Crunch decision on Chinese-owned Port of Darwin looms

A decision on whether to force a Chinese company to hand back its ownership of the Port of Darwin could be handed down in a matter of weeks, as the federal government weighs whether to make a move that will further ignite tensions with Beijing.

The Department of Defence has handed its advice on security risks at the port to the government after the national security committee of cabinet ordered a review this year.

A range of options for the future of the port, which was sold to Chinese government-owned Landbridge group in 2015 for $506 million, have been canvassed in recent months.

The Port of Darwin’s 99-year lease with Chinese company Landbridge has attracted criticism since 2015.Credit:Glenn Campbell

The most drastic would involve the government forcing Landbridge, owned by Chinese billionaire Ye Cheng, to divest the strategically important asset on national security grounds under critical infrastructure laws passed in 2018.

Other options include requiring the government to conduct regular “security views” of the port to ensure any risks are being dealt with.

Laws passed in 2018 would allow the Home Affairs Minister to issue a direction to an operator of critical infrastructure such as a port to mitigate significant national security risks.

The government could also use proposed new critical infrastructure laws yet to pass Federal Parliament to force staff at the port to undergo background checks and create a mandatory reporting framework.

It is unclear which if any of these options have made their way into Defence’s final advice to the government.

The Sun-Herald and The Sunday Age spoke to senior members of the government and defence establishment to gauge the timing of the decision. Several suggested the government was wrestling with how to balance national security requirements in an increasingly tense strategic environment in the region with how to avoid causing further damage to the trade relationship between China and Australia.

While Defence’s advice has been handed to government, it’s understood the issue has not yet been discussed by the National Security Committee of cabinet, or by the full cabinet.

A decision to force the sale of the port would significantly ratchet up tensions with China, which has hit Australia with more than $20 billion in tariffs after federal government decisions including leading calls for an independent global coronavirus inquiry.

The Head of the Northern Australia Strategic Policy Centre at think tank ASPI, John Coyne, said he expected a decision in early 2022 and the “government will have little choice but to acknowledge that there needs to be a change in how the port is managed in the lease arrangements”.

“The current lease arrangements can’t stand as they are in terms of controlling the day-to-day operations and in terms of its future investment and development,” he said.

“The current arrangements are impacting on our bilateral relationship with Japan and the US and more broadly will in time impact on Quad arrangements and opportunities,” adding a warning that “any announcement other than leaving it as exactly as is will be followed by a really sharp statement from Beijing”.

Australian Defence Association director Neil James said the port “should not have been sold in the first place and if we have to buy it back to solve the problem, then we should”.

“You don’t want to cause the problem you are seeking to avoid by taking it back at a time of increased strategic tensions, you would escalate the problem rather than solve it.” To that end, Mr James suggested the buy-back should occur sooner, rather than later.

A costing undertaken by the Parliamentary Budget Office two years ago estimated the federal government would have to pay $30 million in compensation to Landbridge if it was required the company to give up the port. It said the government would also have to pay $690 million to purchase the remaining term of the lease but cautioned the costings were “highly uncertain” considering the lack of public information about the deal’s terms.

The looming decision comes after the nation’s counter-espionage agency last week warned Australia’s adversaries may try to infect its telecommunications and energy grids with malicious code to launch damaging cyber attacks years down the track.

Australian Security Intelligence Organisation director-general Mike Burgess last month said he remained “concerned about the potential for Australia’s adversaries to conduct sabotage against us”.

US marines leave Darwin. The US would like to deploy more forces to the Top End but Chinese ownership of Darwin Port impedes that.Credit:Royal Australian Navy

“It is entirely plausible that our adversaries would seek to pre-position malicious code on our critical infrastructure,” he said. “Such cyber enabled activities could be used to damage critical infrastructure in the future, especially at times of increased tension.”

Labor senator Kimberley Kitching said “Liberals in Darwin and Canberra sold our most strategically significant port to a Chinese company legally obliged to take direction from the CCP”.

“Labor has said that the Port of Darwin should never have been sold. How do we tell South Pacific neighbours to reject BRI debt traps on infrastructure while this embarrassing Liberal mistake endures,” she said.

“National security issues are a part of the problem, the symbolism of it is appalling and must be addressed.”

Defence Minister Peter Dutton’s office declined to comment when contacted, while Landbridge did not respond to a request for comment.

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