The fight with China over the Darwin port
News report: Alongside the inevitable Panda diplomacy, Albanese will likely be tough on China, albeit behind closed doors.
News report: If there is one issue Australia could try to leverage with China, it is the Port of Darwin. A Chinese company called Landbridge has a 99 year lease over the port and the Albanese government wants to tear that up.
News report: China's also likely to press the prime minister to ditch his election promise, something that Treasurer Jim Chalmers says won't happen.
Jim Chalmers, Treasurer: We've made it very clear that we will see the Port of Darwin returned to Australian hands. That's what we committed to during the election.
Sam Hawley: Alan, the Port of Darwin, it's become a big issue in our diplomatic relationship with China, although Anthony Albanese says it wasn't discussed during a meeting with the Chinese president during his trip to Beijing last week.
Reporter: Did the president express any objection to your plans about bringing the Port of Darwin back into Australian hands or any potential response that China might take to that?
Anthony Albanese, Prime Minister: No, it wasn't raised.
Sam Hawley: Is that surprising to you, given it's a rather big issue?
Alan Dupont: Well, it's not surprising to me in the sense that it's not a sort of issue that the president of China is going to discuss with the prime minister. But it's not to say it's not an insignificant issue, because it certainly was taken up by Chinese Premier Li Qiang in the follow up meeting. And he made it quite clear that China would not be happy if Australia was to take the lease back from the Landbridge company.
Li Qiang, Chinese Premier: I trust that Australia will also treat Chinese enterprises fairly and also properly resolve the issues they encounter in terms of market access and investment review.
Sam Hawley: All right, well, Alan, to understand what's actually going on, I think we should just step back to 2015, because that's when Landbridge, this Chinese company, signed a very long lease to control the port. Just remind me of what happened back then.
Alan Dupont: Yes, well, I think the first thing to remember is just a totally different era in Australia's relations with China, when China was essentially seen as a benign trade partner. Everybody was in sort of in the China basket. More China was good. And in 2015, the Northern Territory government decided to put the lease of the port out to tender and Landbridge won the bid by a substantial margin. It bid far more than the other competitors, which is interesting in itself. And it was granted the lease.
News report: A deal worth $506 million has won Chinese company Landbridge Group the bid for Darwin's 99-year lease. The government hopes the company's connections will open doors to greater territory trade in Asia, particularly China.
Alan Dupont: Now, when Adam Giles, who was the Northern Territory Chief Minister at the time who made the decision, was asked whether he had consulted with the Commonwealth government, the federal government, he said, yes, we've run it past Defence and they've given it a clean bill of health, which is actually correct.
Adam Giles, then-NT Chief Minister: Defence as an agency signed off on that, and we're quite happy with the approval process on that. It didn't need formal approval.
Alan Dupont: So he ran it past Defence. Defence said no problems from a security point of view. And so the Northern Territory government went ahead with it. And the reason they did that is because they wanted to have the money from the lease, from the successful tenderer, which is over half a billion dollars, so that they could develop the harbour as the main gateway into Northern Australia. So it's quite an important economic sort of fillip, if you like, for the Northern Territory government.
Sam Hawley: OK, and just to make clear, Darwin, of course, is a gateway to Asia. The port is the nearest port from Australia to Asia. So it is actually a really important Australian infrastructure, isn't it?
Alan Dupont: No, absolutely. It was then and is now, even more so now. But you're absolutely right. It is the major port in Northern Australia. And unfortunately, at the time, it was pretty moribund. It just wasn't making money. So I think the Northern Territory government saw an opportunity here to beef up the infrastructure and they put some of the money into a shiplift, which was going to be an added attraction to the port so they could lift large ships up and repair them. So that was another offering they could get out of the actual money from the lease.
Sam Hawley: All right. So Landbridge, this Chinese company, it receives a 99 year lease. Just tell me, what sort of links does this company actually have to the Chinese government?
Alan Dupont: Well, Landbridge is owned by a gentleman called Ye Cheng, who is a billionaire and has very direct and specific links to the Chinese government, as most businesses do in China. And the bottom line is that if the Chinese government wants Landbridge to do something, it will have to do it, have to comply, because that's spelled out in the national security law that governs all commercial businesses in China.
Sam Hawley: Well, as you say, back then the federal government at the time did agree that this should go ahead. But there were people who were raising objections, including Anthony Albanese and the then president of the United States, Barack Obama.
Alan Dupont: Yes. Well, not everybody was happy with the decision even back then in 2015.
News report: The US president, Barack Obama, has told Mr Turnbull his country would have appreciated being consulted about the deal before it was announced.
Alan Dupont: I know that Bill Shorten, who was the leader of the Labor Party at the time, did ask for details of why the decision had been made.
Bill Shorten, then-Labor leader: We would like them to explain whether or not they've done all the foreign investment review processes. We want to hear from our security and defence experts.
Alan Dupont: And I think the local Labor opposition in the Northern Territory did criticise the decision at the time. So it's fair to say that Labor generally weren't particularly happy or supportive of it. But I don't think they made too big a deal about it at the time. It's only later on that it's become a controversial issue.
Sam Hawley: All right. OK. So, Alan, we know this lease is now at the centre of a geopolitical storm. And ahead of the last election, Anthony Albanese pledged to return the port of Darwin to Australian hands. But what do we know when it comes to national security risks? Are there any risks to the security of the port of Darwin? Are there legitimate concerns, in your view, regarding the Chinese ownership of this port? It's not like Chinese warships can pull up to it, right?
