Australia's spying on East Timor was hypocritical, says Kirsty Sword-Gusmao Still fighting on: Kirsty Sword-Gusmao with her sons Alex, Kay Olok and Daniel. A better deal in terms of the oil and gas reserves stands not just to benefit the East Timorese, but Australians as well. For Kirsty Sword-Gusmao, the news that Australia had spied on her adopted homeland under the cover of an aid program cut especially deep. The Melbourne native and wife of East Timor Prime Minister Xanana Gusmao was disappointed and angry. The spying, she says, was a "cynical and reprehensible" act from a supposedly friendly nation. But, on a personal level, it smacked of hypocrisy of the worst kind. A former aid worker herself, Ms Sword-Gusmao has revealed that after she was branded a spy for helping East Timor, the Australian government took away her modest allowance as an aid volunteer in response. It was 2002. East Timor was reeling after the devastation of Indonesia's violent withdrawal before the independence vote. The allowance - a few hundred dollars a month - was the only income for her and Mr Gusmao and their son Alex, then two. Xanana had no income. I was the mainstay, the breadwinner at that point," she says. It was a very small amount but it was enough to live on. Speaking from the Mornington Peninsula in Victoria, where she is recovering from treatment for breast cancer, Ms Sword-Gusmao says she agreed to what she felt was an unjust penalty to ensure no schism in relations. What bothers her about it now is the allegation that former foreign minister Alexander Downer had ordered in 2004 that ASIS agents bug East Timor's cabinet offices during sensitive oil and gas treaty talks. The spies reportedly came into East Timor under cover of an Australian aid project. The ASIS whistleblower behind the allegation was raided by ASIO last month, along with East Timor lawyer Bernard Collaery. Underpinning the espionage is a new battle between East Timor and Australia over some $40 billion in revenue locked up in Timor Sea oil and gas deposits. Mr Downer would not comment directly on intelligence matters, other than to note the latest claims of espionage were "old rumours." But he flatly denies he had anything to do with Ms Sword-Gusmao losing her job at Australian Volunteers International, as she suspects. "No involvement at all," he texted on Friday. Bill Armstrong, then head of AVI, said he was told by a senior AusAID official to "take her off our volunteer list." "That meant she could no longer have the allowance," he says. I was told the foreign minister was upset with the discovery of what Kirsty had been doing ... Whether he actually personally said Kirsty should go, or whether the official second-guessed his opinion, I don't know. Living in Jakarta and doing some volunteer work for AVI's predecessor organisation, Ms Sword-Gusmao had begun helping the Timorese resistance movement, still under the control of Indonesia at the time. Codenamed Ruby Blade, she smuggled information, documents and telephones to Mr Gusmao, then in a Jakarta prison. She also liaised and sometimes housed other Timorese resistance figures. Her activities were disclosed in an Australian Story program. The right-wing columnist Andrew Bolt said she was "dumb and dangerous" for "putting at risk the safety and the work of Australian aid workers and possibly a few of our diplomats." It is Mr Downer who is now accused of potentially jeopardising aid workers by allegedly authorising the ASIS eavesdropping operation in Dili by agents masquerading as humanitarian workers. Ms Sword-Gusmao is hoping that the underlying issue of Timor's share of the oil and gas is resolved. The country is "much stronger" 12 years after independence but is still racked by poverty. In the meantime, she is thankful her breast cancer has cleared after treatment. I basically have to live in trepidation for five years, waiting to see with bated breath how things are going, but I'm feeling very healthy and strong. Her eldest son Alex is now 13. Alex and his brothers Kay Olok (11) and Daniel (9) keep her busy. It is for them and their fellow Timorese youth that her husband is again fighting with Australia for the Timor Sea reserves, she says.