Darwin port storm a test of Australia’s national interest

The sale of the Port of Darwin to a Chinese government-backed company in 2015 presents an unwelcome complication in a rapidly evolving regional security and geopolitical landscape. After initially not objecting to the grant of a 99-year lease to Shandong Landbridge Group, Australia’s Department of Defence is now reviewing its position. For government, there are no easy options that are free of risk in terms of balancing Australia’s broader relationships with our major defence and economic partners, who are drifting further apart.

On one level, the Darwin port deal is a commercial transaction and there is a real danger in sending the wrong message about sovereign risk should the lease be revoked. But since the port agreement was inked by the Northern Territory government six years ago, China has shown itself willing to use economic coercion against trading partners, including Australia, to prosecute its national interests. As we reported on Wednesday, from an economic perspective the port deal appears to be a poor transaction with accumulated losses of $151m over five years.

We have maintained a consistent position on the sale, which has already caused tensions with our major defence partner, the US. Alarmed by the sale, the US government polled attitudes in Australia and found that almost half of those surveyed believed the lease posed “a lot of risk” to national security. Then president Barack Obama raised the issue with then prime minister Malcolm Turnbull, saying: “Let us know next time.” We editorialised in September 2016 that Australia must manage two vitally important relationships, noting: “Australia’s alliance with the US is the bedrock of our security. Our ties with the US are also economic; the US is our No 1 source of direct foreign investment. China is our biggest trading partner and the fifth-largest foreign investor in Australia.”

Since then, the defence relationship with the US has strengthened and our economic relationship with China has become strained but remains hugely significant in dollar terms. In 2016, we concluded that Australia was free to make our own decisions but “we could do much better when crafting procedures for testing foreign acquisitions against our national interests”.

Almost five years later, we are being forced to revisit the Port of Darwin deal and ask whether things have materially changed. As Nicholas Whitlam wrote on Wednesday, Dennis Richardson, the Department of Defence secretary at the time of the sale, told a Senate committee that 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 and not a navy base. Mr Whitlam said our navy could enter any Australian port without any permissions, and foreign navies could not enter without government permission. The local harbour master has no authority to stop our people and every authority to stop others. The lease is for those parts of the port involved with international commercial shipping. It doesn’t include Stokes Hill Wharf (which houses Customs), or the fishing and coastal shipping facilities around Frances Bay, or the naval base. We can take back all of the port in a crisis.

Peter Jennings, executive director of the Australian Strategic Policy Institute, is more concerned, saying the review is an opportunity for Defence to correct a dreadful policy error when it concluded in 2015 that the lease was not a problem. Jennings says Xi Jinping’s China is on an aggressive course to dominate the Indo-Pacific, supplant the US as the region’s leading military power, weaken its allies, and brook no dissent against Beijing’s wishes. In response, Washington is rapidly shaping a strategy of “dispersal” of its forces in times of crisis to reduce the likelihood of successful attacks on places such as Guam and Japan. In these scenarios, says Jennings, northern Australia takes on added strategic importance to the security of our region.

Foreign editor Greg Sheridan writes on Thursday that Darwin’s port should never have been leased to a Chinese company but now that it is, we need to work with that rather than seize it back. Other nations need to know investments in Australia are secure. Sheridan says it would be a huge provocation to the Chinese to cancel the lease (even though China would never have allowed a reciprocal situation). And we can take it back if we need to.

Given the stakes and changed conditions, it is appropriate that Defence be able to review its position on the sale and for its views to be taken seriously by government. Defence’s wishes must be measured against the broader community and commercial interest, and any decision must be made in a transparent way and according to due legal process. In this regard, since the port deal was done, new powers have been enacted that give the government the ability to review agreements involving foreign interests, and act if necessary. As shown by the commonwealth’s decision to revoke the Belt and Road memorandum of understanding between Victoria and China, these laws have retrospective powers. Our position remains unchanged. This is a decision that Australia alone must make.