Australia is tightening its military ties in the Timor Sea in a move analysts say is designed to head off the growing influence of China.
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And the government has been told its support for Timorese membership of ASEAN could prove a key "bargaining chip" as it looks to counter Beijing in the region.
Prime Minister Anthony Albanese on Wednesday revealed the government has signed a defence cooperation agreement with Timor-Leste, describing it as a "significant step" in relations between the pair.
China's influence in the region has caused increasing alarm in Australian security circles, after it potentially paved the way for Chinese naval bases in the Pacific by striking a security pact with Solomon Islands.
President Jose Ramos-Horta reiterated on Wednesday again warned Timor-Leste could turn to Beijing to fund a gas pipeline in the Timor Sea, accusing Australian companies of siphoning resources that were "rightfully ours".
Andrea Fahey, from the ANU's National Security College, said the deal was a continuation of Labor's attempts to create a "safeguard" by reaching out to its Pacific neighbours.
Ms Fahey said flirtation with Beijing could remain while the Timor-Leste worked through the pipeline, but the deal could prove effective in swaying the Timorese population.
"While they don't get something that satisfies them, they might still try to threaten that. But it could ameliorate the effects of that rhetoric," she said.
'Bargaining chip'
In a statement announcing the deal, Mr Albanese also stressed his support for Timor-Leste's bid to join the Association of Southeast Asian Nations, which promotes tightened military, economic, and political ties between its members.
Ms Fahey said Australia could use its ability to lobby ASEAN nations over membership, a "crucial issue" for Timor-Leste, as leverage.
"I think that can be the bargaining chip, if Australia could weigh in," she said.
"It would be a massive positive for Australia and for Timor. It would be really good for both countries and for the relationship between them."
'Rightfully ours'
Speaking to the National Press Club on Tuesday, Dr Ramos-Horte urged Australia to back the Timor Sea gas pipeline, saying it had the potential to make the "miracle happen".
The two countries have been locked in a stand-off over the development of the Greater Sunrise field, near Darwin, with Timor-Leste calling for gas to be piped to its coast line.
Pressed on whether Timor-Leste would turn to Beijing in lieu of Australian support, Dr Ramos-Horte was non-committal but stressed China was not the only power in the region.
"We're not talking about maritime security, it's just a pipeline ... I don't think China intends to invade anyone," he said.
Dr Ramos-Horta acknowledged Australia's contribution to the country had been "enormous" since 1999.
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But he said Australia had previously made false claims about resources in the Timor Sea, where it had granted "exploitation rights" to major companies.
"Much was extracted from the Timor Sea that was rightfully ours," he said.
Mr Albanese, who met Dr Ramos-Horta this week, said the defence deal had been a long time coming, insisting Australia was committed to supporting its ally's development.
"Australia and Timor-Leste share a special relationship as neighbours with a shared history and deep ties," he said.
"We have been working towards a DCA for over a decade and today's signing is a significant step forward in our partnership."
The Australian government said Timorese forces operating in Australia would be given the same "protections, responsibilities and privileges as Australian personnel will receive in Timor-Leste".
The government said the pair's ability to conduct joint military exercises and cooperate during humanitarian disaster relief would also be enhanced.
Foreign Minister Penny Wong said Australia was committed to defending Timor-Leste's sovereignty.
"This is a key milestone as we continue working together to maintain a stable, prosperous region," she said.