Ironically, if Indonesia had tried to annex East Timor earlier, during the Cold War when everyone was trying to cozy up to the Indonesia regime, the rest of the world would probably have just accepted it. Trying to do this just after the world mobilizes to defend national sovereignty in the first Gulf War was just really bad timing.
This is easy to prevent. Change domestic politics in either Portugal, Indonesia, or Australia, you only need to do this to one country, and Portugal keeps its colonial empire longer, you don't have an unstable Indonesian regime trying foreign adventures to rally domestic support, or get a Liberal government of Australia at the time that doesn't particularly care about human rights, and no crisis and you only have to do this with one of these countries.