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Journalist discusses his book about Australia's attempts to control East Timor's oil after independence.

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Wednesday , 6 June 2007



FRAN KELLY : When East Timor’s independence finally arrived it was a remarkable achievement for the tiny country that had faced overwhelming odds. Noam Chomsky described the victory as a truly stunning accomplishment, almost without parallel.


But after having played such an important role in helping secure independence for East Timor, the Australian government seemed to do an about face when it came to negotiations over the Timor Sea’s oil and gas supplies. This morning we’re going to have an insider’s account of how East Timor prevailed for six years of punishing negotiations in a real David and Goliath battle for the right to secure its economic future.


Paul Cleary has been a member of Canberra’s press gallery for ten years; he also worked as an advisor then to the Prime Minister of East Timor in the Timor Sea Office from 2003-2005. He travelled extensively around the country and he sat in—I’m almost certain—in a number of meetings. And that’s what we’re going to talk about now. He’s the author of a new book called: Shakedown: Australia’s Grab for Timor Oil . Paul Cleary welcome to Radio National Breakfast.


PAUL CLEARY: Morning Fran.


FRAN KELLY: Paul Cleary, did the East Timorese always recognise that they were going to be in a David and Goliath struggle for what they believed was rightfully theirs? Was this their mindset from the start?


PAUL CLEARY : I think at the beginning actually oil wasn’t a big factor in the independence movement. I mean, what the Timorese wanted was just an end of the terror that went on for 24 years. But what was amazing was as soon as independence came on the scene, all that the oil companies and the Australian government wanted to talk about was oil. That’s all they really cared about.


FRAN KELLY: Once we’d gotten through the independence negotiations?


PAUL CLEARY: Even before. From 1998, early 1999, Mr Downer met with Gusmao—President Gusmao—when he was in prison and all he really wanted to talk about was the oil. And he got what he thought was a verbal agreement that Timor would honour the terms of the Timor Gap Treaty which had been negotiated with Indonesia and which was very unfavourable to East Timor’s interests. So it’s funny how with independence—the outsiders, their big concern was oil.


FRAN KELLY: Okay. Let’s set the scene for everyone listening though. What are these oil fields worth? Give us a sense of the sort of money Australia and East Timor were negotiating over.


PAUL CLEARY : In terms of the known resources—there’s a lot more because it’s quite a new area—we’re looking at about US$100 billion that’s sitting on the north side of the half way line, essentially on Timor’s half of the Timor Sea.


Unfortunately in the early phase of negotiations, Timor was only going to get 20 per cent of that. And in the 2002 treaty they only managed to get 40 per cent.


FRAN KELLY: So at the end, at this point, Timor has ended up with?


PAUL CLEARY: 60 per cent. In the negotiations they went from 20 ….


FRAN KELLY: So that’s a victory for David?


PAUL CLEARY: Well, that is a victory for David. So they went from 20, which Australia pursued an effective share of 20 per cent. Australia was wanting Timor just to sign—to replace its name, to replace Indonesia with East Timor in the Timor Gap Treaty—and to get a stream of revenue which I think, and even many experts at the world bank would say, wouldn’t have made that country viable. So you’ve got to question what Australia’s motives were.


FRAN KELLY: Okay. Let’s go back to these negotiations because you talked about the Timor Gap Treaty there, you’ve talked about the median line, most of these oil reserve lies on Timor side of the half way line.


PAUL CLEARY : Timor side, exactly.


FRAN KELLY: But what it all goes back to is a kind of geological argument, if you like a maritime geological argument. And Australia came up, many years ago—many, many years ago—with the notion of the Timor Trough …




FRAN KELLY: … and the Timor Trough, Australia has argued emphatically—in kind of world forums around the globe—and consistently that it is a geological plate formation that shows that even though it’s more than half way across to Timor it’s our territory.


PAUL CLEARY : Yes. Well in fact that’s wrong. Australia made that argument successfully and that’s why Indonesia signed off on this boundary in the early 70’s which went two thirds of the way out towards Timor. In fact, what the Timor Trough is, it’s actually a wrinkle ….


FRAN KELLY: I love that term, a wrinkle.


PAUL CLEARY : A wrinkle, and what it is ….


FRAN KELLY: In the continental shelf.


PAUL CLEARY: … it’s a crumple zone. What happened, the two plates—the plate north of Timor actually collided and that’s like the impact, actually went into it to create the Timor trough. In fact Timor and Australia are on the same continental shelf. And this is what geologists have shown by looking at the fossils and also seismic work since the late 1960’s.


The geologist Audley-Charles spent two years up there. And also the World War II diggers, they got there. Neville Shoot wrote this in an introduction to one of the great histories of the engagement that most of them came from Western Australia and they found that the rocks, the land, was very similar to what they found back home.


FRAN KELLY: Just like home.




FRAN KELLY: East Timor’s always been pretty close to Australia in that sense and, you know, the diggers were helped by East Timorese during the Second World War. I think the people of Australia have always felt a certain place in our hearts for the East Timorese.


So when it became public in the later years of this wrangle over the oil, that there were sort of raised voices and perhaps even threats veiled or otherwise being made against East Timorese. I think that was a bit of a shock.


