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Just neighbours

On the day Timor-Leste became a sovereign nation, the new government signed a deal with Australia. The 2002 Timor Sea Treaty resembled the earlier Indonesia-Australia treaty in place since 1989, with one fundamental difference.

Whereas the earlier arrangement ignored Timorese interests, under the new agreement 90 per cent of the earnings from the Joint Petroleum Development Area (JPDA) went to Timor-Leste, with the remaining ten per cent going to Australia.

‘It will give East Timor an opportunity to build itself into a truly successful nation,’ Foreign Minister Alexander Downer said at the time. While some international law commentators lauded the deal as a good compromise; others are more circumspect.

Geoffrey McKee, a chemical engineer with more than three decades of experience in the Australian oil and gas industry, is one of them. The treaty will deprive the Timorese of a ‘swathe of important benefits’ especially down-stream infrastructure development, he says.

The Timor Sea’s real prize was not the joint development area, otherwise known as Timor Gap, but oil and gas fields on its fringes: especially, the Greater Sunrise. In August 2002, a Shell spokesman told the Joint Standing Committee on Treaties that the Greater Sunrise expected to return $30 billion in export revenues, with approximately $8 billion in taxes for the two countries.

McKee says it could earn much more. ‘At that time the expected earnings were based on US$20 a barrel for crude, now it’s around US$50,’ he says. ‘The $3 billion offered to East Timor by Australia is far too low, if it is intended to settle a dispute over a gas field that could yield about $90 billion in export revenues.’

More on the $3 billion payment later, but let’s return to our starting point. One of the mysteries, among many, is why Timor-Leste signed the treaty with Australia three years ago. McKee suggests Timor-Leste was badly served by  inexperienced negotiators. The country also needed an income.    

A Commonwealth parliamentary library research note puts it this way: ‘Australia had refused to agree to a new seabed boundary, and new talks on a final agreement might have brought both immediate and future investment in exploration and production to a halt.’
At stake for the Timorese was $8 billion over two decades. ‘With the East Timor government having no other major source of revenue (except foreign aid),’ the note continues, ‘it was in no position to stand on a point of principle.’

Move forward to March 2005: officials from Timor-Leste and Australia meet to resolve what has become a bitter fight over access to resources in the Timor Sea. How did it come to this after the diplomatic backslapping three years ago? The answer depends on whom you talk to.

Pro-Timor-Leste advocates allege that Canberra’s aggressive negotiating position is denying the region’s poorest nation the right to determine its economic future, while the Commonwealth says it refuses to budge on what it claims is rightfully Australia’s.
Two things that are clear through the conflict is the uncertain place of international law in an era of growing bilateralism, alongside the need for greater transparency in Australian foreign policy.

Coming only a few months after accusations of stand-over tactics by Canberra, the talks in March were quickly deemed a success—by the host nation. ‘I’ll only say this,’ said Foreign Minister Alexander Downer. ‘I think we’ve made progress.’

A framework for an agreement had been ‘nutted out’, he said. This ‘creative solution’ would delay boundary negotiations, in favour of revenue sharing. If Timor-Leste dropped its claim to a median line between the two nations it could reportedly receive $3 billion over three decades.

In February a senior Department of Foreign Affairs and Trade (DFAT) official said the nature of the ‘sovereignty offset’ was unclear, as was whether the payments would be in the form of aid. ‘How it is characterised, how it is paid and how much it is will need to be worked out in our negotiations,’ the official said. DFAT says the ‘creative solution’ offers fiscal certainty, without jeopardising either country’s future legal claims.

A similar clause was included in the 1989 Indonesia-Australia Timor Gap that allowed the two sides to set aside the issue of the maritime boundary, while the exploitation of resources went ahead. This was carried over into the 2002 treaty signed between Australia and Timor-Leste.

But what does this mean? The DFAT briefing includes this explanation, ‘Our position is that [determining] the permanent boundaries should be put off for quite some time. At least until the resources have been exploited.’

Tom Clarke, of the Timor Sea Justice Campaign, argues that this is already happening. The Laminaria/Corallina oil fields are claimed by both nations, but Australia exploits about 150,000 barrels daily from this area.

