The Port of Darwin as a ‘grey zone’ situation
Port grey

Protecting national security equities is a tricky business in an era of globalisation. Four years ago President Obama unveiled Marine rotational training in Darwin as the single most tangible security action to mark America’s long-term Asia-Pacific rebalance. While Australian Army counterparts initially relished this idea of introducing US troops to the crocodiles and harsh environs of the Northern Territory, the modest military step carried great political significance. In the face of Chinese criticism of the move as containment, many wondered how Canberra would balance its growing economic ties to China with its long-term security alliance with the US. The most recent move by Beijing to purchase a lease on the Port of Darwin pushes the seams of those two seemingly contradictory demands.

By putting up US$366 million for an 80% ownership stake in the Port of Darwin, Landbridge Group has just acquired nearly a century of access to one of the alliance’s strategic neighborhoods. Even if the private Chinese company’s transaction was simply for commercial benefit, does anyone believe it will take long for the People’s Liberation Army (PLA) and Ministry of State Security intelligence operatives to acquire privileged access—a permanent VIP pass?

No wonder some prominent American and Australian critics pounced on potential Chinese motivations and argued that the deal facilitates a ‘Chinese renaissance.’ The deal also took most of Washington by surprise, as it came immediately on the heels of high-level alliance consultations. Former Deputy Secretary of State Richard Armitage, who holds an honorary Order of Australia (AC), was nonplused about the apparent breakdown in alliance communications. Yet defenders of the lease, mostly in Australia, noted the obvious economic benefits of the deal and dismissed detractors as ‘xenophobic.’

An objective American analysis of the deal might best begin with the common-ground observation that the long-term leasing arrangement represents another example of a ‘grey zone’ situation that is something other than ‘business as usual’. While the agreement isn’t a direct threat, it’s precisely the kind of incremental step that could, in conjunction with other small actions, wind up exposing major future security vulnerabilities.

The acquisition of strategic real estate, like the building of artificial islands, is an attempt to quietly change facts on the ground and advance China’s strategic posture and interests in the region. Officials would be naïve to assume that the proximity to defense installations and personnel poses no risk at all. While Landbridge may claim that it isn’t a state-owned enterprise, a ‘private’ Landbridge doesn’t exactly exonerate the company when it comes to relations with the Chinese government.

Furthermore, it’s uncanny how Chinese companies appear to be investing heavily in areas where the US has bases or strategic access and training arrangements. Chinese companies have not only demonstrated this through the Port of Darwin case, but also through casinos that Chinese companies are reportedly trying to open in the Northern Mariana Islands. There, millions of dollars go a long way in influencing local leaders in Saipan and Tinian. As a result, these leaders might much prefer Chinese casinos rather than US training and exercise facilities.

We would underscore Peter Jennings’s point that this lease tested existing institutions that assess the national security concerns of foreign investments and found them wanting. While Defence Department Secretary, Dennis Richardson says officials in his department were consulted in assessing the deal, it’s surprising that Defence appears to have acquiesced in the lease so effortlessly and free from debate. According to Australian Treasurer Scott Morrison, the deal also evaded formal review by the Australian Treasury’s Foreign Investment Review Board.

There’s something worrisome about the timing of this announcement. It was declared only one day after a bilateral meeting of alliance ministers touted the rotational training and other security cooperation. At a minimum, this breakdown in communications represents an unfortunate aberration from the customary candour that permeates the Canberra–Washington dialogue. In response to a question about possible cooperation concerns with the US as a result of the deal, Richardson commented, ‘If other people have other issues about foreign ownership of whatever, that is not an issue that concerns us unless it impinges on our interests and responsibilities.’

While Australia may view US annoyance at the lack of communication as an affront to their national sovereignty, we would point out that Australia and other US allies are often quick to feel snubbed when they are not consulted about issues of importance to them. This isn’t whinging so much as a recognition that even well-oiled alliances have their limits.

Regrettably, the United States is no better poised than Australia to grapple with this type of indirect risk. Were Washington and Beijing to complete a Bilateral Investment treaty tomorrow, the US could quickly face similar controversies about potential Chinese investments. If neither Australia nor the US is well positioned to analyse these issues—to see that we need a means of looking at property and commercial access as a potential risk, not just an economic opportunity—then surely the alliance is by definition equally unprepared.

The United States and our allies are part of a global economy of which China is a vital part. There’s no way for the United States to encourage China’s continued growth, stability, and participation in global governance without including a high degree of interdependence and thus Chinese presence in our countries, especially in economic domains. The aim of America’s rebalance, after all, isn’t to contain China but to enhance our ability to preserve and adapt an inclusive, rules-based regional and global order. Thus, even though Darwin represents a remote place within a removed country, it’s also part of our shared global economy.

So how should allies like the US and Australia develop safeguards, awareness, and processes for vetting Chinese FDI? As was demonstrated by the ban on Huawei’s involvement in Australia’s National Broadband Network, intelligence agencies can effectively advocate against spying. Additionally, different armed services could champion against ownership as would be the case in a military base. However, Australia’s Defence Department clearly didn’t have much to say about the Landbridge deal—so who’s going to protect Australia’s strategic interests like physical assets?

We would endorse the prudent measure put forward to strengthen the power and independence of the FIRB. In Jennings’ view, the Australian government should ‘redesign the FIRB, give it a statutory basis, separate it from the Treasury, and build a genuine capability to make assessments of risk to national security.’ A strengthened FIRB can more effectively and specifically evaluate potential foreign investment in various elements of infrastructure.

Furthermore, the US and Australia should carefully consider how they collect and analyse business transactions that could compromise national security activities. They should also reconsider the communication mechanisms in their alliance. In this way, a potentially controversial deal is at least shared in advance through the robust intelligence cooperation channels that already exist between these two members of the ‘Five Eyes’ community.

While the economic benefits of the deal for Australians are clear, the resulting concerns about regional security, the process of scrutiny for foreign access to infrastructure, and the nature of the US–Australian alliance urge further discussion. The moral of the story is this: protect core interests but closely scrutinise and monitor potential threats that seek to nibble around those strategic equities. And for mercy sake, communicate.