Hands Off My Petroleum!

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Like recent grief, a burdensome moisture has dropped on the tiny capital at the tail end of the country's wet season. Taxis chug unprofitably around the town's dusty streets seeking passengers. As frequent toots and the precise hand signals of police officers slice the heavy air, lassitude is supreme. Only bony hounds present a menace to the few souls out in the mid-afternoon heat. In a chilly conference room at the Hotel Timor, a bespectacled delegate is setting out Australia's position during official talks that are meant to build a permanent legal fence in the sea between his abundant nation and its impoverished near neighbor. East Timor's lead negotiator, Peter Galbraith, is unmoved by the Australian's argument, but now he's roused by a Canberra official's refrain of "I wish I had a dime for every time I've heard that one" in response to Dili's case. Galbraith asks a woman on his team to hand a 25¢ coin to the opposing side in a dispute that is worth perhaps 50 billion times that amount. Pulses race, heads turn, eyes roll among the negotiators; each side digs its trench a little deeper. This is petro-diplomacy, Timor Sea style. "It's like dealing with the Krajina Serbs (in Croatia)," says Galbraith, a former U.S. Ambassador in Zagreb, describing the Australians, who on the second day of talks declared that Dili's top priority - lateral boundaries - was off the table.

If this was war, the conflict would be called asymmetric. A small, fast-moving mercenary force is launching rocket-propelled grenades in all directions; its larger, cautious opponent knows it can call in air strikes at any time. The difference between the two countries' firepower and tactics could hardly be greater. East Timor (pop. 800,000), the half-island which celebrated independence on May 20, 2002, is one of the poorest countries in Southeast Asia; Australia (pop. 20 million) is the richest nation in the region. East Timor is pressing for a maritime boundary in the Timor Sea that is equidistant between the countries. Provisional arrangements over a sea zone known as the Joint Petroleum Development Area - 90% of whose taxes and royalties are East Timor's - will bring it about $4 billion. Over the coming decades, an extra $8 billion could go to Dili if it is successful in capturing the oil and gas fields to the east and west of the JPDA. But first it must persuade Australia, and then the Indonesians (who occupied the territory between 1975 and 1999), with whom sea-boundary talks are imminent. "The petroleum resources are utterly essential to East Timor," President Xanana Gusmão told Time on the eve of the April 19-22 talks. "We desperately need funds to fix roads, to build up our schools and health system. Our international donors say 'But you have all this oil and gas. So don't ask us for more money.'"