that Dr. Mari Alkatiri accompanied Galbraith to the APPEA conference, and the address was in effect a joint address by both leaders, with Galbraith doing the actual delivery. Alkatiri of all people will know - from his long experience of war with Indonesia - of the necessity for persistence and perseverance in order to achieve a just outcome.

Footnote

Below is a piece of analysis - posted to a private list on 8 December last year - which attempted to make an educated guess at possible political tactics by the Howard government and the Northern Territory government in relation to the Timor Gap negotiations. At the same time it was hoped the scenario outlined would be incorrect. However recent actions by the Northern Territory government tend to reinforce the predictions.

This rhetoric has been inspired a reading today of Chapter 4 of the EAST TIMOR REPORT published yesterday by The Parliament of the Commonwealth of Australia.

FINAL REPORT OF THE SENATE FOREIGN AFFAIRS, DEFENCE AND TRADE REFERENCES COMMITTEE

December 2000

You can download the text, either as PDF or Word files, from www.aph.gov.au/senate/committee/fadt_ctte/index.htm.

Yesterday, exactly 25 years to the day after the mass invasion of Dili by Indonesian forces, the long awaited Senate Enquiry Report on East Timor was released.

One chapter (4) is devoted in it's entirety to the Timor Gap Treaty, under the headings

* Introduction * Indonesia's interest * 1997 Delimitation Treaty * Administrative arrangements in the transitional period * Bayu-Undan liquids recovery and gas recycle project * The transition from Indonesia to East Timor * Attitude of the East Timorese

The "Inside Indonesia" piece was written in January 2000 at a time when East Timor's infrastructure had been all but destroyed and the half the population displaced. Reality had been turned upside down. An intact infrastructure and uncertain Independence in mid 1998 had become a ruined infrastructure and certain Independence a little over 12 months later.

It is easy to understand how the 'successor state' idea for the Timor Gap Treaty might have been appropriate for the first set of circumstances, but inappropriate in the latter (present) situation.

The inevitable 'median line' push by the East Timorese leaders has been accepted by the Labor Party as a reasonable and legitimate position.

Yesterday, the bipartisan Senate Enquiry report almost an endorsement of Labor's ground-breaking policy which

* is prepared to accept a permanent seabed boundary between Australia and East Timor based on lines of equidistance (the median line settlement); or

* is prepared to accept a joint development zone in which East Timor receives at least 90% of the revenue from areas north of the median line.

As yesterday's Senate Enquiry Report put it

* "the median point is now generally accepted as the basis for delimitation" (para. 4.56); and

* "the ratio of 90:10, as claimed by East Timor, would not be unreasonable" (para 4.58)

From the East Timorese perspective, there will be advantages and disadvantages for each scenario, and their process of evaluating the implications of each option will take time, resources and patience.

The East Timorese must not be deprived of the means to make a careful and considered choice, one which will have long term consequences for their fledgling economy - as well as involving issues of national sovereignty. It took Australia 10 years of diplomacy over the period 1979 - 1989 to partially dislodge Indonesia from her strong median line stance in relation to the Timor Gap. The East Timorese incentive to resist similar Australian diplomatic pressure is orders of magnitude higher, so it is going to be a challenge for Commonwealth Department of Foreign Affairs and Trade (DFAT) to come up with a winning formula.

An historical view of the East Timorese position (based on available media reports) can be summarised as

* Phase 1: initiation and endorsement of the 'successor state' idea in July 1998

* Phase 2: November 1999 - June 2000. A transition period between the successor state and median line positions. During this period signals at times coming from the East Timorese leaders appeared mixed and ambiguous, ranging from "we will honour the Timor Gap Treaty" to "the Timor Gap Treaty is illegal".

* Phase 3: a strong push for a median line settlement based on a clear understanding and consensus that this is mandated by international law. This position is eventually accepted by the Labor opposition and, as of yesterday, by the bipartisan Senate Enquiry.

DFAT however, in late November, made an extreme claim in support of a seabed boundary located at the bathymetric axis of the Timor Trough. This claim would give Australia 100% of all government revenue from petroleum projects north of the median line. The gap between this claim and that of the East Timorese is so immense that it can only be interpreted as a political manoeuvre on the part of DFAT (see earlier posting, "Timor Gap Negotiations", Thu, 30 Nov 2000).

What will we see in Phase 4, now commencing?

This might be the most definitive phase, which is to close the deal in the interests of all parties, namely the Commonwealth Government, the East Timorese Transitional Government, and the Timor Gap Production Sharing Contract (PSC) operators.

It will be difficult for DFAT strategists to undermine the East Timorese position using purely legal means. And at the present time, Australian politics - in terms of public and grass-roots parliamentary support - seems to favour the East Timorese position.

Therefore, DFAT have will faced with a difficult dilemma. Either they go with the flow and follow the lead of the Labor Party, or else they work to reverse the tide of pubic opinion and at the same time exert diplomatic pressure on the East Timorese leadership.

The most effective means of reversing the tide will be through political means. The PSC operators and the Northern Territory government might be encouraged to make a series of alarmist press releases warning of serious consequences for the Bayu-Undan project unless East Timor agrees to a continuation of the status quo, or a moderate tweaking of the coefficients in the existing Treaty.

The spectre of "uncertainty" might be raised like the sword of Damocles hanging over Bayu-Undan. At the same time , statements from the Australian government might be crafted to isolate the Labor opposition, setting them up as scapegoats for a manufactured electoral backlash in the Northern Territory.

The US Ambassador to Australia might even be persuaded to take a public position in support of the government under the guise of lending a helping hand to a leading US Corporation - Philips Petroleum.

A rift between ex-Ambassador Peter Galbraith - UNTAET's chief Timor Gap negotiator - and his influential US peers might be engineered in order to apply diplomatic pressure. Industry groups might be urged to lobby the Labor Party to change it's policy on the Timor Gap, in particular to reverse it's acceptance of a permanent seabed boundary based on lines of equidistance. Media commentators like the Sydney Morning Herald's P P McGuiness will probably weigh in to add fuel to the fire, gleefully reinforcing the contrived Labor "anti-development" stigma forced on it by "fuzzy-headed idealists and meddling clergy from the chattering classes". In short, we will have a political mess and much divisiveness.

On the other hand, if the Howard Government and DFAT choose to break with past, and accept the current public mood of generosity, we will see a new Timor Gap Treaty amicably negotiated. It will be signed not in an aeroplane, but in Dili with a celebratory and friendly mood. There will be profits with fiscal and legal certainty for the PSC operators, a more secure future for the East Timorese nation, and praise for Australia's honourable actions to reinforce - not undermine - the strong international image created through it's leadership of INTERFET.

References:

a) Galbraith's speech

"Timor Sea Petroleum: APPEA keynote address" Transcript of Galbraith's speech [reg.easttimor, 20 April 2001]

Michael Weir "UN takes tough line on Timor Gap negotiations" Sydney Morning Herald, Tuesday 10 April, 2001 [reg.easttimor 19 April 2001]

Dennis Schulz and Mark Forbes, "Oil, gas and money: Tiny Timor talks tough" The Age, Thursday, 19 Apr 2001 [reg.easttimor 19 April 2001]

b) Reaction from Northern Territory Government

Craig Skehan, "East Timor eyes off oil's billions", Sydney Morning Herald, April 18, 2001 [reg.easttimor 18 April 2001]

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