It will take some months to play out, but Australia is finally before an international tribunal to determine whether or not it has acted legally over the division of the Timor Sea with Timor-Leste. At stake is the territorial boundary between Australia and Timor-Leste and, therefore, control of tens of billions of dollars worth of oil and gas resources.
Back in 2000, while Timor-Leste was still rebuilding its devastated infrastructure and preparing itself for independence, Australia insisted on retaining the Timor Gap Treaty, which had been so infamously agreed to with Indonesia in 1989. That this treaty was part of Australias acquiescence to Indonesias brutal 1975 invasion and subsequent occupation of Timor-Leste, in which up to a third of the population died, was especially galling to Timor-Leste.
Timor-Leste did not, at that early stage, even have a government. But Australia was already pushing hard in pursuit of its own narrowly defined national interests. Those interests were territorial and commercial. As it turned out, they were also personal. The person who led Australias case at that time was Foreign Minister Alexander Downer.
Downer later used Australian spies to bug Timor-Lestes cabinet office during negotiations, in contravention of Timor-Leste law. Timor-Leste claims that those actions invalidate the subsequent treaty. In his life after politics, through his consulting firm Bespoke Approach, Downer became a paid consultant to Woodside Petroleum. Woodside is Australias largest hydrocarbon company and stands to make billions of dollars from the arrangement.
During those negotiations, Downer told the cash-strapped Timor-Leste government that if it did not agree to retain the pre-existing border arrangements, income from the Timor Gaps oil deposits would be frozen. Without that income, the government of Timor-Leste would collapse and its people would starve.
According to reports at the time, Downer said to then Timor-Leste Prime Minister Mari Alkatiri that this approach was a lesson in politics. Timor-Leste being effectively blackmailed, Downer signed the first part of the three part agreement on 20 May 2002the day Timor-Leste was officially declared independent.
The treaty, however, was incomplete and, allocating Timor-Leste just 18 per cent of revenues from the oil field, led to two further agreements. These resulted in the 2006 Treaty on Certain Maritime Agreements in the Timor Sea (CMATS), which sets aside the question of a permanent boundary between the two countries for fifty years, by which time estimated reserves will be depleted.
CMATS effectively re-instituted earlier agreements, in 1971 and 1972, with Indonesia. These agreements allocated a territorial boundary along Australias continental shelf, placing it much closer to Indonesia than Australia. This arrangement was based on a 1958 iteration of the Convention of the Law of the Sea.
Even then, Indonesia had objected to the continental shelf defining the boundary. Foreign Minister Mochtar Kusumaatmadja said of that agreement that Indonesia had been taken to the cleaners. However, the border that had been agreed to remained.
Portugal, the colonial authority in Timor-Leste at that time, had not participated in these border discussions. There thus remained a gap in the boundary, corresponding to the Portuguese colonial territory.
Soon after Indonesias invasion of Timor-Leste, Australia resumed discussions with it about closing that gap. By this time, however, the Convention on the Law of the Sea had moved on. By 1982, the already contested continental shelf argument was replaced by the convention that maritime boundaries be drawn at a point equidistant from claimant states; the so-called median line principle. Addressing both the existing boundary arrangement with Indonesia, as well as median line argument, and recognising the potential for oil and gas exploitation, the two countries agreed to the Timor Gap Treaty.
This treaty allocated a smaller part of the gap exclusively to Indonesia, a larger portion to be shared between the two countries and a significant southern portion to Australia. The treaty remained unequal in terms of the median line principle, but did not disrupt the previously agreed boundary, while also allocating some of the resources of the gap to Indonesia.
Following the finalisation of the Treaty with Indonesia, Australian Foreign Minister Gareth Evans and Indonesian Foreign Minister Ali Alatas infamously celebrated by toasting with champagne toast while flying over the Timor Gap. However, development of the gaps resources had only just begun when Timor-Leste voted for independence in 1999.
It was against this background, and Timor-Lestes desperate need to begin earning revenue, that it went into negotiations with Australia. But what Timor-Leste did not know at this time was that Australia had brought the full force of its capabilities to bear in deciding the outcome of the negotiations; Alexander Downer had ordered Australian foreign intelligence officers to bug Timor-Lestes cabinet room, to gain inside information on Timor-Lestes negotiating strategy.
