Timor secures huge oil royalties

East Timor has been reliant on aid since the 1999 war

Australia and the former Indonesian territory of East Timor have signed an agreement designed to give the fledgling nation an income of billions of dollars over the next 30 years.

Australia agreed that East Timor should receive 90% of royalties from Australian mining operations for liquid petroleum and gas oil under the Timor sea between the two countries.

This will not make the people of East Timor rich but it will give them a chance

UN administrator

Australian aid agencies say they are delighted with the new agreement. Impoverished East Timor faces an enormous development task, they say, and this should dramatically reduce the dangers of having to depend on foreign loans.

The shattered East Timorese economy has been largely propped up by aid donors, notably Australia, former colonial power Portugal and the United Nations.

Passport to progress

Australia's Foreign Minister, Alexander Downer, who flew to the capital, Dili, to sign the agreement, described it as a great moment for for East Timor.

The project could generate up to $5bn to be shared out over 20 years from 2004 according to the UN.

"Fundamentally this means the difference between being mired in poverty and dependent on foreign aid, and being able to make progress," the chief negotiator with the current United Nations administration, Peter Galbraith, told AFP news agency.

He said he thought East Timor would use the money to provide education and basic health care, and to continue rebuilding the territory.

The BBC's correspondent in Sydney, Red Harrison, says the deal represents a substantial gain over previous agreements with Indonesia, under which revenue was to be shared 50-50.

"This will not make the people of East Timor rich but it will give them a chance, " said Mr Galbraith.

Year-long talks

Australian and East Timorese officials reached agreement on the deal late on Tuesday after 12 months of protracted negotiations.

Ramos Horta welcomed the deal

Spokesmen for East Timor's transitional government say the new agreement is founded on international recognition for East Timor's claims over the geographic boundary between the two countries.

The foreign envoy of East Timor's interim administration, Nobel peace laureate Jose Ramos Horta, said the money would generate jobs, which in turn would stabilise the economy.

After 24 years of guerrilla warfare following Indonesia's 1975 invasion, East Timor's economy was devastated by pro-Indonesian militia violence in the wake of the 1999 independence.