Vaudine England, Jakarta – Bargaining over property and compensation claims between Indonesia and East Timor has begun in what is already proving to be a complex and sensitive process.

A team of 10 Indonesian businessmen and bureaucrats has just returned from an inspection of properties in East Timor, ranging from half-wrecked power and telecommunications buildings to largely destroyed private homes. The United Nations Transitional Administration for East Timor, Untaet, provided assistance to the team and said a new round of talks would take place next week in the Indonesian city of Surabaya. But sorting through the detritus of a bloody occupation and Indonesian departure "quickly gets so murky", a diplomat said yesterday.

"It starts just with ownership issues, who really owns what, and how. And then you try to find the records. Maybe they were destroyed in Dili, but there should be copies here in Jakarta. It could go on for years," she said.

Beyond practicalities are the political sensitivities, including Indonesia's wounded pride, surrounding East Timor's violent route to independence. "From the beginning, both [Indonesian President Abdurrahman] Wahid and [Indonesian Foreign Minister Alwi] Shihab recognised that it was a bit cheeky, shall we say, for Indonesia to insist on compensation for properties," said another diplomat in a reference to the destruction of East Timor by Indonesian troops. "But also from the beginning, the bureaucracy was demanding a proper accounting for buildings, items, whatever, that they have to sign off in their books."

At first, the Indonesian side wanted compensation even for stretches of tarmac, bridges and roads which Jakarta had built in East Timor from 1976 onwards. And regardless of international condemnation of Indonesia's scorched earth departure from East Timor, a strong body of Indonesian opinion maintains Jakarta has nothing to be ashamed of in its actions toward East Timor and thus deserves a generous accounting.

"Many things in East Timor were built with foreign aid, aid which we are still paying the debt service on. So how can we calculate such things?" said Sulaiman Abdulmanan, Indonesia's Foreign Ministry spokesman."We know it is impossible to bring back bridges and all those things, so we are finding ways to discuss compensation for them. But at the same time, we know we cannot really do that so easily because East Timor also needs assistance," Mr Sulaiman said.

International diplomats agree that Indonesia, under the Wahid Government, now has a realistic approach to the problem, but many constituencies need to be assuaged.

United Nations sources also insist that the issue of compensation must be inextricably intertwined with the issue of East Timorese demands for redress. "There is a pre-established precedent from when a state devolves, whereby the public property built by the old state becomes owned by the new state," a diplomat said. "What we're talking about is so-called private properties, such as those of semi-commercial state enterprises like the telecoms. For these, yes, Indonesia should be compensated, but we are saying this compensation has to be tied to the valid claims of the East Timorese."

Asked if this principle was accepted by the Indonesian side, Mr Sulaiman replied: "This is a remnant of a past problem, and we are all trying to find a win-win solution." In the end, which may be as far off as the elections in East Timor now set for late next year, these asset talks will probably result in no movement of money in either direction.