‘Every day that goes by, the Australian government takes an average US$1 million contested royalties,’ says Clarke. ‘[These] gas fields will be depleted in the next few years, before any boundaries are set.’

In late March, Timor-Leste formally protested against Canberra’s issuing licences over areas that it claims as its own. ‘International law requires that Australia exercise restraint in disputed maritime areas,’ said Prime Minister Mari Alkatiri. If only it were that easy. There is little convergence in terms of how the law should be applied. Australia claims sole seabed jurisdiction in areas outside the JPDA because of a treaty signed with Indonesia more than three decades ago.

And yet notes for new exploration contracts for areas outside the jointly operated zone suggest that Canberra acknowledges that these areas are contested. ‘East Timor has declared an exclusive economic zone and continental shelf extending 200 nautical miles from its baselines which include this release area.’

The note continues, with the justification, ‘Australia has exercised exclusive sovereign rights over this area for an extended period of time, and has notified East Timor that it will continue to do so.’ Gillian Triggs, of the University of Melbourne’s Institute for Comparative and International Law, endorses Australia’s position. ‘The fact is that the co-ordinates were impeccably and fairly drawn out 32 years ago,’ she said in a January article. ‘So unless Australia also believes there is a dispute, there is really no dispute about those lines.’

(More recently, Professor Triggs wrote in an email that her central point is that ‘both states have arguable legal positions at international law and that joint management of the resources is a sensible way to unlock the oil to the mutual benefit of East Timor and Australia’.)

These co-ordinates followed international law that determined Australia’s maritime boundary in terms of its continental shelf. From the early 1950s, Australia has argued that its maritime boundary follows its shelf that reached as far as the Timor Trough (at times only 9.3 nautical miles from Timor-Leste’s coast). East Timor’s former colonial power, Portugal, meanwhile, called for the establishment of a median line. Indonesia tried the same in the 1970s, with no success.

Some ask whether referring to a continental shelf argument is a meaningful way to determine maritime boundaries. Charles Scheiner, a chemical engineer from the United States who has worked to support Timor-Leste’s political and human rights since 1991, dismisses the idea. ‘East Timor is on Australia’s continental shelf,’ he says. ‘If you look at geological history going back tens of millions of years, Timor has always been part of Australia’s continental shelf. It doesn’t make any sense.’

Geoffrey McKee, meanwhile, says it depends whether you are talking law or geology. In terms of international law, Australia’s continental shelf could end where Australia says it does; but in a geological sense, the issue is open for debate. Citing the research of Dr Tim Charleton, an expert on tectonics of the Timor Trough, McKee says that Australia’s continental shelf extends beneath Timor-Leste.

Dr Clive Schofield spent 11 years at the University of Durham’s International Boundaries Research Institute in the UK, but has recently taken up a post at the University of Wollongong’s Centre for Maritime Policy. Recent developments in international law, he says, have in any case largely relegated the continental shelf argument to the past.

Since the 1982 signing of the United Nations Convention on Law of the Sea (UNCLOS) came into effect, around 80 per cent of all disputes have enacted the principle of equidistance where the two countries were separated by less than 400km, he says. More pointedly the International Court of Justice’s (ICJ) judgment in 1985 in a dispute between Libya and Malta found that geophysical factors were ‘completely immaterial’ when deciding maritime borders.  

For Jeff Smith, a Vancouver-based oceanographer and expert on international maritime law, the situation is simple: ‘The existing maritime boundaries are not binding on East Timor.’ None of the previous treaties signed by Indonesia and Australia apply to Timor-Leste, he says, and the nation has the right to negotiate its own boundaries as it sees fit. ‘It’s simply a matter of international treaty law,’ he says. ‘Two parties contracting in a treaty situation cannot bind without the consent—generally expressed that is positively declared at the time of the making of an agreement—of the third party state.’

The third party at the time of the 1989 Timor Gap Treaty, where Australia’s foreign minister, Gareth Evans, famously clinked champagne glasses with his Indonesian counterpart, Ali Alatas, in an airplane above Timor Gap, was the occupied state of East Timor.

