Australia’s Port Deal With Chinese Company Stirs U.S. Unease
Australian defense official takes responsibility for not giving the U.S. notice on leasing Darwin port
The Royal Australian Navy released this image from July of HMAS Perth as it arrives in the Darwin port in northern Australia during a joint exercise with U.S. and Japanese troops. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
A senior Australian defense official conceded Tuesday it was an oversight not to inform the U.S. government about the impending lease of part of a key strategic port used by U.S. marines in the country’s north to a Chinese company.
Shandong-based Landbridge Group in October purchased a long-term lease on a commercial port facility in the Port of Darwin where thousands of U.S. and local troops train and which provides the country’s closest route to the disputed South China Sea.
U.S. officials weren’t consulted about the 506 million Australian dollar (US$366.5 million) lease and only heard about the deal when it was publicly announced as they were returning from an annual Australia-U. S. meeting on foreign affairs and defense in Boston.
Parts of the Port of Darwin are used by U.S. marines and the Australian troops who train with them for six months of the year, though not in the area that is at the center of the deal.
U.S. President Barack Obama chided Australian Prime Minister Malcolm Turnbull at a meeting on the sidelines of the Asia-Pacific Economic Cooperation summit in Manila last month, making it clear he would have preferred to have known sooner about the deal, although the issue is seen more as a minor hiccup in the relationship between the two countries than a major spat.
Giving evidence at a parliamentary inquiry in Canberra on Tuesday, Australia’s Defence Department Secretary Dennis Richardson rejected claims U.S. officials should have been consulted on the deal but said it would have been “sensible” to advise them in advance.
“That was an oversight for which I take personal responsibility,” he said.
Concerns over the deal highlight Australia’s challenge in balancing growing economic ties with its biggest trading partner, China, with those of its closest military and political ally, the U.S.
Canberra is looking to bolster its alliance with Washington to include possible joint South China Sea naval patrols from the Darwin port, and regional tensions remain high as Beijing asserts ownership over islands in the sea that are also claimed by other neighboring countries.
The lease of the Darwin port was exempt from oversight by the country’s Foreign Investment Review Board because it was owned by the Northern Territory, not the federal government, something Mr. Richardson described as “an apparent systemic issue” with the country’s foreign takeover laws.
The Australian prime minister was so concerned about the deal falling through the gap in policy that he requested a review of that aspect of the law a week before the lease was announced, Mr. Richardson said.
Northern Territory Chief Minister Adam Giles is in China this week to reassure Landbridge representatives the government remains supportive of the deal, which is central to funding its infrastructure expansion plans as revenue from mining and energy projects falls at the end of long mining boom.
The deal comes amid heightened interest from foreign investors in Australian infrastructure and follows China Merchants Group teaming up with Australian fund manager Hastings Funds Management last year to buy the lease on the Port of Newcastle in New South Wales state, the world’s biggest coal export terminal, for A$1.75 billion.
Foreign takeovers are a sensitive matter in Australia, where nationalistic politicians vigorously oppose deals seen to threaten Australia’s security. Takeovers from China are especially contested because many companies there have close links to the government.
Michael Hughes, director of Landbridge’s Australian infrastructure division, said the company was surprised and disappointed about the controversy surrounding the deal and denied a local media report that the company has established an armed militia to support the military in the event of war.
‘That was an oversight for which I take personal responsibility.’
Despite this, he said Landbridge is on the lookout for more investments in Australia.
“We are very excited about the opportunities in northern Australia and the Northern Territory in particular across a range of sectors, mining, oil and gas, tourism, agribusiness and food,” he told the inquiry.
“Landbridge certainly sees the investment in the Darwin port as a catalyst for further investments into northern Australia both in oil and gas and more broadly across the businesses it operates in,” he said.