Tom Allard – It has to be the most unlikely of alliances, a concord that has defied a bloody history forged in battle. One man, Xanana Gusmao, was leader of a tenacious and elusive East Timorese resistance. The other, Susilo Bambang Yudhoyono, was the first commander of the first battalion of Indonesian troops sent out to destroy them by any means necessary.

Today they are leaders of their countries, and firm friends.

"All the [Indonesian] generals, we are now friends," President Gusmao said last night. "Before, we were enemies looking at each other and fighting one another, killing each other. Now, these same human beings can be friends. For me, it is amazing."

This is a man who spent more than 15 years as a guerilla, enduring extreme deprivation and witnessing terrible crimes against his people. He also spent time in Jakarta's notorious Cipinang jail.

"Seven years was not a short time but they were seven years when I could understand the suffering of the Indonesian people, the bad side of the [Soeharto] regime. It is why now we are so close."

Mr Gusmao said he has a "very good personal relationship" with Mr Yudhoyono. It was Mr Yudhoyono, then Indonesia's security minister, who urged the former freedom fighter to become East Timor's first head of state at a time when he was most disinclined to do so. More recently, Mr Yudhoyono has asked, and received, Mr Gusmao's in-principle approval for autonomy, but not independence, for Aceh province.

Mr Gusmao's conciliatory approach to East Timor's former brutal overseers has rankled some in his country still haunted by vivid memories of war crimes and angry that their perpetrators have gone unpunished. But the dividend has been a cessation of militia activity and a relatively stable East Timor.

And, to be sure, the resistance hero can still express his anger with force, and get results. It was Mr Gusmao's lashing of Australia's approach to the Timor Sea oil and gas talks that captured the imagination and publicity, and led to a multibillion-dollar backdown by the Federal Government.

Now the challenge is to use those billions to rebuild a country with a wrecked economy, battling incessant drought and suffering endemic poverty.

Only 10 per cent of the oil revenues will be used in the next five years on the people of East Timor. The remainder will be invested in US Treasury bonds.