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24 March 2016

U.S. Casts Wary Eye on Australian Port Leased by Chinese


http://www.nytimes.com/2016/03/21/world/australia/china-darwin-port-landbridge.html?ref=world&_r=1
By JANE PERLEZ,  MARCH 20, 2016
DARWIN, Australia — The port in this remote northern Australian outpost is little more than a graying old wharf jutting into crocodile-infested waters. On a recent day, there was stifling heat but not a ship in sight. “Our pissy little port,” as John Robinson, a flamboyant local tycoon, calls it.
The financially hurting government of the Northern Territory was happy tolease it to a Chinese company in October for the bargain price of $361 million, raising money for local infrastructure projects.
“We are the last frontier; you take what you can get,” said Mr. Robinson, who is known as Foxy. “The Northern Territory doesn’t have the money for development. Australia doesn’t have it. We need the major players likeChina.”
But the decision has catapulted the port of Darwin into a geopolitical tussle pulling in the United States, China and Australia.
This month, the United States said it was concerned that China’s “port access could facilitate intelligence collection on U.S. and Australian military forces stationed nearby.”
The Northern Territory doesn’t have the money for development,” said John Robinson, a local tycoon. “Australia doesn’t have it. We need the major players like China.” CreditThe New York Times
It may not look like much, but the scruffy port is a strategic gateway to the South China Sea, where China is challenging the United States, and it serves as a host base for the United States Marines, who train here six months a year.
Critics contend that the Chinese bought a front-row seat to spy on American and Australian naval operations.
“There is a deep Chinese interest, driving interest, in understanding how Western military forces operate, right down to the fine details associated with how a ship operates, how it is loaded and unloaded, the types of signals a ship will emit through a variety of sensors and systems,” Peter Jennings, a former Australian defense official who is now the executive director of the Australian Strategic Policy Institute, told a parliamentary inquiry.
China has invested in more than two dozen foreign ports around the world, including a port in Djibouti adjacent to an American military base. But the 99-year Darwin lease was the first time the Chinese had bought into a port of a close American ally hosting American troops.
The Australian government did not consult with Washington, and the parliamentary inquiry showed that the corruption-plagued and unpopular government of the Northern Territory, of which Darwin is the capital, had rushed to lease the port to raise money for new projects before an election.



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By The New York Times 


Australia’s defense secretary, Dennis Richardson, rejected the criticism, saying the Chinese could find out what they wanted by “sitting on a stool at the fish-and-chip shop on the wharf” and noting the vessels that entered the harbor.

The lease to the Chinese company, a shipping and energy conglomerate called Landbridge Group, highlighted the competing pressures in Australia between its more than 70-year alliance with the United States and its flourishing trade ties with China.

Australia’s attitude to China swings between greed and fear, people here say. On one hand, huge sales of minerals, property and food to China have kept the country recession proof, and have proved lucrative for the powerful Australian business community and the government.

On the other, the government relies on its deep defense ties with Washington, including close intelligence cooperation, to keep the sparsely populated country safe.

Despite its unimpressive real estate, the port here, which was hit with more Japanese bombs in 1942 than Pearl Harbor, has long had strategic value.

The central business district of Darwin. The 99-year lease was the first time the Chinese had bought into a port of a close American ally hosting American troops. CreditThe New York Times

Australia is considering running freedom-of-navigation patrols of the South China Sea from here, according to the American State Department. And this month, the Pentagon asked the national government to base B-1 bombers in the Northern Territory.

American officials say they believe the lease by Landbridge was a strategic deal, not a commercial one. They cited the length of the lease and the fact that Landbridge paid 20 percent more than the two closest bidders.

Among the specific worries, Mr. Jennings said, is that fuel storage tanks used by the American military are inside the area leased to Landbridge. Future construction by the Australian navy for new facilities would be limited to parts of the harbor not under the company’s management, he said.

Australians appear to be worried as well. In an illustration of its pique, the United States commissioned a poll of Australians that found nearly half believed the lease posed “a lot of risk” to national security, and nine in 10 said it involved at least some risk.

The lease was reviewed by midlevel Defense Department officials, who found no problem, the department said. But the review is less stringent for private companies like Landbridge than for state-owned companies, a distinction that means little in China, where private companies often work hand in glove with the government.

The Australian government changed that policy on Friday, saying that from now on, the Federal Investment Review Board would assess all sales of state-owned critical infrastructure to private companies.

The Landbridge website cites the company’s close ties to the government. Its chairman and founder, Ye Cheng, was honored as one of the top “10 individuals caring about the development of national defense” by the Shandong provincial government in 2013.

Landbridge, which is based in Rizhao, Shandong Province, has worked with state-owned companies like China National Petroleum Corporation, which supplies oil to Landbridge and allows it to sell fuel at retail gasoline pumps under the corporation’s name.

“A strong enterprise does not forget to repay the country, while a profitable enterprise does not forget national defense,” the company says on its website.

In an interview in Beijing, Mr. Ye said the investment fit into the company’s strategy to expand its shipping and energy interests and served China’s foreign policy goal known as One Belt, One Road.

That policy is President Xi Jinping’s signature measure to encourage Chinese investment across Asia into Europe. Participating companies are honored as doing the right thing for China.

“Australia needs China, China needs Australia,” said Mr. Ye, who was in Beijing as a delegate to the annual Chinese People’s Political Consultative Conference, an advisory body to the government.

He dismissed security concerns about his company’s running the port as “paranoia.”

“You Americans think too much,” he said. “You can think what you want, but this is about port-to-port business.”

The port manager, Terry O’Connor, said Australians would continue to run the port. He said there were no plans to bring in Chinese employees.

Mr. O’Connor said shipping movements in and out of the harbor, including of the 100 or so naval vessels each year, mostly Australian and American, would be kept in the company’s Australian computer systems, which are not linked to the Chinese headquarters.

Despite these assurances, American officials say they are keeping a close eye on Darwin. They are also watching to see if Chinese companies buy other important infrastructure in Australia.

A strategic port in Fremantle, Western Australia, where United States warships frequently tie up has been put out for bids.

When President Obama met the Australian prime minister, Malcolm Turnbull, in Manila in November, he registered his displeasure at not being informed about the Darwin lease.
According to a senior American official, Mr. Obama said, “Next time, please let us know ahead of time.”

Yufan Huang contributed research from Beijing.

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