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C O N F I D E N T I A L SECTION 01 OF 05 DILI 000341 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EAP/MTS 
PACOM FOR POLAD AND JOC 
NSC FOR HOLLY MORROW 
 
E.O. 12958: DECL:  6/30/2016 
TAGS: PGOV MOPS ASEC KCRM AEMR PO AS TT
SUBJECT: EAST TIMOR SITREP FOR 30 JUNE 
 
REF: DILI 339 
 
DILI 00000341  001.2 OF 005 
 
 
CLASSIFIED BY: Grover Joseph Rees, Ambassador, U.S. Embassy 
Dili, Department of State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (U) Summary: 
---  Ramos-Horta to head interim government? 
---  President may negotiate with Fretilin on new Prime Minister 
---- Demonstrators depart after speeches by Gusmao, Alkatiri, 
Lu'olo; 
--- Alkatiri claims Parliamentary immunity in arms case; 
--- Fretilin activists contend their leadership elections were 
valid; 
--- Fiscal year ends without adoption of new budget; 
--- Incident raises concerns about potential for continued 
unrest in Dili. 
End Summary. 
 
Ramos-Horta to head interim government? 
------------------------------------------ 
 
¶1.  (SBU) According to President Xanana Gusmao and acting 
Foreign Minister Jose Ramos-Horta, by Monday (July 3) 
Ramos-Horta will assume the role of "co-ordinating minister" in 
an interim government that will last until the President 
appoints a new Prime Minister.  The designation of Ramos-Horta 
will be made by ex-Prime Minister Mari Alkatiri, whose authority 
to make such a designation rests on the theory that Alkatiri is 
still in office as acting Prime Minister until a new Prime 
Minister is sworn in.  Ramos-Horta told the Dili diplomatic 
corps today that Alkatiri will meet with the Fretilin party 
Permanent Poltical Committee this weekend to inform them that he 
is not presently able to perform his duties as interim Prime 
Minister and has therefore designated Ramos-Horta, the 
second-ranking government minister, as "co-ordinating minister." 
 Gusmao also told Ambassador Rees today that he thought this 
would happen.  In response to a question about the underlying 
assumption that Alkatiri still retained some authority as 
interim Prime Minister, Gusmao responded, "that's their 
business." 
 
¶2. (SBU) Ramos-Horta had expressed a preference for the title 
"Acting Prime Minister," see Reftel, but Alkatiri reportedly 
insists that the proper term is "Co-ordinating Minister." 
 
¶3. (C) Comment:  Both Ramos-Horta and Gusmao have accepted the 
word of their respective Portuguese legal advisors for the 
proposition that the Constitution of East Timor requires that a 
dismissed Prime Minister and all other government ministers 
remain in office until a new Prime Minister is sworn in.  In 
fact the Constitution is silent on this question.  Leaving 
dismissed government ministers in office during a transition is 
the most common practice in countries with parliamentary 
systems, but it is not universally followed, particularly in 
cases where particular ministers have been dismissed for cause. 
Ramos-Horta appears to believe that the Constitution explicitly 
requires this practice, and he also appears to believe that it 
is a good idea in the present circumstances.  Gusmao, on the 
other hand, has doubts both about the legal necessity and the 
political wisdom of leaving Alkatiri with any power at all, but 
he appears to have concluded that the question is not worth 
fighting about so long as Alkatiri is willing to sign a letter 
vesting these powers in Ramos-Horta.  Moreover, the President 
still retains ultimate authority over defense and security under 
the "declaration of crisis" that was recently renewed for 
another 30 days.  See Reftel.  President Gusmao has made it 
clear on a number of occasions, including in his meeting with 
Ambassador today, that he will no longer deal with Alkatiri as 
Prime Minister.  However, acquiescing in the idea that Alkatiri 
has the authority to relinquish the powers of interim Prime 
Minister to a "Co-ordinating Minister" may lead to the 
conclusion that Alkatiri can later write another letter taking 
these powers back.  It would have been at least as legally 
 
DILI 00000341  002.2 OF 005 
 
 
sound, and far more advisable from a political standpoint, for 
President Gusmao simply to have designated Ramos-Horta as 
Co-ordinating Minister pusuant to his own authority under the 
declaration of crisis.  End Comment. 
 
