MEDIA – Analysis – Australian Institute of International Affairs – Port of Darwin review welcome, but tread with care
CANBERRA – 13 May, 2021
A 99-year lease over the Port of Darwin was awarded to Landbridge Industry. It has been a source of contention and controversy ever since it came into effect in 2015.
That controversy has been exponentially increasing as Australia’s relationship with China has sharply deteriorated. The Australian government has begun to explicitly describe China as a strategic adversary in a way that it hasn’t previously.
The controversy over the deal is twofold. Firstly, Landbridge Industry is the Australian subsidiary of a Chinese firm with substantial links to the Chinese People’s Liberation Army. Secondly, the Port of Darwin is an asset of strategic importance, servicing naval vessels and enjoying close proximity to a range of defence installations and facilities. This situation is further complicated by the ongoing six-monthly rotation of US Marines to Darwin and sensitivities in Washington about the deployment of its assets to a location in such close proximity with a Chinese-managed facility.
The recent announcement by Peter Dutton that the Department of Defence will conduct a review into the security implications of the lease arrangements is welcome, but well overdue. It was Dutton’s own federal Coalition government that initially greenlit the lease that was proposed by their conservative brethren, the CLP Northern Territory government.
It also contradicts earlier assurances by the federal government that the lease arrangements posed no adverse security implications. On 21 October 2015, Dennis Richardson, who was then secretary of the Department of Defence, told Senate Estimates:
Defence does not have any security concerns about the sale of the port to Chinese interests … When we were subsequently advised that the sale was to Chinese interests, we examined the possible security implications. Within Defence, that involved the three services. It involved the Australian Signals Directorate, the Defence security agency, and the strategic policy area of Defence. No part of Defence had a concern from a security perspective in respect of the sale. The Navy’s interest was overwhelmingly the question of access, not the question of ownership, given that it is a commercial port, not a navy base.
Richardson publicly repeated this assurance in December 2015, stating that the lease arrangement posed no risk to Australia.
However, back in 2015, the deal unsurprisingly raised the ire of many observers in Washington and the region who were caught off-guard by the announcement. President Barack Obama asked then Prime Minister Malcom Turnbull to keep him appraised of further developments.
Commentary and reaction within Australia was not positive. Indeed, wherever I go in Australia, people ask me what went wrong. Peter Jennings, executive director of the Australian Strategic Policy Institute, reflected this disbelief when he stated:
The Port of Darwin lease raises hard questions about the specifics of the deal and how Australian governments make sensible decisions on national security when considering foreign investment proposal. … Given the strategic value of Darwin Harbour – Australia’s only substantial northern navy facility – one would expect a matter of this seriousness to be considered by the national security committee of cabinet.
In an opinion editorial in the NT News on 17 January 2016, I expressed my own dismay that “the Port of Darwin, a strategic asset for the movement of military equipment and people through northern Australia, was leased to a foreign company for a century.”
It was also widely noted that the deal was structured in such a way to deliberately avoid the scrutiny of the Foreign Investment Review Board (FIRB). The deal was made up of about $100 million in an actual sale of assets, and about $400 million for the lease. That came under the $248 million sales benchmark that could have triggered FIRB action. It’s clear that the federal government didn’t apply sufficient scrutiny to the deal. Indeed, until recent weeks, the government maintained that there were no security risks associated with the lease arrangements for the Darwin Port.
In September last year, then Defence Minister Linda Reynolds told the public that no concerns existed on the “defence front.” It’s up to the federal government to explain to Australians what has changed in the past eight months in its assessment of the security situation. It’s also unclear if this is cheap political trick to provide cover on a contentious issue, or an effort to actually solve a real problem.
Let’s make no mistake, the Port of Darwin is a strategic asset. And not just because of its position within Darwin Harbour. It’s also because the port’s facilities, including the Fort Hill Wharf, do service Australian and allied naval vessels. It is, as Peter Jennings said back in 2015, the only substantial northern naval facility in Australia.
Darwin is a city of significant strategic importance for Australia and the region. It sits at the fulcrum of the Indo-Pacific and straddles the strategic fault lines that are defining the century. Darwin is a source of interest beyond Australia and the region. This confluence of proximity and location makes the ownership or management of any port facility in Darwin a matter of national security.
There may be speculation about the real or perceived security risks arising out of the lease arrangements, and in an immediate and practical sense, the risks may be minimal. It will be instructive to see what Defence concludes. It’s true that naval vessels are not inspected by port authorities.
But in a larger sense, it is not in Australia’s national interests for an important port, in an important harbour, in an important part of the world, to be managed by a foreign company. It is a question of Australian sovereignty and security. While foreign investment is very important for Northern Australia, that investment must be made in appropriate sectors.
I firmly believe that the Port of Darwin must be returned to Australian hands. We do need to be cognisant of the potential costs of ending the lease. The lease agreement is secret, and without this information we cannot know how much terminating it will cost, and who will bear the cost. Such a move to terminate the lease arrangement over the Port of Darwin, however it is made (and indeed if the government is contemplating such a move), will likely have a negative impact on Australian relations with China.
It may be the case that the relationship is currently so poor that there is very little to lose in taking this action now. Australia would need to be clear as to the potential retaliation from the Chinese government- there would likely be a significant response. Of course, it would not be necessary to consider taking action if the federal government had done the right thing in the first place and prevented the lease arrangement from coming into effect.
But the problem remains, and the government must act to fix this. While it has been a controversial lease, the rectification of this error is not a controversial proposition. Australia’s northern strategic port should be controlled by Australia. Anyone with a knowledge of Australian history knows this. Indeed, a dissatisfied veteran said to me it was like the US leasing Pearl Harbour in the 1930s.
I do believe that Australia needs to maintain a strong line with China. It cannot afford to compromise on its core interests. But at the same time, Australia can do this without seeming overly belligerent, disrespectful, or aggressive. I believe that the Chinese government will respect Australia’s sovereignty and its resolve.
The federal government needs to assume a far greater level of nuance in handling its relationship with China than it has shown up to this point. The government will have to tread carefully as it reviews the security implications of the Port of Darwin lease. The prime minister, the treasurer (who in 2015 was minister for Northern Australia), and the CLP have already made a serious and treacherous mistake. I will be watching carefully to see whether they do the right thing.
Luke Gosling OAM MP is the Federal Member of Australian Parliament for Solomon.