The Global Tussle For The Port of Darwin

In 2015, Chinese company Landbridge was awarded a 99-year lease over the Port of Darwin. Now, Australia wants to take it back and put it into local hands. This week on the podcast, Rebecca Jones speaks to government reporter Ben Westcott and senior editor Chelsea Mes about why Beijing is speaking out against that decision, and what role the US might play.

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Episode Transcript

Speaker 1 (00:02):
A port court in a political storm. Ownership of the
Port of Darwin to be stripped from a Chinese company.

Speaker 2 (00:09):
We will enter into negotiations to do that.

Speaker 3 (00:13):
We should control our own infrastructure, and I think it's
a good ordea that China should run oir infrastructure.

Speaker 1 (00:21):
Just weeks into Anthony Albanesi's second term, yet another geopolitical
tussle is escalating, involving Australia its biggest trading partner, China,
and its biggest defense ally, the United States. And this
time it's all about the Port of Darwin. Hello, I'm
Rebecca Jones, and welcome to the Bloomberg Australia Podcast. The

(00:44):
Australian government back in twenty fifteen awarded the Chinese company
Landbridge a ninety nine year lease over the Port of Darwin. Now,
ahead of the election in twenty twenty five, both sides
of politics have pledged to bring that lease back into
Australian hands. So now the time has come for action,

(01:06):
and Beijing is not happy to help me unpack this issue.
I am joined this week by Bloomberg's Government reporter Ben Wescott,
who recently returned from a trip to Darwin to investigate
this very issue. I'm also delighted to welcome Chelsea Mez
to the podcast.

Speaker 3 (01:23):
Now.

Speaker 1 (01:23):
Chelsea is based in Bloomberg's Sydney newsroom, but her job
is very much like a silent disco. Her body is
in one place, her head is in another. Chelsea is
a senior editor on the Washington DC Breaking News team
and is responsible for tracking Donald Trump while our US
colleague sleep Chelsea welcome, great to be here.

Speaker 3 (01:45):
Ben.

Speaker 1 (01:45):
Let me start with you for the Australia China take
on things. Can you set the scene for us? How
exactly did a Chinese company end up with the lease
over the Port of Darwin and why now is the
government trying to override it?

Speaker 2 (02:03):
Also, it all goes back to the early twenty tens
back and there was a real error back then of
privatization and neoliberal policy making, and the general thought was
that if something could be done, it would be done
best by a private company. And that's why local governments
across Australia were encouraged by the then center right coalition to

(02:23):
sell off their public assets to make money to basically
put into the vital services that Australians needed now. The
Port of Darwin was one such facility that was sold
off that in this case by the Northern Territory Government,
and that was then signed in the contract to land Bridge,
a Chinese company, which leased it for ninety nine years

(02:45):
at a cost of about five hundred million Australian dollars. Now,
the decision was controversial even back then. It was considered
a poor decision by the center left Labor Party who
are now government, and by then President Barack Obama, who
was pretty critical of it in discussions with then Prime

(03:08):
Minister Malcolm Turnbull, telling him maybe you should just tell
us next time we are going to do something about it,
something like this. According to Obama, he heard about it
from the New York Times. So cut forward to the
twenty twenties and despite multiple reviews, there was no decision
to take the port away from Lanbridge until there were

(03:29):
some reports towards the end of twenty twenty four that
the company itself might be in some financial trouble back
in China. That led to discussions between Albanese's government, the
Northern Territory government, and Landbridge over how potentially Albanzi might
end up taking that away from Landbridge and moving into

(03:49):
Australian hands. That culminated at the last election with the
decision by both Albanesi and the center right coalition that
no matter who won that what would be going back
into Australian hands. So now having won a big mandate
in May, Alberizi has to deliver.

Speaker 1 (04:08):
And as you might expect, China has been quite vocal
in its opposition to this, their Chinese ambassador to Australia
just this week saying it was ethically questionable for the
government to try and take the lease back. Then if
Landridge doesn't want to sell how does Albanesi propose taking
it back? Are there provisions in the original contract that

(04:30):
would force it to sell it back?

