Australia reviews lease for Chinese port near US military outpost
A Chinese deal to run an Australian port near where thousands of US and local troops train has become the latest line of fault in a deterioration in diplomatic and trade relations between Canberra and Beijing.
Australian defense officials are examining whether a 99-year lease granted to the Shandong Landbridge Group in 2015 to operate the port of Darwin – in return for A $ 506 million, or roughly $ 392 million – is a potential security threat national.
The deal blinded the US government at the time, as it was not informed in advance of the lease of the port by the Government of the Northern Territory to Landbridge.
The port manages ammunition, equipment and fuel used by U.S. Marines and Australian troops who train with them for up to six months a year, defense experts say. It is also the most suitable site in northern Australia for a major naval base and is the country’s closest route to the contested waters of the South China Sea.
The port of Darwin regularly supports Australian Defense Force exercises and hosts visits from Australian and foreign navies, according to the port’s annual reports.
“Australia and our American ally are increasingly recognizing the value of our strategic geography in the north, centered on Darwin,” said Michael Shoebridge, national security expert at the Australian Strategic Policy Institute, a supported think tank. by the government. . “The American and Australian strategy means that we need to make much better use of Darwin as a strategic asset for the naval and air forces, in particular.”
Representatives for Landbridge, a heavily owned company, said on Wednesday the company would act to protect its interests if Australia terminates the lease, potentially by taking legal action and seeking compensation for its losses.
The investment was a business decision that “does not involve any safety concerns,” said Vincent Lai, managing director of Landbridge Infrastructure Holdings Ltd., a Hong Kong-based subsidiary that oversees the assets of the Port of Darwin. He said Landbridge was willing to cooperate with the Australian government review.
The Chinese lease illustrates the awkward diplomatic feat Australia has had to contend with in trying to balance deeper strategic ties with Washington with a growing dependence on China for its economic well-being.
Landbridge was selected by the Government of the Northern Territory following interest from dozens of companies around the world. Lawmakers in the territory saw it as an opportunity to accelerate development in northern Australia and help increase exports to Asia, especially livestock and mineral products.
Mr Lai, reading a statement on behalf of Landbridge Chairman Ye Cheng, said the company has invested A $ 20 million to modernize the port since becoming its operator and can now manage a range larger goods, including liquefied natural gas. He said recent security concerns regarding the port are hampering its business and relationships with customers.
Landbridge, which owns logistics, petrochemical, real estate and other assets in China, secured the deal at a time when trade and economic ties between the two countries were deepening. A few months earlier, Canberra and Beijing had signed a free trade agreement that had been in the works for nearly a decade.
The port deal did not need Australian federal government approval at the time and then Northern Territory chief Adam Giles said it posed no security risk . The Federal Secretary of Defense did not object either.
However, Australian officials are increasingly concerned about Chinese influence in the country’s affairs and President Xi Jinping’s more aggressive approach to diplomacy and trade. Australia has passed new laws that strengthen its powers to review agreements that may affect national security and plans to strengthen them further.
Relations between the two countries deteriorated last year after Australian Prime Minister Scott Morrison called for an international investigation into the origins of the coronavirus. Since then, China has imposed restrictions or tariffs on some Australian imports like coal, barley and wine.
China has complained that Australia is imposing increasingly discriminatory restrictions on investment by Chinese companies and limiting the activity of its technology companies. Australia was one of the first countries to block Huawei Technologies Co. components of its 5G wireless networks.
Last month, the Australian federal government canceled a preliminary agreement between China and Victoria, one of Australia’s most populous states, which was part of Beijing’s Belt and Road Initiative, a foreign policy program in which China is investing billions of dollars in infrastructure projects around the world. large.
“If there is any advice from the Defense Ministry or our security agencies that changes their perspective on the national security implications of any piece of critical infrastructure … then you can expect that I, as Prime Minister, take this advice very seriously and act accordingly ”. Mr Morrison said recently when asked about the Darwin Harbor lease.
On Wednesday, China’s Foreign Ministry said Australia should stop “disrupting normal trade and cooperation with China.” Companies investing overseas have been encouraged to comply with local laws, he said in response to questions from the Wall Street Journal.
Some Australian defense experts see the port deal as a policy error. Darwin is the only place in northern Australia for the development of a major naval hub, said Neil James, executive director of the Australian Defense Association, a security think tank.
The port will likely process the supplies needed for an A $ 747 million upgrade to the training ranges announced by Mr Morrison last month, said Mr Shoebridge, the national security expert.
Northern Territory Chief Minister Michael Gunner has said he supports a federal review of the Darwin harbor lease. His party opposed a deal while in opposition in 2015, he added.
Landbridge, based in the coastal town of Rizhao in northern China’s Shandong Province, is not the only Chinese investor with Australian port infrastructure. China Merchants Port Holdings Co. Ltd. is a 50% shareholder in the Port of Newcastle on Australia’s east coast and a key hub for coal exports. China Investment Corp. is part of a consortium that bought the Port of Melbourne in 2016.
Some federal lawmakers want these investments to be canceled as well. Senator Matt Canavan – a member of the National Party, which is part of Mr Morrison’s governing coalition – said last month that Australia was threatened by what he called aggressive behavior by the Chinese Communist Party.
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