Australia Holds the Key to a Fair Deal for Timor-Leste

With COP29 underway, the rift between climate action and climate justice has only deepened. The youngest nation in Asia, Timor-Leste, exemplifies this complex dynamic: Considered both a Least-Developed Country (LDC) and a Small Island Developing State (SIDS), its economy centers on fossil fuels but also requires outside interests for it to be able to access this vital economic lifeline.

To utilize its resources, Timor-Leste finds itself ensnared between two powerful forces greater than itself: the need to carefully navigate the geostrategic interests of its powerful neighbors and the imperative to offer significant concessions to attract foreign investment necessary to extract the wealth from this resource.

Since 2004, the liquefied natural gas from the Bayu-Undan Field has been a cornerstone of economic stability, generating over $25 billion in essential revenue for the country’s development. However, the final shipment was completed in December 2023. As royalties and other contributions to Timor’s Petroleum Fund (PF) – responsible for funding more than 80 percent of state expenditure – begin to decline, projections indicate that the fund could be exhausted entirely by 2034. The IMF has shown that deficits of around 43 percent of non-oil GDP over 2025-28 will far exceed the estimated sustainability of the PF.

Timor-Leste has three options: a dramatic shift in fiscal policy, rapid economic diversification, or inflows from new oil or gas production. Politically, with stalemates between elites and extreme tensions between its major political parties and leaders, policy change is highly unlikely. With agricultural productivity low, and new markets such as tourism or the Blue Economy underdeveloped, diversification has lagged.

So now, all eyes are on the Greater Sunrise fields.

Promising high deposits of natural and condensate gas, Greater Sunrise is estimated to be worth an estimated $65 billion to $74 billion — potentially bringing the country $50 billion in revenue and $50 billion in development benefits. This is at least double what Timor-Leste has netted from its previous extraction efforts.

With these funds, Timor-Leste could thrive – and make good on President José Ramos-Horta’s vision of Timor becoming the “next” Singapore. But as Prime Minister Xanana Gusmão famously said, he will only celebrate when he “smells the first gas in Beaço…”

As Minister of the Presidency of the Council of Ministers and Interlocutor Agio Pereira has consistently emphasized, the development of the Greater Sunrise fields is the most critical project for Timor-Leste. And as the fiscal cliff looms, Timor-Leste must become more insistent on this project going ahead.

Ramos-Horta optimistically hopes that the project could break ground within months. This seems unlikely. And in the wake of Donald Trump’s re-election in the United States, ushering in a period in which reductions in climate financing for LDCs are likely, the needs for Timor-Leste should be examined through a justice lens.

It is not only a matter of self-determination and the right of communities to pursue freely their economic development. Instead, as Gusmão has admitted, the Timorese “can’t make decisions as we like.”

Timor-Leste’s combined but uneven development is the continued expression of its former colonization. These events are not over. They inform the present and why Novak was right to observe that this project “carries existential economic significance for the country.”

According to Gusmão, it is the “entrenched inequality between nations” that prevents all SIDS nations from progressing to sustainable development. The “rules-based global order” governed by international law and frequently ignored by the developed world, he said, is the same that “perpetuates inequity and exploitation.” He reiterated that SIDS should lead their development and “not be asked to compromise our ambition.”

But it appears they are asked to compromise all the time.

Some have called on the Timorese government to refrain from new gas projects in the name of climate change mitigation – even though many see gas as a vital transition energy source toward a renewable future. Of course, any fossil fuel project is counterproductive to global efforts. But it is hypocritical to insist that Timor-Leste refrain from such undertakings when its closest neighbors continue to approve coal projects with impunity. Seven coal projects have been started in Australia in the last three years, and Indonesia remains the third biggest coal producer globally.

Ramos-Horta has urged Australia to urgently back the deal and to include onshore processing in Timor-Leste, providing necessary employment and capacity-building. Recent meetings suggest that the Timor Gap CEO is now advocating for this position. Greater Sunrise is 300 km closer to Timor-Leste and the government has already said it would tax far less than Australia, despite its desperate need for revenue.

As Australia vacillates, it has been claimed that international partners – including China – could become involved. This was reported to have ruffled the “feathers of Western powers,” and the prime minister was quick to note “any rational Timorese leader” must take “into consideration the sensitivities” of its two neighbors and not bring in regional powers unwelcome to them.

This gives Australia an unfair position in terms of investment power and geopolitics. Nevertheless, relations with Australia are at an all-time high. Celebrations of the 1999 INTEFET mission in Dili this August were buoyant. Such good-will could be leveraged.

Yet 2004 was not so long ago. That year, Australia’s Secret Intelligence Service (ASIS) planted listening devices to gain an advantage in negotiations with Timor over the Greater Sunrise fields. While the maritime boundaries have since been redefined – with 70 percent to 80 percent of the revenue going to Timor-Leste (depending on processing) – the country must still lure Australian investment.

The just way to proceed would be to assist in this project as a transition fuel for Timor-Leste’s economic development, ensure its long-term stability, and act as a way to right historical wrongs.

Originally published under Creative Commons by 360info™.