Speaker 2 (04:32):
So we don't know what was in the original lease. However,
if you talk to the government, they are reasonably confident
that there is something in that contract that they can
say Landbridge has not fulfilled a break of the lease.
They could then use to go ahead and take that
away from the company if necessary. Now there is a

(04:54):
few problems with that. One is there maybe compensation that
the government will be forced to pay out of tax
payer pockets. No one really want wants that, And in
addition to that, any sort of move to rip it
away from Lanbridge or nationalize it could lead to some
concerns inside China. So I think the solution that Australia,
Landbridge and China would probably all prefer is one in

(05:17):
which a private company and Australian based private company probably
took over the lease in return for fair compensation with Lanmbridge.

Speaker 1 (05:26):
We've of course had reports this week of a US
private equity firm that has some links of sorts to
the Trump administration showing interest in buying that lease, which
kind of runs counter to the plan for Australia to
bring the lease back into Australian hands. As you've just mentioned,
that's also going to be riling up China further, right, Ben,

(05:49):
with all that's happening between the two countries at the moment.

Speaker 2 (05:53):
So those reports have still not been confirmed at our end.
And when I spoke to Luke Gosling, a labor lawmaker
up in Darwin during my visit there, he made it
very clear that there's lots of interest from different buyers.
This is you know that this will not be a
case where the government has to pick and choose who
they sell to. There will be a real array of

(06:14):
options for them to choose from, although he did say
that some of them would have an Australian footprint, which
hinted that maybe they might be international companies rather than
Australia based. Now what would that mean for China?

Speaker 1 (06:26):
What?

Speaker 2 (06:26):
China so far has been reasonably relaxed about this announcement
as far as the Foreign Ministry in Beijing goes. They've
sort of advised that it has to be done within
the bounds of business law. They've warned against any nationalization
of the port. But it's been fairly relaxed as far
as these things go. Now, if decision was made to

(06:49):
either terminate the police or to sell to a US company,
that may result in a far more heated response from Beijing.

Speaker 1 (06:57):
Chelsea mays LL bring you in now. Asides from US
companies that may be interested, the US itself has a
long military history in this part of Australia, right.

Speaker 3 (07:09):
Yeah, that's right back. America's history and Darwin dates back
to the Second World War, particularly during the japan bombing
of the city that killed more than one hundred Americans,
American marines during the bombing of the USS PII warship,
and then obviously it's a significant place terms of US
military history. But there was another sort of shift in

(07:30):
twenty eleven under the Obama administration's foreign policy tilt towards
the Asia Pacific, and that meant more than two and
a half thousand US Marines are now stationed near the city.
And obviously the population of Darwin is not big. There's
really only one hundred and fifty thousand people living there,
so quite a significant place in terms of the US

(07:50):
Obama was actually the first US president to visit the
city in twenty eleven as part of this shift towards
the Asia Pacific and to commemorate the loss of US
soldiers there in World.

Speaker 1 (08:00):
War Two and Chelsea. Beijing is no stranger to this
kind of action from the US. It's also been a
vocal opponent to the US government's push to claim the
Panama Canal from what it claims Chinese control. Is the
Port of Darwin example just another one of Australia being

(08:22):
stuck between its biggest defense ally and its biggest trading partner.

Speaker 3 (08:27):
Yeah, look, you could certainly look at it that way.
The Panama Canal issue is actually really interesting, you know.
During Trump's inauguration address in January, he called for the
US to take control back over the Panama Canal, you know,
alleging it was under the control of Chinese forces, and
that obviously sparked a big deal between C. K. Hutchinson,
a Hong Kong backed consortium, and another global consortium led

(08:51):
by Black Rock. Albaneze has a really tricky dance to
perform here, you know. Relationship relations between Australia and China
have really only just to frosted, with China putting essentially
a trade blockade on Australian imports after Scott Morrison called
for an investigation into the origins of COVID nineteen. So
Australia lost its biggest sport markets during that time. But

(09:13):
on the other hand, as Trump has upended the global
trade order with the impositions of reciprocal tariffs, he famously
singled out Australian beef imports for special mentioned as he
unveiled these tariffs basically against every US trading partner.

Speaker 1 (09:28):
It wouldn't be a Bloomberg podcast if we didn't mention
the word tariff at least once, now, would it. But
you're quite right, obviously the relations between Australia and China,
they have dominated our news cycle for you know, going
on five years ever since, as you say, those early
days of the coronavirus pandemic where Morrison called for the

(09:49):
probe into its origins. When we come back, let's discuss
how Anthony Albinizi is going to approach China and indeed
the US in his second term. Off you're listening to
the Bloomberg Australia Podcast, and welcome back to the Bloomberg
Australia Podcast. You're here with me, Rebecca Jones, and I'm

(10:12):
talking to Ben Westcott, our Canbra based government reporter and
senior editor in charge of tracking the US president while
her US colleagues sleep. Chelsea Mez. Ben, You've just been
in Darwin. What is the feeling on the ground there
about the port of Darwin. Are people in the top
end concerned?

