Australia – Timor-Leste Timor Sea agreement thrown into doubt

Australia’s agreement with Timor-Leste to settle a permanent maritime boundary in the Timor Sea may have hit a snag as Timor-Leste’s politics is thrown into turmoil. On 30 August this year, the two countries announced they had reached the ‘central elements’ of an agreement to end a falling out over the disputed waters – and their oil and gas resources – with details to be made public this month.

The dispute, which marked a low point in bilateral relations, appeared to have been resolved with the outline of an agreed permanent maritime boundary and resource sharing from the Greater Sunrise liquid natural gas field. This implied that part of the Greater Sunrise field would remain in Australian waters, contrary to Timor-Lestes’ original position for a boundary to be established at the half way point under the provisions of the United Nations Convention on the Law of the Sea.

The initial text on the agreement also referred to ‘the establishment of a Special Regime for Greater Sunrise, [and] a pathway to the development of the resource’. While this could have allowed Timor-Leste’s preferred position of processing the LNG at a yet to be built facility on the country’s south coast, this was unlikely.

The lead Greater Sunrise partner, Woodside Petroleum, rejected the south coast option, instead opting for a floating processing platform. The quickest option – and that likely to produce revenue for Timor-Leste in time to address its falling income stream – would be to backfill an existing oil pipe from the Bayu-Undan oil field, which is expected to run dry by 2022.

What appears to be a compromise appeared to fit with the more conciliatory approach of Timor-Leste’s recently appointed Prime Minister, Mari Alkatiri. Alkatiri allowed former prime minister and Minister for Planning and Strategic Investment, Xanana Gusmao, to continue as lead negotiator on the Timor Sea following the elections.

Gusmao had always argued for all of Greater Sunrise to be within Timor-leste’s territorial claim and for processing the LNG on Timor-Leste’s south coast. A compromise would not have sat well with Gusmao’s preferred position.

This would not matter, given that Gusmao’s CNRT party lost power in the July elections, except that its former governing partner, the Fretilin Party, only won the elections with 23 of the parliament’s 65 seats, and just a 0.2 per cent margin over CNRT. Even in coalition with the Democratic Party, the new government only holds 30 of the 65 seats.

Under Timor-Leste’s constitution, the President can appoint as government the party with the most votes, even if it is short of a majority. With Francisco ‘Lu-Olo’ Guterres – a loyal Fretilin member – as president, he was expected to favor Fretilin to lead the government if it achieved the most votes of any single party.

This might not have mattered if Fretilin had continued in partnership with CNRT, as was widely expected before the elections. However, there appeared to be a falling out between Fretilin’s Alkatiri and CNRT’s Gusmao, likely over Alkatiri’s decision not to reciprocate CNRT’s support for Fretilin’s Rui Araujo as Prime Minister when Gusmao stepped down, or CNRT’s support for Guterres as President.

In this, Alkatiri appeared to have returned to the centralizing political style of when he was Prime Minister between 2002 and 2006. That centralizing style earned Alkatiri much political animosity at the time and contributed to the troubles of 2006, a result of which he was forced to resign as Prime Minister.

The Popular Liberation Party (PLP) and smaller Joyous Fertility of Timorese People’s National Unity (KHUNTO), and even Fretilin’s governing partner Democratic Party (PD), complained about Alkatiri’s lack of inclusion during negotiations over joining the new government.      

CNRT and the other two parties in parliament, PLP and KHNTO, recently joined together as the Parliamentary Majority Alliance (AMP – the same name as given to the CNRT-led governing alliance in 2007). Last week, the AMP voted down Fretilin’s proposed governing program in parliament and was expected to defeat a second vote on the program this week. If it did so, President Guterres could appoint a new Prime Minister who was able to command a majority in the parliament or, more likely the government would go into caretaker mode ahead of fresh parliamentary elections expected in late January.

The political instability that is currently shaking Timor-Leste could mean a delay in finalising the Timor Sea agreement, the details of which had been put off for another month. Or, it could mean that the agreement will not be signed before the expected elections, which could produce a different government with a different view on compromise on the issue.

It is likely that if the Timor Sea agreement is not signed before a new government is elected (or appointed, which remains an option if one that President Guterres would not prefer), the extent to which an agreement on the Timor Sea had been reached could be back on the table for renegotiation.