Left to right: Treasurer Josh Frydenberg, Landbridge chair Ye Cheng, and former trade minister Andrew Robb in Darwin in 2015 (Image: Andrew Robb/Twitter)

The federal government is considering scrapping a 99-year lease of Darwin’s port to a Chinese company, the latest point of tension in an increasingly chilly relationship between Canberra and Beijing.

The lease, signed in 2015, is between the Northern Territory government and Landbridge Group, a Chinese company with ties to the Chinese Communist Party.

Back then it was criticised over national security implications, and drew a rebuke from former US president Barack Obama. Now, in a climate where national security concerns dominate the China relationship, the deal seems like a strange throwback to a simpler time — a time when ministers like Andrew Robb and Josh Frydenberg could pose for photos with CCP-aligned Chinese billionaires, and when the relationship with our biggest trading partner was dominated by economic optimism.

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Why did it happen?

The Northern Territory’s Country Liberal government had always wanted to lease the Port of Darwin. For years its pleas to Canberra for investment needed to revitalise the port were ignored. It had also been in the midst of a typical Coalition privatisation blitz. So then-chief minister Adam Giles, determined to “get off the teat” of Canberra, settled on Landbridge, which offered a $506 million deal he couldn’t refuse.

Nearly straightaway that raised national security questions. The port is considered a major strategic asset. About 1000 US marines spend time in Darwin each year. The Americans were so antsy about this that Obama chided then-prime minister Malcolm Turnbull.

While the lease did not have to be approved by the Foreign Investment Review Board, the national security establishment maintained there was nothing wrong with the deal. Then-Defence secretary Dennis Richardson told a Senate committee the director of the Defence Intelligence Organisation had gathered people from the country’s intelligence agencies and confirmed there were no risks, and then-Defence force chief Mark Binskin said you could more easily spy by “sitting on a stool at the fish and chip shop on the wharf”.

Why did we start worrying?

Ever since the deal was signed, concerns about national security were raised, particularly from groups like the Australian Strategic Policy Institute, whose director, Peter Jennings, calls Defence’s decision to greenlight the deal a “dreadful policy error”.

The more that was learnt about Landbridge and its extensive interests in petroleum, construction and mining, the more concerns grew. It also has strong ties to the People’s Liberation Army, and created its own “people’s militia group”.

In 2013, Ye Cheng, the man behind Landbridge, who is described as China’s “invisible billionaire”, was named one of 10 outstanding individuals in Shandong province who concerned themselves with national defence construction. He reportedly has strong ties with the CCP — but that much is an inevitable part of becoming a billionaire in China’s boom years. Landbridge, meanwhile, used the port as security to get a $500 million loan from the Chinese government’s trade bank in 2017.

Concerns about Landbridge and the port are a natural outcome of the way our relationship with China has evolved. In 2015 we still viewed it as one primarily driven by mutual economic opportunity. Now it’s tempered by national security concerns, diplomatic spats, and fears about economic coercion.

Nobody better encapsulates that than former ASIO boss Duncan Lewis. In 2015 he was one of the national security heads who approved the deal. Four years later, he was warning about China’s insidious attempts to take over Australia’s political system.

The Landbridge connection

Even if Landbridge loses the port, it still has extensive business interests in Australia, which will only grow. A year before the Port of Darwin deal, it acquired Westside Corporation, a player in Queensland’s gas industry.

In 2018, well after its acquisition by Landbridge, Westside received a $6 million grant through the government’s gas acceleration program, handed out by former resources minister Matt Canavan. Its managing director, Oxford-educated Mike Hughes, has attended summits at Parliament House about developing northern Australia. It’s a member of APPEA, the gas lobby group, and will no doubt be a beneficiary of the Morrison government’s push for a gas-fired recovery.

Then of course, there’s Robb, the former trade minister and Liberal elder statesman who took an $880,000 a year job consulting for Landbridge the day after he left Parliament. He quit that job two years ago, right before the cut-off to be placed on the foreign influence register.

Despite the bluster around the Darwin port, Landbridge and Westside show the deep entanglement between Australian and Chinese corporate interests, especially in the resources sector.

What happens now?

Morrison hasn’t yet committed to scrapping the deal. Doing so would cost the government millions of taxpayer dollars — $30 million in compensation to Landbridge plus $690 million to buy the rest of the lease. It would also seriously dent a relationship with China that’s pretty much hit rock bottom already, risking further economic coercion and stern rebukes.

But the government seems happy to cop China’s ire. It was comfortable dealing with the blowback of scrapping Victoria’s Belt and Road Initiative with Beijing. Peter Dutton, who has got his Defence Department to prepare advice on the Darwin port deal, warns about the risk of war. Mike Pezzullo, secretary of the Home Affairs Department, warns even louder.

There’s every chance the port could become the latest costly flashpoint in a relationship that isn’t getting any easier.

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Peter Fray
Peter Fray
Editor-in-chief
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