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

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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

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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

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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