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14 September 2022

With Grant Wyeth

Timor-Leste ties

Last week Timor-Leste’s president, José Ramos-Horta, visited Australia and signed a new defence cooperation agreement that followed a decade of negotiations between the two countries. Such agreements are the bedrock of security coordination. They establish the responsibilities and protections each defence force has when operating in the other’s territory for joint training or humanitarian relief efforts. In particular, this agreement will allow for greater cooperation within the Timor Sea, the two countries’ shared maritime zone. 

Pursuing such an agreement with Timor-Leste involved complications due to its relationship with Indonesia. The primary concern for Australia would have been making sure that Indonesia was comfortable with it enhancing its security partnership with Timor-Leste. Trust between Canberra and Jakarta became strained during the process of Timor-Leste gaining independence from Indonesia, and it has taken a lot of effort to improve the relationship. It is unlikely that Australia would have pursued such an agreement without Indonesia’s blessing.

For Ramos-Horta, the defence cooperation agreement signals his intent to strengthen the relationship with Australia. Although the president has recognised that playing the China card is an excellent way to get attention, his actions, rather than his words, demonstrate that he believes more long-term, resilient and trustworthy opportunities for his still fledging country are tied to Australia. It would be in Australia’s interest to reward this perspective through resolving the dispute over gas in the Timor Sea in a way that enables Timor-Leste to help itself develop.

How to help Ukraine

In recent weeks Ukraine has made remarkable progress in pushing Russian forces out of its territory. It may be too soon to claim that Ukraine will be able to repel Russia completely, but the trajectory looks positive enough for the global community to start considering Ukraine’s reconstruction. In a joint report released last week by the government of Ukraine, the European Commission and the World Bank, the estimated cost of reconstruction was placed at US$349 billion. This figure is 1.6 times Ukraine’s total GDP in 2021.

Clearly, Ukraine’s reconstruction will be heavily reliant on donor countries like Australia to make significant contributions. One approach that was floated by the Ukrainian prime minister, Denys Shmyhal, at a conference in Switzerland in July was to give each donor country a personal investment in the reconstruction efforts by adopting either a region or industry in Ukraine. Already Denmark has offered to rebuild the city of Mykolaiv, the Baltic countries plan to pool their resources within Zhytomyr Oblast, and Portugal has committed to rebuilding Ukraine’s schools.

The cost of Ukraine’s reconstruction to the Australian taxpayer will be significant, but being able to follow the progress and see tangible results from the expenditure will give Australia’s contribution greater public legitimacy. The idea would also lead to an immense solidarity between Australia and the people of a specific region of Ukraine, and a greater appreciation within Australia of the shared ideals that Ukraine has been fighting to protect.

China loans

In recent years China has become the largest lender of money to other nations, establishing itself as a competitor to the International Monetary Fund (IMF). Beijing has provided a number of “emergency loans” to countries under financial stress, most notably Sri Lanka, Pakistan and Argentina. Yet unlike organisations like the IMF and Western donor countries, such as Australia, there is little transparency around these loans, or what China expects in return. The weight of China’s loans has the potential to significantly alter the way states behave.

Since the launch of its Belt and Road Initiative, in 2013, there has been a dramatic increase in Chinese loans to lower- and middle-income countries. Many of these loans come with non-disclosure agreements which prevents other lenders from making accurate financial assessments of countries, limiting their access to capital, or making them more reliant on Chinese loans. Cross-cancellation clauses mean that attempting to cancel one loan will affect others, as Argentina discovered in 2016 when it decided against building a hydroelectric dam with Chinese money, only to find that this would also cancel funds for a railway project. Many loans also include clauses that assert cutting diplomatic ties with Beijing would result in default.

Of course, IMF loans, as well as those from Western countries, do come with their own strings attached. Usually these are tied to adopting certain market-orientated policies and limits on spending in the case of the IMF, or liberal-democracy structures from Western donors. Chinese loans may have been attractive to countries looking to circumvent the constraints of austerity and democracy. Although it may prove that China’s lending conditions are even more binding.



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Weekly round-up

AUKUS, one year on

“A year on, it is hard to think of a major defence or foreign policy initiative in living memory with such a stark divergence between what the public knows and what the government and its officials know.” Sam Roggeveen,The Interpreter (Lowy Institute)

Australia’s Indo Pacific hope – equilibrium

“The Asian century isn’t turning out how Australia had hoped … Increasingly over the past decade, Australian rules-and-order references have become a lament for what’s going or gone.” Graeme Dobell,The Strategist (Aspi)

What China’s shifting relationship with Western media says about its ambition in Taiwan and the South China Sea

“For many years, Chinese diplomats have been careful not to imply there would be what amounts to a ‘re-education’ of the people of Taiwan. Gone is that hesitancy. The Dragon is strong and it wants us to know it’s strong.” John Lyons,abc news


The weakness of Xi Jinping

“As Xi’s rule becomes more extreme, the infighting and resentment he has already triggered will only grow stronger. The competition between various factions within the party will get more intense, complicated, and brutal than ever before.” Cai Xia,Foreign Affairs

Reinvigorating the international trade system

“One consequence of these challenges is the possible division of the world economy into two or more political blocs not unlike the situation that prevailed before the Second World War. To avoid this, the rules-based international trading system needs reinvigoration to deal with the problems faced by the World Trade Organization (WTO).” Shujiro Urata,East Asia Forum

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