Alan Dupont: Yeah, that's correct. I mean, look, there's been a bit of hyperbole about it at both ends of the spectrum here. I do think there are national security implications, but they're not quite what people would think. I don't think the Chinese Landbridge is going to suddenly start spying on Australian Navy ships. I mean, why would it need to do that? I mean, their satellites are quite capable of monitoring what goes on in Darwin Harbour.
Sam Hawley: They can do it anyway.
Alan Dupont: That's right. So it's not so much that from a technical espionage point of view. It's really about the fact that you have to see the lease in terms of China's broader strategic ambitions in the region. And also, they saw it useful as making it more difficult for the US to actually beef up its capabilities in northern Australia if the US saw this as a problem and the US did see it as a problem. So China is quite happy to see that happen, because obviously it would like to decouple Australia from the US alliance if it can possibly do so. So you have to see it in terms of that broad strategic context rather than just a commercial decision.
Sam Hawley: Yeah, right. And as you said, the world is a different place than it was 10 years ago. And China spent that decade building up influence in the region, right? So there is, what, more reason for concern now?
Alan Dupont: Yes, I think that's right. I mean, it's a totally different environment now, obviously, than it was back in 2015. And as you're aware, now it's become a political issue here in Australia at two levels. One is that the China hawks see this as a big problem. It's a perception problem as much as a real problem. The US is not happy with it. But the other thing is it's become politicised too.
Anthony Albanese, Prime Minister: What we will do is negotiate in the interests of Australian taxpayers, in the national interest. It will come back under Australian control. We would never have flogged this off.
Alan Dupont: Both parties have committed to taking the lease back, preferably in commercial grounds. But if necessary, they will play the national security card through the Security of Critical Infrastructure Act, which it's set up and designed to protect Australian critical infrastructure, of which Darwin Port would be considered an important part of that. So that's where we are at the moment.
Sam Hawley: What sort of influence do you think the Americans are playing in this decision, if any at all? As you've said, the Americans do not want Chinese ownership of this port, and they've been pushing for a long time for that to end.
Alan Dupont: Yeah, look, I mean, the Americans have been actually tiptoeing around this rather than coming in strongly about it. I mean, clearly they're not happy to have the Chinese, a Chinese company in charge of the port. But I wouldn't overestimate the US pressure side of this. I think it's probably much more an Australian internal decision. I think there was some embarrassment on the part of Defence that this was given a clean bill of health, when later on, I think if it had gone back up to Defence two years later, there's no way that the lease would have been approved now.
Sam Hawley: All right. Well, of course, as we've mentioned, the Chinese are not happy about this at all. What has the company Landbridge actually had to say in response to this?
Alan Dupont: So the Australian CEO of Landbridge, Terry O'Connor, I mean, he's a straight commercial guy. And he's saying, look, you know, I'm just running a port here.
Terry O'Connor, Landbridge non-executive director for Australia: What we've seen is the port continue to be used as a political football in an election cycle. We've seen a bit of hysteria around the fact that it's owned by a private Chinese individual. I call them myths and mistruths often being said around the port. One that continues to amuse me is the perception that we're somehow connected with the People's Liberation Army in China. We're not.
Alan Dupont: But, you know, there are broader considerations here. And the point is that the government is now committed to doing it. And the issue is how they do it. Right. And I think I don't think the government has fully understood the complexity of this. So it's looking to engineer a commercial buyout, preferably by an Australian provider of port management. But it's going to be difficult to find one to take that on board because it's not an easy thing to do. They're not companies with the expertise. If we can't get a commercial buyout, if, for example, Landbridge doesn't sell regardless of the offer, then we only have no alternative but to play the national security card. In which case China is going to say, well, what is the legitimacy of taking this lease back? When we complied, when the Landbridge complied with all the provisions of it? In fact, the Chinese ambassador has talked about I think his term was a ethically questionable decision. So you can see that there's a lot of obstacles ahead to actually engineer this. And how Albanese does it is going to determine how China responds.
Sam Hawley: Yeah. OK, well, let's then look, Alan, at how China could actually respond to this. We know it's a volatile relationship. Regardless of the way it happens, will there be a backlash from China, do you think?
Alan Dupont: Yeah, well, look, they could do a number of things. They could just make a pro forma protest and let it go through to the keeper, so to speak, in the interest of the broader relationship. Or if they really wanted to go to town, they could actually do something quite serious in terms of our trade relationship, for example. So I think, you know, there's a lot of different outcomes here. It could be a relatively minor thing and easily dealt with, but I suspect it's going to be somewhere in between. And it's going to be fascinating to see how it plays out.
Sam Hawley: Sure is. So will Anthony Albanese stick to his guns on this? He's not going to back out amid threats from China, is he? I mean, this could get ugly.
Alan Dupont: Well, so now he's made that decision, it would be very difficult for him not to see it through. So I think he's got to now engineer an outcome where the lease is taken back from Landbridge, but not in a way that really offends China. And I'm not entirely sure how he's going to do that.
Sam Hawley: Alan Dupont is the chief executive of geopolitical risk consultancy, the Cognoscenti Group, who until recently advised the Northern Territory government on boosting defence investment. This episode was produced by Sydney Pead. Audio production by Sam Dunn. Our supervising producer is David Coady. I'm Sam Hawley. Thanks for listening.
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