East Timor takes on "Goliath" Australia in oil talks

East Timor takes on "Goliath" Australia in oil talks

DILI, East Timor (DPA): When Australia and Indonesia agreed in
1989 to jointly exploit East Timor's vast offshore oil and
natural gas deposits, their foreign ministers inked the deal on a
private jet flying over the Timor Sea, toasting the treaty with
champagne.

The arrogant display, in which Australia implicitly recognized
Indonesia's 1975 invasion of the former Portuguese colony, was
likened to the Biblical David and Goliath, where the defenseless
territory's larger neighbors were unlawfully pillaging its
resources.

Now East Timor, which split from Indonesia last year following
a landmark ballot that was marred by murder and violence, is
fighting back.

The UN, which is administering East Timor as it prepares for
statehood, will begin negotiations on Monday with Australia for a
new agreement on control over oil and gas fields between their
maritime borders in the Timor Sea - called the Timor Gap.

East Timor, which has a US$43 million budget and is solely
dependent on foreign aid, could receive a financial windfall of
hundreds of millions of dollars in the next decade.

It is believed to be the first time the UN will negotiate a
treaty on behalf of a territory or country, and that history is
not lost on UN diplomat Peter Galbraith, who will head East
Timor's team.

"There is a sense of injustice," Galbraith, a deputy chief of
the UN Transitional Authority in East Timor (UNTAET), told
Deutsche Presse-Agentur in an interview.

Indeed, Indonesia and Australia spent years haggling over who
would control most of the Timor Gap as hundreds of thousands of
people in East Timor died under the harsh military occupation.

Galbraith said UNTAET was so confident East Timor was legally
entitled to the disputed oil and gas fields that it was prepared
to take Australia to the International Court of Justice in the
Hague if negotiations did not go well.

"The view of East Timor, which was shared by UNTAET, was that
the Australian-Indonesian treaty was illegal because Indonesia
didn't have the authority to make any decisions," he said.

Australia apparently did not think so and threatened UNTAET
officials during preliminary talks earlier this year. They said
the UN position could affect bilateral relations with East Timor,
a source close to the negotiations said.

"The Australians were basically shocked and I think fair to
say, not very gracious," the source told dpa. "They anticipated
that the UN would do nothing during its tenure and an independent
East Timor would follow the current treaty until a new treaty is
negotiated."

The Australia-Indonesia treaty divided the Timor Gap into
three connected vertical zones. The countries each controlled one
zone, and jointly managed and split profits from the larger third
section, called Zone A.

Maritime law in the early 1970s stated that a country's
natural boundary was its seabed, which benefited Australia
because its seabed north of Darwin is a 3,000-metre trench that
included nearly all of the Gap.

But by 1982, a new interpretation of maritime law stated that
countries were entitled to sovereignty over waters 440 kilometers
off their coast. If there were not a 440-kilometer boundary
between two countries, as was the case with East Timor and
Australia, the boundary would be the mid-way point between their
shores.

This interpretation meant that East Timor, still under
Indonesian occupation, was entitled to all of Zone A as part of
its mid-point boundary.

To avoid legal problems, the sides signed the 1989 interim
treaty creating the Gap zones - which together look like a coffin
- and split oil and taxes revenues from the largely unexplored
Zone A.

Significant gas and oil reserves were later found in Zone A,
including a staggering 3 trillion cubic feet of gas called Bayu
Undan, making the Gap even more valuable.

UN negotiators will demand control of up to 100 per cent of
Zone A when they meet with Australian officials beginning Monday
in Dili, Galbraith said.

Australian officials have said they hope to retain the 50-50
split in Zone A that they had with Indonesia, although opposition
politicians passed a resolution supporting East Timor's right to
the mid-point maritime boundary.

Even if it loses joint control of Zone A, Australia still
stands to earn tens of millions of dollars annually by handling
gas piped from the Gap to facilities in Darwin.

UN-controlled East Timor has already received a few million
dollars under the current treaty, but that is considered peanuts
compared to future revenues estimated to be at least $80 million
a year.

"Think of what that means in terms of rebuilding, and hiring
teachers," Galbraith said. "Spent wisely, it would make an
enormous difference to the future of the country. It would mean
the difference between East Timor being dependent on long-term
foreign aid and of being self-sufficient."