Australia’s department of defence is reviewing whether to scrap a contentious lease to a Chinese company of Darwin port, which is located close to a US Marines base.
Washington has long expressed concern about the 99-year lease, which was sold by the Northern Territory government to Shandong-based Landbridge for A$506m in 2015.
The review was announced following a sharp deterioration in Australia-China ties, which prompted Canberra to rip up two Belt and Road Initiative deals between the Chinese and Victorian state governments last week.
Peter Dutton, Australia’s defence minister, confirmed the lease review in an interview with the Sydney Morning Herald on Monday, saying he had asked his department to “come back with some advice” to ensure that government could “look at options that are in our national interests”.
New legislation has handed Canberra “last resort” powers to act retrospectively to force companies to divest assets when national security risks emerge.
But experts said any move against a private Chinese company would be controversial, as it could result in retaliation against Australian companies by Beijing. It would also overturn previous advice from Australia’s defence department that the port deal posed no security threat.
“Australia’s defence and security agencies were unanimous in 2015 that the deal didn’t present a national security risk,” said James Laurenceson at the University of Technology Sydney.
He said the assessment did not change in 2018, according to comments by Julie Bishop, then Australia’s foreign minister. And despite public agitation by China hawks over recent months, the government had not received any advice about potential security risks, added Laurenceson.
Last week, Dutton warned that conflict with China over Taiwan “should not be discounted”, prompting Beijing to warn Canberra to stop interfering in its internal affairs.
Scott Morrison, Australia’s prime minister, said if he received advice that suggested there were risks, then the government would take action.
When Landbridge bought the lease, Ye Cheng, the company’s founder, suggested the port would be part of Beijing’s BRI plan, a centrepiece of President Xi Jinping’s foreign policy.
Mike Hughes, vice-president at Landbridge Australia, told the Financial Times that the company was aware of the review and was willing to participate.
The deal initially passed without much scrutiny in Canberra, which had recently signed a free trade deal with Beijing. But US-China tensions linked to China’s aggressive expansion in the contested South China Sea, prompted Barack Obama to raise concerns directly with Malcolm Turnbull, then prime minister, about not being consulted on the deal.
Since then, Canberra has banned Huawei from its 5G network, tightened foreign investment rules and blocked the sale of several assets to Chinese bidders. Beijing has accused Canberra of unfairly targeting its interests and slapped trade sanctions on a range of Australian goods.
Peter Jennings, director of the Australian Strategic Policy Institute, who has campaigned against allowing Landbridge to retain the lease, said there had been a change in strategic circumstances since 2015.
“China is now pursing a policy of coercion to try to get states to behave in ways that suit Beijing. The obvious question to ask is: how comfortable can we be that key elements of Australia’s critical infrastructure are being held by Chinese companies?”
Jennings said the government should review Chinese or Hong Kong ownership of other important assets, including electricity networks and port infrastructure in New South Wales and gas pipelines in Western Australia.