Australia and Timor-Leste: Boundaries and Royalties

In March 2018 Australia and Timor-Leste signed a treaty to delineate their disputed maritime border. The agreement established a line between the two states that had been in limbo for decades, a consequence of the complex history involving Portuguese decolonization in 1975, the subsequent Indonesian invasion, and the eventual establishment of Timor-Leste’s sovereignty in 2002. The agreement also established a new royalty sharing agreement for the multibillion dollar oil and gas fields that lie in the Timor Sea.

However, over a year later, the treaty has yet to be ratified by the Australian parliament, and due to this the revenue-sharing arrangements within the treaty have yet to come into effect. This means that Australia is continuing to collect royalties from gas fields that are within Timor Leste’s Exclusive Economic Zone (EEZ). It is estimated that these royalties generate between US$250,000 and $2.1 million per week; sums that could be game-changers for the small, impoverished Timor-Leste. With the Australian government currently in caretaker mode in light of the May 18 election, it remains unknown when the treaty will be ratified.

Due to the amount of royalties that have accrued since the signing of the treaty, actors within Timor-Leste have began to make it known that they expect Australia to reimburse their country the money from this period. In an interview with Guardian Australia in mid-April, former Timor-Leste President José Ramos-Horta stated that he had faith the Australia “will not quarrel over this payment due to Timor-Leste,” adding further that he was “sure Australia will reimburse every cent it wrongly received following the solemn signing last year at the UN HQ in New York of the permanent maritime boundary between our two countries.”

Ramos-Horta made note that a number of fields that now lie within Timor-Leste’s EEZ have now been depleted, and that “Timor-Leste showed pragmatism and statesmanship when as part of the maritime boundary agreement it did not demand back pay of several billion dollars from Australia’s illegal exploitation of three fields, Buffalo, Laminaria and Coralina, now depleted.” His implication was that he expected Australia to recognize this, demonstrate the same pragmatism and grace, and honor the royalty arrangements from the date the treaty was signed.

The delay in the ratification of the treaty seems to be another unfortunate episode in Australia’s treatment of its close neighbor, the second youngest country in the world. A more cooperative relationship between the two countries was expected, especially after Australia led the United Nations Peacekeeping forces that restored order to the region after violence broke out following the 1999 referendum on independence from Indonesia. However, negotiations over the maritime boundary have been fraught, notably after it was revealed that Australia had bugged the offices of Timor-Leste officials – under the guise of Australian aid sponsored renovations – in order to gain an upper hand in the negotiations.

Australia had hoped to establish a maritime boundary with Timor-Leste based on the bilateral agreement it established with Indonesia in 1972, which extended Australia’s sovereignty to the continental shelf. This gave Australia rights to the seabed, with Indonesia rights to the water column above it, effectively granting Australia the mineral rights while leaving Indonesia with fishing rights (an agreement that Indonesia is now unhappy with). However, Timor-Leste insisted that the boundary follow the 1982 United Nations Convention on the Law of the Sea (UNCLOS), with the median line between the two states delineating their respective EEZs.

What seems to have forced Australia to relinquish its claims to the continental shelf and sign a treaty based on UNCLOS is the wider regional picture in regards to Chinese claims in the South China Sea. Australia needed to avoid a hint of hypocrisy when pushing back against Chinese activities in the South China Sea. Attempting to force an agreement with Timor-Leste not based on UNCLOS would limit Canberra’s credibility in being able to challenge Beijing’s regional movements, and so Australia had to relent.

Due to this it is most likely that the new government – regardless of who wins May’s election in Australia – will eventually ratify the treaty. It’s just a matter of how high a priority the new government will give the ratification, and whether Ramos-Horta is right that royalties accrued since the signing of the agreement will be returned to Timor-Leste.