Australia was one of the few countries to recognise the 1976 annexation of East Timor by President Suharto's "New Order" government.
The 1998 resignation of Suharto and replacement by his reformist protégé, B.J. Habibie, created an opportunity in both countries for policy reform.
Habibie was suggesting East Timor receive special autonomy status within the Indonesian republic, which he offered as part of United Nations (UN)-mediated negotiation process between Indonesia and the territory's former colonial ruler, Portugal.
Australian policy also changed.
From a position of not supporting any act of East Timorese self-determination, the Prime Minister and Foreign Minister Downer formulated a shift in policy to suggesting not just autonomy but a political solution that included a referendum on independence be provided in about a decade.
This was developed confidentially without the knowledge of Cabinet, and outlined in a December 1998 letter to Habibie suggesting the Indonesian government prepare for such a referendum.

Reacting to the Howard-Downer letter, in January 1999 Habibie announced a snap decision for East Timor to have a UN-supervised referendum within 6 months rather than the 10 years suggested by Howard.
The Habibie announcement provoked violence from East Timorese pro-integration militia groups, violence that the Indonesian military (TNI) could not or would not control.
The Prime Minister's request for President Habibie to permit a UN peace-keeping force to take control was rejected by President Habibie as unacceptable and inflammatory to the Indonesian domestic political environment.

On 30 August 1999, the East Timorese voted overwhelmingly for independence.
Within a few days, the pro-integration militia—along with their TNI supporters—undertook a retaliatory scorched earth campaign that left over 1,000 people dead and destroyed much of the territory's infrastructure.
In the face of Australian public and international outrage, the Prime Minister led discussions for a UN peacekeeping force, a position supported by US President Bill Clinton and UN Secretary-General Kofi Annan.
Following international pressure, President Habibie allowed the peacekeeping force (INTERFET) to enter Indonesia, with Australia providing the largest contingent of 4,500 troops.
Landing in Dili on 20 September 1999, the mission was popular within Australia and maintained bipartisan political support.
In early October, the UN Secretary-General announced that INTERFET had largely restored order to East Timor.
Australia was one of the few countries to recognise the 1976 annexation of East Timor by President Suharto's "New Order" government. The 1998 resignation of Suharto and replacement by his reformist protégé, B.J. Habibie, created an opportunity in both countries for policy reform. Habibie was suggesting East Timor receive special autonomy status within the Indonesian republic, which he offered as part of United Nations (UN)-mediated negotiation process between Indonesia and the territory's former colonial ruler, Portugal. Australian policy also changed. From a position of not supporting any act of East Timorese self-determination, the Prime Minister and Foreign Minister Downer formulated a shift in policy to suggesting not just autonomy but a political solution that included a referendum on independence be provided in about a decade. This was developed confidentially without the knowledge of Cabinet, and outlined in a December 1998 letter to Habibie suggesting the Indonesian government prepare for such a referendum.
Reacting to the Howard-Downer letter, in January 1999 Habibie announced a snap decision for East Timor to have a UN-supervised referendum within 6 months rather than the 10 years suggested by Howard. The Habibie announcement provoked violence from East Timorese pro-integration militia groups, violence that the Indonesian military (TNI) could not or would not control. The Prime Minister's request for President Habibie to permit a UN peace-keeping force to take control was rejected by President Habibie as unacceptable and inflammatory to the Indonesian domestic political environment.
On 30 August 1999, the East Timorese voted overwhelmingly for independence. Within a few days, the pro-integration militia—along with their TNI supporters—undertook a retaliatory scorched earth campaign that left over 1,000 people dead and destroyed much of the territory's infrastructure. In the face of Australian public and international outrage, the Prime Minister led discussions for a UN peacekeeping force, a position supported by US President Bill Clinton and UN Secretary-General Kofi Annan. Following international pressure, President Habibie allowed the peacekeeping force (INTERFET) to enter Indonesia, with Australia providing the largest contingent of 4,500 troops. Landing in Dili on 20 September 1999, the mission was popular within Australia and maintained bipartisan political support. In early October, the UN Secretary-General announced that INTERFET had largely restored order to East Timor.
Howard Government