Author says Aust extorted East Timor over oil, gas

ABC - Transcript PM programme - Friday, 1 June , 2007 18:46

Reporter: Mark Colvin

Mark Colvin: "Shakedown" is a slang term for an act of extortion, and a shakedown is what the writer Paul Cleary calls the way Australia acted towards East Timor over the oil and gas in the sea between our two countries.

Mr Cleary is a former journalist who was appointed by the World Bank as an adviser to East Timor's Prime Minister in the oil and gas negotiations.

His new book on the story is called Shakedown, and I asked him first, if East Timor's case for the resources was so cut and dried, why had the Indonesians, who were in charge before Timorese independence, agreed so easily to Australia's demands.

Paul Cleary: Indonesia signed that agreement when international law in this area was in its infancy and subsequent to that the Foreign Minister said Australia had taken Indonesia to the cleaners.

Mark Colvin: So you're saying that Australia kind of behaved as some kind of regional bully?

Paul Cleary: I think there was a lot of bully that went on. Mr Downer pounding the table saying "we're a rich country, we can sit this out for 30, 40, 50 years". And also really threatening East Timor to sever its economic lifeline to stop development in the Timor Sea unless East Timor signed over its rights to 80 per cent of the biggest field in the area.

Meanwhile Australia was already exploiting the resources, which was actually contrary to international law. I think people in East Timor would've wanted it to take longer but however I think the Government particularly in the interim period from 2000 when the UN was in control in the transitional government, there was a need to get the revenue, so that's why the Timor Sea Treaty was negotiated in 2000 and signed in 2002.

Mark Colvin: And then we got to this point in 2004 when the East Timorese patience just ran out and one of the signals was actually on this program when Jose Ramos-Horta came on spoke to me about what the DFAT (Department of Foreign Affairs and Trade) negotiator Doug Chester had just done.

(excerpt from PM interview)


Jose Ramos Horta: The Australian side basically imposed on us an ultimatum. Mr Doug Chester, the Senior Official from Foreign Affairs, DFAT, that led the Australian delegation simply said "take it or leave it".

Mark Colvin: So what did you say to this "take it or leave it"? offer?

Jose Ramos Horta: Of course we can't accept ultimatums, we cannot accept blackmail, we are poor but we have a sense of honour, a sense of dignity of our rights.

Mark Colvin: Jose Ramos Horta is a man, usually very moderate words. What was the significance of what he said?

Paul Cleary: He is, I mean, in this book I call Mr Ramos Horta the consummate diplomat, he always is very measured and this is a rare example of him really loosing his cool, loosing his patience. Because this is a classic example of the bullying tactics that were being used, Mr Doug Chester telling the Timorese, "You hand over your rights to this field by 5 pm on October 28th and we'll give you $3-billion and that's it," and Timor by digging in standing up for its rights, managed to get 3 times that amount of current oil prices.

Mark Colvin: So it was worth hanging on?

Paul Cleary: Oh definitely. I think the Timorese are, realized once they got the revenue under the Timor Sea Treaty, and once Australia ratified that treaty the revenue began to flow. They had a bit more comfort they could afford to stand their ground and to really get the deal they thought was fair.

And in the end I think what the Timorese got was probably the 50 per cent share of Greater Sunrise, probably the minimum acceptable to the Timorese and the maximum that Australia was willing to give up.

Mark Colvin: So it ended without irreparable damage to the relationship between the two sides. What about the situation in East Timor, the spending of the money?

Paul Cleary: Timor does have a very good system to save the money. This was modeled on Norway, which really does have a very excellent system, very transparent, very robust, really cannot be tampered with.

Mark Colvin: They used their oil to really create a massive future fund…

Paul Cleary: Exactly, it was a massive future fund. Something that Australia could actually think about well with all the revenue we're getting from the commodity boom.


Essentially Timor is only spending about half the money and the idea is at the end of it, when the oil runs out, they'll have this massive fund and they can live of the interest forever.

Mark Colvin: This is to overcome what some people call the curse of oil?

Paul Cleary: The resource curse, that's right, or the paradox of plenty. All these problems that these countries get a huge influx of revenue, it inflates their exchange rate, political leaders go and spend money on weapons and big grandiose palaces and things. So the idea is to have the fiscal discipline.

The problem with Timor had been though is that they haven't done a very good job spending the money. And this has been the real weakness in the current government.

Mark Colvin: Because what we see, what we tend to see on our television screens from Timor recently has been riots and poverty.

Paul Cleary: Well exactly, you got massive youth unemployment. I mean the East Timor economy went backwards for four years straight in per capita terms.

I mean no developing country coming out of a post conflict situation can really stay together under that situation. And that was really I think the background to this crisis that a lot of people will have overlooked.

That it was the Government's failure with the UN withdrawing rapidly and I think that was a problem Australia urged that of the United Nations to pull out the peacekeepers.

The economy imploded, and the Government was very fiscally conservative, I think they had some quite patronising ideas about the Timorese, that you can't trust them with money, and they'll have this dependency mentality but there just wasn't enough money circulating around the economy.

Mark Colvin: Paul Cleary whose book Shakedown was released today.