All of East Timor's fledgling dreams, and all of the threats to those dreams, are on display in The Australian today. First the good news. After a long negotiation, agreement is near on the mechanism for distributing tax and royalties on $30 billion worth of gas and oil under the Timor Sea.

Details are scant, but by agreeing to put aside the renegotiation of the maritime boundary between the two nations, probably for 50 years, East Timor will gain upwards of $5 billion from the Greater Sunrise gas field, which lies almost entirely within Australian territory. Given the Timorese are already getting a 90:10 split on royalties from the adjacent joint development area that straddles the maritime boundary, this is a good outcome for East Timor, and a generous gesture by Australia.

But there are manifold dangers for a developing country that suddenly gains access to buckets of resource-driven profits, and Timor needs only to look at neighbours such as Nauru and PNG to see what they are. Whilever the institutions of civil society are not yet sufficiently robust to control it, corruption will haunt the distribution of resource rents. That is why the exclusive report in The Australian today, that the younger brother of East Timorese Prime Minister Mari Alkatiri has been given the country's only arms import licence, is so disturbing. It not only raises questions about whether East Timor's political elite is prepared to act in the national interest, rather than its own; it also raises the question of what a nation that is wallowing at the bottom of world economic tables, and has a fifth of its workforce unemployed, is doing buying fancy rifles and bullets. While no orders have been placed for tanks or heavy weaponry, why do Timorese police need the kind of sophisticated firepower normally associated with an SAS?

This bizarre $US108,000 budget item makes a mockery of attempts to morally shame Australia over the Greater Sunrise deal. We would greatly like to be comforted by the plan, also reported today, under which East Timor will sequester its royalties in a dedicated fund with a special architecture to guarantee transparency. If the $15 billion or so in tax and royalties that will gradually arrive in Timor's treasury coffers, independent of any productive effort on the part of its people, could be properly locked away from the clutches of the corrupt, greedy and incompetent, and the interest used exclusively for national infrastructure, Timor would truly be a winner from the Greater Sunrise deal.

But the machinations of Bader Bin Hamut Alkatiri give us great cause for concern.