PAUL CLEARY : I think so. I mean, it just indicates, I think, how some times our government and particularly the foreign policy elite can be just so far out of step with public opinion. I think Australians—after all the Timorese went through, those terrible 24 years and losing a third of their population—that we should have really been about helping this country to stand on it’s own two feet and to really be viable.


Unfortunately I don’t think that really was the policy. The military engagement was fantastic; the emergency phase. But as soon as independence came we were giving Aid of $40 million a year. I mean, that country really needed something like a martial plan to get it together.


FRAN KELLY: I mean, ironically, the martial plan could be funded by the Timor oil.


PAUL CLEARY: Exactly, but that was the thing.


FRAN KELLY: It could be released and produced.


PAUL CLEARY: Indeed. Yes.


FRAN KELLY: What is really revealing in this book of yours—and you were very much an insider in this process and you had access to a lot of confidential documents and conversations—seems to be the threatening pose that Australia took at times; really unapologetically.


I mean, we really did say: or else. And that was or else and the threat was reducing their Aid budget or you sign over to us or else.


PAUL CLEARY: Yes. Indeed.


FRAN KELLY: Tell us about some of those meetings or one of those meetings.


PAUL CLEARY: Well Mr Ramos-Horta who throughout this tried to …. I mean the President Mr Gusmao and the Prime Minister Mr Alkatiri were really making some very strident statements from 2004 when Australia was basically saying: you don’t have any rights, there is nothing to negotiate …


FRAN KELLY: Take it or leave it.


PAUL CLEARY: … we don’t even recognise your claim. That’s it. This is after the Timor Sea Treaty was signed. Mr Ramos-Horta brokered a truce, and this was just before the election, it was a critical time and public opinion was really starting to rise on this issue.


And Downer managed to take it out of the limelight by this meeting with Mr Ramos-Horta. They agree to this fast track process. First meeting after the election, they turn up and they say: we’ll give you $3 billion—paid over 30 or 40 years by the way, so it’s about one and a half billion US in today’s dollars—for a field worth $60 billion.


And that was to be the settlement. Timor already had 18 per cent of the Greater Sunrise field but many would argue it’s actually entitled to 100. So the settlement Australia wanted was $3 billion over the life of the field.


FRAN KELLY: And as you say, it was very much ….


PAUL CLEARY: Take it or leave it.


FRAN KELLY: Take it or leave it.


PAUL CLEARY : And then they broke off negotiations; first meeting after the election. This was meant to go to Christmas. Remember when Mr Downer talked about the Christmas present we could give the Timorese? Very sort of patronising, paternalistic terms, but first meeting after the election they break it off; that’s it. They walk out.


FRAN KELLY: In the end it was people power here in Australia … that changed the dynamics of this.


PAUL CLEARY: Absolutely.


FRAN KELLY: … that changed the dynamics of this.

PAUL CLEARY: It’s a wonderful example of what ordinary Australian people can do by just faxing, telephoning their politicians. And also we had people—very ordinary people like Ian Melrose, but obviously someone who had a bit of money.


FRAN KELLY: Ian Melrose, just a businessman with a conscious who read a story about a girl dying ….


PAUL CLEARY: A 12 year-old girl dying of worm infestation which could have been saved with a ten cent tablet. And he picked up the phone, he rang Oxfam, he said: what can I do.


FRAN KELLY: And Oxfam said?


PAUL CLEARY: Well Oxfam actually tried to get him involved with them, but he just wanted to do his own thing which was amazing. And he did it, he really did it all himself.


He got involved with a grass roots organisation which was set up called the Timor Sea Justice Campaign, a group of law students from Melbourne and they ran this incredible grass roots campaign.


FRAN KELLY: And then the odium around it just brought the government back to the table.


PAUL CLEARY: Well I think the World War II diggers actually won it. That’s what I say. I say the World War II diggers who have lobbied tirelessly on the part of the Timorese since 1975. And they came back and they did these incredible ads, these television ads.


FRAN KELLY: Paul, there’s a bigger story here about where East Timor is now and what it needs to get it going. But I loved in your book the descriptions of the oil seeping up from the ground in East Timor, so it’s there for all to see.


How long till it is… those fields are developed and the money is flowing into the coffers.


PAUL CLEARY: The money’s already flowing. There’s a major field called Bayu-Undan which went into production in 2004—by the way the Australian government tried to stop that development. At one point in negotiations they said: we will not ratify the Timor Sea treaty unless you sign over the 80 percent of the Greater Sunrise fields.


So they were willing to effectively cut this country’s economic lifeline. That field did get up and running. It’s now providing a massive amount of revenue; more than the country can spend.


Most of the revenue is actually being saved through the US Federal Reserve. It’s being invested fairly wisely. The big problem for Timor is to spend the money.


FRAN KELLY: Okay. Paul Cleary, thank you very much for this tale of intrigue. It is told like that too; it’s told like a real thriller. Thanks for joining us.


PAUL CLEARY: Thank you Fran.


FRAN KELLY: Paul Cleary, and his book: Shakedown: Australia’s Grab for Timor Oil is published by Allen and Unwin.