The outcome of Timor Leste's parliamentary election could be seen as a political victory for former President and now Prime Minister Xanana Gusmão. Some factors are running in his favour; but there are substantial challenges.

Xanana has managed to sideline Fretilin (still the strongest political force in the country) for the time being. His Parliamentary Majority Alliance (AMP), created after the election, has a new constellation of Ministers and Secretaries of State. Fretilin still regards the process by which the AMP was installed as unconstitutional, but has abandoned the idea of a legal challenge.

Xanana's alliance inherits a budget which has more than doubled, thanks to increased petroleum royalties. Further, the Howard Government has rewarded with increased aid what it sees as a more pro-Australian regime. A Rudd Government has already committed to increased aid and scholarships for the entire region.

In a clever move, Xanana has contracted the services of former Victorian Labor Premier Steve Bracks, as an adviser. This will give him an excellent line of communication with the likely incoming Labor Government in Canberra.

However an increased budget and Australian support may not be enough. Xanana has used up much of his political capital in coming to power. He has undermined the political parties he helped create and now dominates and relies on a disparate group with little collective political will.

The strongest group in the new Ministry is the conservative Social Democratic Party (PSD), with links to the old UDT. Xanana's National Congress for Timorese Reconstruction (the new 'CNRT'), despite being the major party in the AMP, remains more an umbrella group than a party. The Democratic Party (PD), formerly the major opposition party, now has less influence.

Nationalists are thin on the ground. Two of the new ministers and at least three of the Secretaries of State backed the 1999 'autonomy' option with Indonesia. Graffiti in Dili reminds them of this, and of their links with militia violence.

Autonomists in, nationalists out. Xanana's main post-independence theme of reconciliation has contributed to this re-alignment. This political shift, more than the somewhat associated 'east-west' ethnic divide, reflects the divisions that destroyed the police and damaged the army in 2006.

Former army Major Alfredo Reinado, an escapee wanted for murder, remains at large and a potential embarrassment to the new government. Xanana is widely believed to have backed Reinado's armed rebellion. The UN investigation into the 2006 crisis diplomatically labelled the former President’s connection with Reinado as unwise (“increasing tensions between the President and the army”) but not criminal. Reinado might yet have his say on this matter, if he faces trial. However in view of the failure to arrest and prosecute the high-profile escapee, resolving the ‘Reinado problem’ is now universally seen as Xanana’s responsibility.

Fretilin, the former government leader, has worn its share of blame for the crisis. Its vote fell from 56% in 2001 to 29% in 2007. However Xanana's fall was hardly less dramatic. As a Fretilin-backed independent he gained over 80% in the 2002 Presidential vote. His new political party gained just 24% in the 2007 elections.

The new ‘CNRT' (using the initials of an earlier, genuinely broad coalition) has little by way of policies or party structure. On one view this new CNRT, with refugees from Fretilin, PD and elsewhere, is little more than a political vehicle for Xanana. He certainly has all authority in both the CNRT and the AMP.

After the breakup of the original CNRT, in the name of multi-party elections, Xanana encouraged the formation of the PD. This party became the main opposition and the potential beneficiary of the attempted coup in 2006.

However in 2007 Xanana bypassed the PD, attracting some of their support into his new CNRT. As a result, PD's vote only increased a little over that of 2001 (from 9% to 11%). PD was offered just two ministries in the new government, plus the Presidency of the Parliament for PD leader Fernando ‘Lasama’ de Araújo. Many PD members are dissatisfied with this outcome. Lasama seems to have gained little influence, remaining dependent on Xanana.

In sum, Timor Leste has acquired a weak and disparate government, dominated by a Presidential-style Prime Minister, with few policies. Its vulnerability to external pressures is plain.

What are these pressures? First, the struggle with Australia over energy resources, having reached some form of compromise over royalties in the shared JPDA zone, is likely to move on into issues of gas processing and new explorations.

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