Having been involved intensely with East Timor's independence from Indonesian annexation, Australia has been supportive of (or at least non-obstructive to) former President Xanana and former Foreign Minister/Defense Minister Jose Ramos Horta getting rid of former Prime Minister Mari Alkatiri’s support base in the police.
To anti-Alkatiri forces in the country, the police were heavily-armed and too highly-organized (including border police, the rapid response unit and the special force) for comfort. Rumours also emerged that Alkatiri was forming a group of assassins. The Australia-backed Xanana/Ramos Horta government’s loyalist 800 veteran soldiers (among a total of 1,400 personnel) remained their surest guarantee against any Alkatiri-led police insurrection.
Alkatiri's socialist outlook was not acceptable to some Australian interest groups with interests in Timor Leste and Australia under the conservative Howard government was perceived as being increasingly uncomfortable with rumoured Chinese influence in East Timor and might have moved to contain Chinese influence courted by Alkatiri to balance Australian power.
According to some reports, the previous John Howard administration supported by the Labor Party utilized strong-arm negotiations on the exploitation of the Timor Sea’s petroleum with the former Alkatiri administration to secure control over the majority share of East Timor’s oil and gas and keep China at bay.
Alkatiri was perceived to be keen to sell East Timor's rights to oil and gas in the Timor Sea to Chinese state companies or at least used the Chinese as a bargaining chip to drive a hard negotiation with Australia. He hoped a state-owned petroleum company assisted by China, Malaysia and Brazil will enable Timor to benefit more from its own oil and gas in addition to the revenue it will raise from the area shared with Australia.
On the afternoon of September 18, 2003, President Hu Jintao met with Alkatiri at the Great Hall of the People and urged China to play a bigger role in the international and regional affairs while cooperating with East Timor in all fields.
China was the first country to establish diplomatic relations with the country after it achieved independence in 2002 and had donated rice to East Timor but stayed out of sending troops to the troubled new nation (though military aid in the form of naval vessels was later provided). A standoff resulted when Former President Xanana Gusmao threatened to resign if Alkatiri stayed on in power. Eventually, under great pressure, Alkatiri finally relented and resigned on 26 June 2006 Monday.
In October 2008, the Parliamentary Majority Alliance (AMP) coalition government awarded a US$390 million power project to build two power generating stations (in Manatuto district central Timor and on the south coast) and an electricity grid to Chinese Nuclear Industry 22nd Construction Company.
But, the project was legally struck down when the Court of Appeal on 27 October 2008 upheld a petition submitted by 16 members of parliament, many from the opposition Revolutionary Front for an Independent East Timor (FRETILIN) party based on the argument that the four-year budget allocated to the Chinese projects was unconstitutional as the money for the China-tendered deal would entail a withdrawal beyond the amount permitted by existing laws governing the country's oil revenue-financed sovereign wealth fund.
Crook, Matt, "East Timor kills Chinese power deal" dated 3 December 2008 in Asia Times website [downloaded on 1 Jan 2009], available athttp://www.atimes.com/atimes/Southeast_Asia/JL03Ae02.html.
Foreign Ministry of PRC (FMPRC), "President Hu Jintao Meets East Timor Prime Minister Mari Alkatiri" dated on 22 September 2003 in the FMPRC website [downloaded on 1 Jan 2009], available at http://www.fmprc.gov.cn/ce/ceat/det/xwdt/t104838.htm.
Hill, Helen, "The Australian Government and media have demonised East Timor's PM without knowing all the facts" dated 31 May 2006 in The Age website [downloaded on 1 Jan 2009], available at http://www.theage.com.au/news/opinion/stand-up-the-real-mr-alkatiri/2006...
O’Connor, Patrick, "East Timor: Former PM Alkatiri claims alleged assassination attempt on Xanana Gusmao was faked" dated 8 April 2008 in the World Socialist Web Site (WSWS) [downloaded on 1 Jan 2009], available at http://www.wsws.org/articles/2008/apr2008/alk-a08.shtml.