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After Indonesia, could Timor-Leste be key to China’s Asia-Pacific dominance?

Updated: Oct 8, 2023

Indonesia has long been one of the key exporters of iron, steel, mineral fuels and coal to China, contributing widely to the latter’s steel and energy sectors for several years. Historically, Sino-Indonesian relations have been strong, given Indonesia’s penchant towards communist parties, further cemented due to its anti-imperialism and Non-Aligned Movement.

However, of late, concerns of China’s growing influence in the Asia-Pacific region have arisen, leading to Indonesia prioritising its own growth more, as seen by the recent nickel export ban.

This has given Timor-Leste, also known as East Timor, the perfect opportunity to strengthen ties with China, knowing that it’s one of the biggest powerhouses in the region. But it’s not all one-sided- China may have more to gain from the island nation than it’s letting on.

Why Timor-Leste?

Sharing the island of Timor with Indonesia, Timor-Leste has faced a long and bloody struggle with both colonial Portuguese forces and contemporary Indonesian factors to reach where it is today. Being considerably underdeveloped, with one of the youngest populations in the world, 80% of its revenue was dependent on foreign aid and donations until recently.

That is until its oil revenues started picking up, bringing with it more international attention and scrutiny. Although nowhere as impressive as major producers Russia or Saudi Arabia, Timor-Leste does have significant oil reserves for its size, estimated to be about 226 million barrels as of 2020.

This is mainly courtesy of the Greater Sunrise Fields, an offshore field located in the Timor Sea, between Timor-Leste and Australia. Discovered in 1974, it was estimated to be worth about $50 billion in 2023. For a country like China, which relies heavily on its mammoth manufacturing sector, obtaining oil and energy as cheaply as possible is of the utmost importance.

With Timor-Leste tottering at the edge of a fiscal crisis and still struggling to assert itself at the moment, China has found the right opportunity to both offer support and hopefully secure another source of cheap energy, following Russia. However, speculations of Timor-Leste using its bilateral relations with China as an excuse to coerce more support from Australia have also surfaced.

Greater Sunrise Fields is currently owned by Timor Gap EP, Osaka Gas and Woodside Energy Group. Recently, Woodside Energy, also floated the idea of taking the oil and gas mined from the fields to also be further developed in Timor-Leste, instead of in Darwin, Australia, as they were doing until now, given the relative ease of securing licenses.

If this does happen, it could provide Timor-Leste with much more revenue, as well as added stability and reduced reliance on foreign aid. This will also go long way in helping the economy recover from the battering by COVID-19, with payoffs for China as well, should it choose to invest further in Timor-Leste.

Chances of instability in the Asia-Pacific?

Until now, Australia has been a relatively stable counter-balancing force to China. However, its recent regulations regarding offshore gas projects have made the country unpopular with energy bigwigs. This includes increased Indigenous consultation on projects, as well as tighter environmental policies.

This has led to Santos Gas’ Barossa project, valued at $5.5 billion and Woodside Energy’s Scarborough Project, valued at $16.5 billion to look for another home. This has led to Timor-Leste’s growing share in the Asia-Pacific, with China always looming in the background.

With regional dynamics shifting quickly and unpredictably, Asia-Pacific is increasingly exposed to more instability, especially when conflicts and economic turbulence in other parts of southeast Asia, such as Pakistan, Laos and Sri Lanka are taken into account.

More ire from the US?

Given that China has made great strides in recovering from COVID-19, with increased government stimulus measures, both the US and Australia have pledged greater support to Pacific island nations and other players in the area, in order to counter China’s influence. This could be upwards of $200 million.

This latest tie with Timor-Leste could also put China further down in the US’s bad books. As a counter, the US may choose to offer Pacific islands with more hard-to-resist measures such as secure undersea cable connections, increased recognition for the Cook Islands and Niue, as well as more US embassies and aid.

However, there is still some resistance, especially from the Solomon Islands, which went ahead with a China security agreement recently, but backed out of signing a US-Pacific partnership agreement. Other nations such as Vanuatu can also be of little help, as the prime minister himself faced a vote of no confidence in parliament in August 2023.

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