President may negotiate with Fretilin on new Prime Minister 
--------------------------------------------- -------------- 
 
¶4. (U) In his meeting with the diplomatic corps today 
Ramos-Horta announced that President Gusmao has gotten over his 
reluctance to negotiate with the Fretilin leadership, which has 
been based on his view that they were illegally elected and 
therefore have no legal standing (see Reftel).  Ramos-Horta says 
Gusmao will soon receive a delegation from the Fretilin Central 
Committee (CCF) consisting of Alkatiri allies Ana Pessoa, 
Estanislau DaSilva, Arsenio Bano, and Jose Lobato, which will 
propose to him a candidate or candidates for Prime Minister. 
Ramos-Horta said he has urged "my colleagues, my friends" in the 
Fretilin leadership to "be flexible with names, to give the 
President a chance to appoint someone who is not only acceptable 
to Fretilin but also consistent with the mood of the country." 
He predicted they would be flexible and that the President would 
propose a new Prime Minister who would form a new government 
next week.  Ramos-Horta also said that if it the new government 
were acceptable both to the Fretilin leadership and to the 
general population of the country, it could remain in office 
until the 2007 elections with no need for a snap election this 
fall.  But see paragraph 5. 
 
¶5. (U) In his meeting today with Ambassador, President Gusmao 
suggested a different course of action than the one Ramos-Horta 
predicted to the diplomatic corps later in the afternoon.  He 
reiterated earlier statements that there is currently no 
legitimate Fretilin party leadership to propose candidates for 
Prime Minister, and therefore that it will be necessary to hold 
a new party Congress soon.  In the meantime, however, he has no 
objections to meeting with individual Fretilin leaders and with 
the Fretilin party leadership of Parliament, whose status 
predates the May 2006 party congress and is therefore not 
affected by the illegal procedures at the Congress.  Gusmao met 
this afternoon with Francisco "Lu'Olo" Guterres, who is 
President of Fretilin and also of the National Parliament, and 
with Francisco Branco, the leader of the Fretilin bench in 
Parliament.  Gusmao told Ambassador that he would meet with 
Lu'Olo and Branco to urge that Parliament resume its sessions 
and pass an electoral law within the next few days, but he did 
not rule out listening to whatever they or other Fretilin 
leaders might have to say about discussing possible candidates 
for Prime Minister.  Gusmao also reiterated his view that 
parliamentary elections should be held this fall rather than 
next spring. 
 
¶6. (U)  Possible "consensus" candidates for Prime Minister, who 
might be acceptable not only to Gusmao and to the Fretilin 
leadership but also to the general population of Timor, would 
include Ramos-Horta himself --- who insisted today that he 
preferred only to serve as defense minister in a new Government 
--- as well as ex-and-acting Minister of Health Dr. Rui Araujo 
and Jose Luis Guterres, Ambassador to the UN and to the United 
States. 
 
¶7.  (C) Comment:  Dr. Ramos-Horta, who is once again attempting 
to mediate between President Gusmao and the current Fretilin 
leadership, may have been over-optimistic in his statements 
today about the two sides' willingness to meet each other 
halfway.  Gusmao reiterated to Ambassador today that he cannot 
accept a candidate for Prime Minister from a group that in his 
view has no legal standing to offer such a candidate.  Even if 
the President were to change his position on this question, it 
is difficult to imagine the current Fretilin leadership --- 
which basically consists of Alkatiri's Mozambique group plus 
their close ally Lu'Olo --- proposing anyone from outside their 
own immediate circle for Prime Minister.  End Comment. 
 
Demonstrators depart after speeches by Gusmao, Alkatiri, Lu'Olo 
 
DILI 00000341  003.2 OF 005 
 
 
--------------------------------------------- -------------- 
-------- 
 
¶8. (U) Fretilin party demonstrators from the eastern districts 
departed Dili this afternoon, after a morning during which they 
were addressed first by President Xanana Gusmao and then by 
ex-Prime Minister Alkatiri and other party leaders. Gusmao, who 
arrived to address the crowd at about 9 a.m., was received with 
little enthusiasm and questioned by members of the crowd about 
the pressure he has put on Fretilin leaders and about the 
security situation in Dili, where many homes identified as 
belonging to easterners have been burned in recent weeks. 
 