Speaker 2 (10:33):
There's no doubt that Susans in Darwin see themselves as
being very much on Australia's front lines. So they're just
below Indonesia and Southeast Asia more broadly, and they're the
only Australian seed to ever have been bombed in a conflict.
It was struck by Japan in the Second World War.
But when it comes to the actual port. There is
a stark divide in the community over whether or not

(10:55):
Landbridge deserves to keep running it. If you speak to
residents who oppose the original sale, they say that Lambridge
has done a poor job of managing the port, that
it has not delivered on its promises to make it
a successful business, and that is many ways it's wasted
taxpayer money in some instances, and they say that therefore
he would be lucky to get back the original asking

(11:17):
price of the lease that it paid in twenty fifteen.
But on the other side, particularly the Chinese community, point
to the great role that Lambridge has played in the city.
They say that Lambridge has worked very closely with community organizations,
that Lambridge has turned what was a flailing port into
a heavily profitable one, and that therefore it should be

(11:38):
rewarded for that. So a real stark divide between the
different views in the community. And we've heard that same
sort of divide in the language used by Alberzi and
the Northern Territory government and the Chinese government.

Speaker 1 (11:52):
I'll stay with you, Ben. Finally, Albanizi is obviously just
getting his feet under the desk for this his second
term as Prime Minister, as Chelsea mentioned his first term
marked an improvement in relations with Beijing. What do you
expect his approach to be in this second term. Right
after the election, we had Beijing bureau chief at Bloomberg News,

(12:13):
Jan Pinglee on the podcast and she said the approach
should be all about composure. Is She's still right?

Speaker 2 (12:21):
Look, Minister Anthony Albernizi, like all his predecessors since about
twenty fourteen, faces one of the most challenging questions in
Australian history. Do you turn to the US closest security
partner or to China, the largest trading partner for the country. Currently,
Albinizi faces a stabilized situation with China where relations are

(12:44):
not worsening, but where you see some of the most
intense aggression from the Chinese military that Australia has faced
in a very long time, including the live fire exercises
off the East Coast in February. At the same time,
there is growing pressure from the Trump administration firstra to
take more action on China. Are enjoying in the US's

(13:07):
sort of trade war against Beijing. However, the way things
stand at the moment, probably a status quo would be
the best thing that Albanize you can probably hope for.
There's not going to be many chances to move closer
to China over the next three years, and there are
many many opportunities for things to fall apart. So I
think Albinizi will just be focusing on balancing the plates

(13:28):
that he's bounced for the past three years, or while
Donald Trump and Shijing Ping try and take potshows at
each other through the.

Speaker 1 (13:35):
Metal Chelsea Man, same question to you. How does Anthony
Alberzi manage this delicate dance with a world leader like
Donald Trump, who could very well look to leverage the
mission of this second term Australian labor government to his
own advantage.

Speaker 3 (13:51):
Yeah, look, Albinizi is dealing with what every world leader
is trying to get their hits round within Trump's seekns term.
He's an incredibly mercurial president, and I think what we've
seen so far is world leaders trying to get in
Trump's good graces. And if this deal, you know, as
it's been reported, could potentially fall into an American company,

(14:12):
I don't think that's something that would be seen as
a bad thing for Anthony Albanesi and the relationship that
Camberra has with Washington.

Speaker 1 (14:19):
It's certainly a delicate dance, isn't it. And we'll be
following along that story and you can too on Bloomberg
dot com. Ben Westcott, Chelsea Mas, thank you for.

Speaker 3 (14:29):
Joining me, thank you for having me, Thanks for having me.

Speaker 1 (14:32):
And thank you for listening to the Bloomberg Australia podcast.
I'm Rebecca Jones. This episode was recorded on the traditional
lands of the Wondery, Gutdigal and Dullawill people. It was
produced by Paul Allen and edited by Ainsley Chandler. Don't
forget to follow and review the show wherever you get
your podcasts, and sign up for Bloomberg's free daily newsletter,

(14:53):
Australia Briefing. Go to Bloomberg dot com to subscribe.