Australia was ultimately successful in restricting Timor-Lestes claims to those associated with the previous Indonesian agreement. The region in questionthe Joint Petroleum Development Area (JPDA) remained jointly operated, with a smaller northern section allocated to Timor-Leste, a larger central area to be divided between the two states, and a large southern area allocated to Australia.
The rest of the boundary remained as agreed with Indonesia. While Australia agreed to relatively generous terms in the allocation of income from the field, this assumed that Australia had a legitimate territorial claim in the first place. But more importantly, it placed the most valuable part of the Timor Seas hydrocarbon fields, the Greater Sunrise gas field, largely in Australian territorial waters.
The Greater Sunrise field has been estimated to be worth between $40 and $50 billion, with its revenue to be divided between Australia and Timor-Leste. Woodside Petroleumthe company that has since secured the services of Alexander Downerhas the contract to develop the field. However, a separate dispute between Woodside and Timor-Leste about processing the liquid natural gas from the field has stopped further development to date.
Timor-Leste has insisted that the Greater Sunrise gas be processed on shore in Timor-Leste to help kick-start a petro-chemical industry. This is intended to generate employment and technological transfers to Timor-Leste. With support from Australia, Woodside has so far resisted, preferring an off-shore floating processing site. If Timor-Leste is successful in having the maritime boundary redrawn, it will have the whip hand in deciding where processing will take place. If Woodside continues to resist, Timor-Leste may seek an alternative development partner.
Since the beginning of negotiations, Timor-Leste has been deeply unhappy about the whole issue of the Timor Sea. It has continued to argue for a fairer allocation of income from the Seas resources and a more internationally acceptable maritime boundary. Until recently, however, given that a treaty is in place, its legal case has been weak. And then came evidence that Australia spied on Timor-Lestes cabinet discussions. Timor-Leste argues that this spying means that the treaty negotiations were conducted in bad faith and hence invalidates CMATS.
Australias spying on Timor-Leste was confirmed by a former intelligence agent who ran the spying operation on Timor-Lestes cabinet. Following revelations about Downers employment by Woodside, he provided evidence of Australias actions to Timor-Lestes counsel, Canberra-based lawyer Bernard Colleary.
Last year, Timor-Leste took the matter to the International Court of Arbitration at The Hague, asking that CMATS be formally invalidated. In response, the Australian Attorney-General, George Brandis, ordered that Australian domestic intelligence agency ASIO raid Collearys office and seize the claimed evidence.
This seizure has since been challenged in the International Court of Justice, and the Australian government has since said it will return those documents that do not present it with a security risk. The problem, of course, is that what represents a security risk to Australia could, like its national interest, be widely interpreted. This is not to mention that Australia has again secured inside knowledge of Timor-Lestes position and thus advantaged itself in a way that constitutes bad faith.
Australia has not just acted badly in relation to Timor-Leste, it is being seen to have acted badly. The question will be, if Timor-Leste is successful in its claim, whether the court will send the two countries back to negotiations or whether it will rule on a median point maritime boundary.
If it is compelled to return to negotiations, the Timor-Leste government says the median line will be its minimum position. If the court rules on the median line, however, it will not need to negotiate. Either way, the result will push the maritime boundary very much closer to Australia and, in effect, put almost all of the Timor Sea oil and gas resources under Timor-Lestes jurisdiction.
As a result, beyond controlling the Greater Sunrise gas field and existing oil and gas fields, there is also the question about whether, if a median line boundary is imposed, Australia would be required to repay the billions of dollars it has inappropriately received under CMATS.
And perhaps as importantly, a median line maritime boundary with Timor-Leste will be at significant odds with Australias maritime boundaries with Indonesia. While redrawing Australias sea boundary with Indonesia is a separate issue, this will also come under reconsideration. Such a redrawing of boundaries would significantly reduce Australias maritime reach and expand that of Indonesia, with significant resource and security implications for both countries.
Australia is therefore trying desperately to hold off Timor-Lestes claim, and may yet resort to further pressurising tactics. Australian aid to Timor-Leste could come into question although, with access to greater oil and gas revenues, such aid would become redundant.
In pursuit of its narrowly defined national interest, Australia has all but officially alienated a small regional country that has wanted nothing more than to be a friend. As a friend, however, it has wanted to be treated as an equal. If Timor-Leste is successful in The Hague, it will be made equal to Australia under international law. There wont, however, be much left of the official friendship.