¶9. (U) Within 30 minutes of Gusmao's departure, Alkatiri and 
Lu'Olo arrived to address the crowd.  Their remarks focused on 
Fretilin's historical role and described it as a party of 
national unity, with no reference to East or West.  They touched 
on the current issues under consideration by Gusmao, stating 
that the dissolution of Parliament would be unconstitutional and 
undemocratic.  Fretilin MP Antonio Cardoso also delivered a 
speech, while Alkatiri and Lu'olo remained on the platform, in 
which he stated that the interim Prime Minister must be 
designated by Fretilin. 
 
¶10. (U) Australian Defense Force (ADF) officers on the scene at 
the demonstration characterized the participants as thoroughly 
cooperative with all crowd control measures.  Emboffs were at 
the demonstration this morning and observed that it was 
essentially a party rally, with key Fretilin leaders involved in 
its organization.  Jose Reis, one of two newly-elected Deputy 
Secretaries General of the party and a close Alkatiri ally, was 
 
SIPDIS 
closely involved in all aspects of the organizing process. 
Alkatiri and Lu'Olo were also both directly involved in 
coordinating security arrangements with the international 
forces.  A few hours later the demonstrators left the capital in 
a convoy escorted by international forces. 
 
Alkatiri claims Parliamentary immunity in arms case 
--------------------------------------------- ------ 
 
¶11. (SBU) Alkatiri responded today to the Prosecutor General's 
summons to appear for questioning in connection with arming an 
alleged "hit squad" with a letter claiming immunity as a Member 
of Parliament.  Alkatiri reportedly stated in his letter that 
the Prosecutor General would have to obtain authorization from 
Parliament before Alkatiri could be compelled to appear.  The 
Prosecutor General today reportedly relayed a letter to the 
National Parliament requesting this authorization. 
 
¶12. (SBU)  The Constitution provides for Parliamentary immunity 
only for words and acts in the course of the member's official 
parliamentary duties.  However, a law on the Status of Members 
of Parliament purports to create additional immunity beyond that 
set forth in the Constitution, stating that MPs cannot be 
arrested or placed in custody without authorization from the 
Parliament.  Although this law does not explicitly preclude 
questioning a Member of Parliament in the process of an 
investigation, it has been used by MPs on previous occasions to 
avoid cooperating with investigations.  Rather than test the 
constitutionality of this arrangement in court by seeking an 
arrest warrant for Alkatiri, the Prosecutor General appears to 
have deferred further action for the time being. 
 
Fretilin activists contend their leadership elections were valid 
--------------------------------------------- ------ 
 
¶13. (C) In conversations with Emboffs over the last two days, 
Fretilin sources close to Alkatiri have argued strongly that it 
is inappropriate for the President to treat the current party 
leadership as illegitimate.  One Fretilin Central Committee 
(CCF) member stated that setting aside potential criminal 
charges, it was fair and appropriate for Alkatiri to resign 
solely on the basis that the nation's security institutions had 
"blown up" under his leadership.  However, Fretilin insiders see 
the President's position on the legality of the party's 
 
DILI 00000341  004.2 OF 005 
 
 
leadership and consequent ineligibility to designate an interim 
prime minister as going too far.  They also object to his 
statements that he will dissolve Parliament if Fretilin does not 
elect legitimate leaders and propose an acceptable candidate for 
Prime Minister. 
 
¶14. (C) Fretilin party insiders are claiming that the party 
congress last month, at which the leadership was elected by a 
public hand vote after the secret ballot was abolished, was 
legal.  They claim that under the law, any challenges to the 
legitimacy of the congress must be made within ten days, and 
that because no such challenge was made the results stand. 
Beyond this, they claim that any challenge should be pursued in 
court rather than by non-recognition of the Fretilin leadership 
in a collateral political context. Party insiders have also 
expressed unhappiness with the current impasse between Fretilin 
and the President, expressing their willingness to enter into 
dialogue with him and their frustration that he seems unwilling 
to do so.  This frustration appeared to be somewhat ameliorated 
today by the President's agreement to meet with the delegation 
of Fretilin MPs headed by Lu'Olo and Branco.  . 
 