‘It’s no more than the common law principle,’ Smith adds. ‘If I agree to buy a car from you, the sale is not binding on third parties.’ Thus any treaty Australia-Indonesia treaty does not affect Timor-Leste. ‘It’s a contract—albeit in treaty terms—made in the absence of a third party.’

Where that leaves Timor-Leste in 2005 is unclear. Two months before Timor-Leste’s independence, Australia withdrew from the International Court of Justice’s jurisdiction on maritime issues and the International Tribunal on the Law of the Sea—the two main arbitration bodies for resolving such issues, which leaves the country few options. 

Timor-Leste’s chief negotiator, Jose Texeira, made no comment after the talks in March. Yet the country’s foreign minister, Dr Jose Ramos Horta, has previously shown interest in the so-called creative solution. ‘Without prejudicing either side over sovereignty claims, we should focus on revenue and resource sharing,’ he said last year.

News of the revived talks between Australia and Timor-Leste would be welcomed by Woodside Petroleum and its international partners, as its proposed development of the Timor Sea’s largest gas field—the Greater Sunrise—stalled when both parties failed to reach an agreement by the Christmas deadline.

Tomas Freitas, from La’o Hamutuk (Walking Together), a Dili NGO that has advised the government on petroleum law, is unconvinced. ‘We do not care how much money we’re going to get from the Timor Sea,’ he says. ‘We will be proud if we can tell our children and grandchildren that the border between Timor-Leste and Australia is a median line, rather than a line to [Australia] … If our leaders prefer money, rather than sovereignty, I think they will lose their people in the future.’

Yet money is a major concern for a nation where many live on less than 55 cents a day. An open letter signed by more than a dozen US politicians and delivered to the Australian prime minister in March made this clear. Urging speed, the politicians called for the establishment of a permanent maritime boundary and revenue from disputed oil and gas fields to be held in trust. East Timor’s citizens, the letter said, ‘continue to struggle against illiteracy, poverty, preventable diseases and a lack of basic services’.

Particularly concerning to the politicians were reports of preventable deaths resulting from food shortages and dengue fever outbreaks. ‘An equitable sharing of oil and gas reserves would enable Timor-Leste to provide better health care and other essential services to its citizens,’ they wrote.

While acknowledging Australia’s generosity to East Timor following its independence in 1999, the politicians said that the US$2 billion Australia has received from the Laminaria/Corallina fields had repaid the debt. Oxfam released a report last year that argued that Timor-Leste risked becoming a failed state if Timor Sea resources were not shared more equitably.

Charles Scheiner agrees, and then offers the following example. Soon after the 1999 referendum Scheiner moved to Dili, where he worked at La’o Hamutuk. Two colleagues of his were expecting a child. ‘By economic and education standards, they’re among the top ten per cent of East Timor’s population.’

Endah, originally from Indonesia, moved to Dili after meeting her Timorese husband at university. Scheiner later wrote in an article: ‘At 4pm Sunday afternoon, as Endah began to bleed, the couple scrambled for medical care.’ They went to the nation’s central hospital in the capital. ‘One midwife was trying to care for five birthing mothers. No doctors were on duty.’ Endah’s baby, healthy before its birth, died soon afterwards. Of the five children born to office-mates during Scheiner’s first year, four babies died within days of being born.

‘There’s two issues,’ he says. ‘One is East Timor’s legal entitlement to resources within its territory that would be the same whether East Timor were rich or poor. Then there’s the moral question [whether] Australia—a huge, rich country—wants to allow people to live in these kinds of standards.’

The Final Report to the Senate Foreign Affairs, Defence and Trade References Committee reached the same conclusion in 2002. It urged policymakers to help Timor-Leste move on from its status as a ‘mendicant state’.

Timor-Leste’s poverty, Charles Scheiner suggests, differs from the question of legal boundaries. ‘One is for governments to work out,’ he says, ‘the other is for people to work out in their own consciences.’   

Madeleine Byrne is a Fellow at OzProspect, and former SBS and ABC journalist.



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