Fragile nation exploited, says Gusmao

Tom Allard, The Sydney Morning Herald, 20.10.14

East Timor: Australia and other foreign interests lambasted

Foreign interests tried to “dominate” East Timor, exploiting the fragility of the tiny nation to deny its rightful share of the oil and gas revenues in the Timor Sea and sow unrest, Prime Minister Xanana Gusmao says.

Mr Gusmao made the remarks as the fledgling state is embroiled in bitter fights with the Australian government and multi-national oil companies over the resources that contribute 90 per cent of its income.

It emerged last year that Australian Secret Intelligence Service (ASIS) agents bugged East Timor’s government offices to gain an advantage in treaty negotiations over the lucrative reserves that lie between the two countries.

In a rare and wide-ranging interview with Fairfax Media in the Timorese capital, Dili, the former resistance leader and political prisoner rebuffed suggestions that the country will exhaust its sovereign wealth fund and become effectively bankrupt in a decade.

At the heart of East Timor’s grievance is the belief it was exploited by the Australian government during negotiations over the untapped resources in the Timor Sea, conservatively worth more than $40 billion.

“We are fighting for our sovereignty. We are fighting to say ‘it’s our right’,” Mr Gusmao said.

“If you are a fragile country, if you don’t open your eyes, if you don’t have any intelligence structure to know what’s going on, other people from outside will dominate you.”

After negotiating a highly favourable deal on the boundary with Indonesia when East Timor was still occupied, Australia withdrew from the dispute-resolution procedures governed by the UN Convention on the Law of the Sea two months before East Timor achieved independence in 2002.

Australia then negotiated two agreements while East Timor was extremely vulnerable – in 2002, when it had no income and a traumatised people, and 2006, when it was racked by internal divisions and violence that displaced 150,000 people, 15 per cent of its population.

East Timor wants the treaties nullified because they were not negotiated in “good faith”, and is using the spying by ASIS as its main argument.

Mr Gusmao said he was “shocked” by Australia’s withdrawal from the Law of the Sea Treaty and “disappointed” by the spying.

East Timor and Australia are in negotiations to resolve the spy case and the dispute over the maritime boundary.

Mr Gusmao also attacked the tax minimisation practices of multinational corporations.

“We see tax avoidance, trillions not billions of dollars each year [globally],” he said.

East Timor is in a dispute with oil giant ConocoPhillips, Woodside Petroleum and Santos over taxes as the resource companies contest $US362 million ($414 million) in payments – big money for a country with an annual budget of $US1.5 billion.

East Timor banks its proceeds from oil royalties and taxation in a sovereign wealth fund to avoid the “resource curse”, uncontrolled spending followed by economic collapse that has afflicted many developing countries.

Investment income from the fund – which stands at $US16.6 billion – is spent on infrastructure, health and education.

As existing oil and gas fields in the Timor Sea are depleted and East Timor refuses to approve the development of the $40 billion Greater Sunrise project until it gets a processing facility on its territory, a widely quoted analysis from non-government organisation La’o Hamutuk suggests the fund will run out by 2025.

Mr Gusmao dismissed the analysis. The latest IMF estimates forecast that, in a worst-case scenario of no further diversification of the economy or development of oil and gas fields, the fund would still have more than $10 billion by 2025.

Highly recommended: Paul Cleary, Shakedown – Australia’s grab for Timor oil, Allen and Unwin, 2007