Nigel Wilson – East Timor President Xanana Gusmao has broken ranks with Prime Mininster Mari Alkatiri, threatening to veto the proposed deal struck with Australia to share the energy riches of the Timor Sea.

An agreement that would allow $13billion in revenue to flow from Australia to East Timor – in exchange for postponing talks on the maritime boundary between the countries for 50 years – was expected to be signed next month.

But sources said Mr Gusmao remained unconvinced that his country, one of the poorest in the world, should give up its claimed sovereignty over gas reserves the UN believes are conservatively worth more than $US30billion ($39.5billion).

Mr Gusmao has reportedly told Dr Alkatiri there needs to be more debate over the maritime boundary issue, which determines who owns the undersea oil and gas reserves, before he could accept the best deal had been struck with Australia.

East Timor sources said last night that under the country's constitution, the President had little executive power but could veto legislation on the grounds of national interest.

Australian analysts say the veto threat, believed to have been made in the past month, reflected the long-running antagonism between Mr Gusmao and Dr Alkatiri and the residual opposition among some of the country's elite to Australia's hardline approach to Timor Sea negotiations ahead of the country's independence in May 2002.

Nevertheless, the proposed deal with Australia is backed by East Timor Foreign Minister Jose Ramos Horta, who supports Dr Alkatiri's position.

Senior Australian officials said they were not surprised at the possibility of disagreement between the two East Timor leaders but suggested the veto threat was only a rumour and would not be implemented.

Earlier this month, Mr Gusmao met Australian officials in Canberra to discuss the proposed agreement. He was accompanied by Mr Ramos Horta and the country's chief Timor Sea negotiator, Jose Texeira, in a discussion designed to explain why the boundary question had been set aside for such a long period.