¶15.  (C) Comment:  The Fretilin insiders' heated assertions that 
the party leadership elections were legitimate and cannot be 
challenged make it appear unlikely that they will move quickly, 
if at all, to organize an extraordinary congress as demanded by 
the President.  In Ramos-Horta's briefing today, however, he 
said he believed Fretilin had agreed a new Congress --- or 
perhaps a "national conference" --- to elect leaders by secret 
ballot, although he said it might take longer than a month and 
that the selection of a new Prime Minister could not await the 
outcome.  Embassy is looking into the assertion that there is a 
ten day time limit for challenges to party leadership, but it 
does not appear anywhere in the law governing political parties. 
 The law does clearly state that leadership must be elected by a 
secret vote.  The Fretilin members may be quoting their own 
 
SIPDIS 
party rules rather than the Political Parties Law, which as a 
statute is binding on all political parties and would invalidate 
any contrary provisions in party rules.  End Comment. 
 
Fiscal year ends without adoption of new budget 
--------------------------------------------- ---- 
 
¶16. (U) A World Bank official expressed concerns to EmbOff today 
regarding the fact that today marks the last day of the 
2005-2006 fiscal year.  A budget was proposed by the recently 
resigned Government, but it has not been approved by Parliament. 
 President Gusmao told Ambassador today, and GOET  budget 
advisors appear to agree, that the budget proposed by the 
Alkatiri Government became obsolete with his resignation because 
of the constitutional provision that "draft legislation shall 
lapse with the dismissal of the Government."  An Acting Prime 
Minister, such as Ramos Horta, could resubmit the same budget or 
a revised budget, or any Member of Parliament could introduce 
such a bill.  There is also an emergency provision in Timorese 
law called the "duodecimal regime," which allows the government 
to draw upon unexpended funds in an amount up to one-twelfth of 
the previous year's budget each month. 
 
¶17. (SBU) The GOET's inability to execute last year's budget has 
raised concerns that many of the recently announced supplemental 
expenditures aimed at addressing issues related to the current 
crisis will not be effectively executed due to a lack of 
capacity.  The official also stated that the finance and 
procurement functions of the GOET have all but ground to a halt. 
 According to this official, only one of the the few officials 
with the authority to sign checks and approve procurement orders 
remains in Dili, and even he refuses to report to work due to 
security concerns.  On several occasions this official has 
reportedly met international advisors at undisclosed locations 
in Dili to sign checks so that GOET purchases of fuel and 
humanitarian supplies could go forward.  The breakdown in the 
procurement system almost lead to a fuel shortage earlier this 
week and both the Ministry of Labor and the Ministry of Health 
are reporting that stocks of medical and humanitarian supplies 
 
DILI 00000341  005.2 OF 005 
 
 
are dangerously low.  President Gusmao told Ambassador today 
that he is aware of this problem and has met with Ministry of 
Finance and Banking and Payments Authority officials to devise 
an interim arrangement that will ensure payment of properly 
authorized items while including safeguards against improper 
authorizations by ex-officials who are temporarily retaining 
their offices. 
 
Incident raises concerns about potential for continued unrest in 
Dili 
--------------------------------------------- ----------- 
 
¶18. (C) Embassy today received an incident report from the ADF 
reporting that several Molotov cocktails were thrown at two ADF 
personnel carriers yesterday afternoon.  This is the first 
instance of international troops being targeted using lethal 
means.  (There have been a few previous rock-throwing incidents, 
none of which resulted in injuries.)  None of the explosives 
caused any injury and none of the attackers were captured. 
Counter-demonstration groups numbering in the hundreds in the 
immediate vicinity of where the attacks occurred provided no 
information that might have been useful in apprehending 
potential suspects.  At this point it cannot be ascertained 
whether this incident signals an escalating trend toward more 
directed violence against international forces. 
 
¶19. (U) International NGOs working in the camps for internally 
displaced people (IDPs) today reported to us that numbers in the 
camps went up yet again following increased unrest June 27-28. 
One camp alone reported that over 100 additional families have 
arrived. 
REES