Witha Carnation Revolution in Portugal, new Portuguese Goverment decided to rapidly ditch all portuguese colonies. One of them was Eastern Timor.
When East Timorese political parties were first legalised in April 1974, three major players emerged. The
Timorese Democratic Union (UDT), was dedicated to preserving East Timor as a protectorate of Portugal and in September announced its support for independence.
[6] Fretilin endorsed "the universal doctrines of
socialism", as well as "the right to independence",
[7] and later declared itself "the only legitimate representative of the people".
[8] A third party, Apodeti emerged advocating East Timor's integration with Indonesia
[9] expressing concerns that an independent East Timor would be economically weak and vulnerable.
[10]
Indonesia, on the other hand, seemed intrested for annexing of Eastern Timor, but, learned with WNG experience, feared of Australian reaction.
So Indonesia approached Australian Government about the issue.
Australia didn't wanted that Eastern Timor slides into chaos, but also wanted to preventing that it becomes part of Indonesia. Niether side wanted that Eastern Timor becomes communist stronghold.
So, Australia decided that she supports independent Eastern Timor, but that civil war between political groups there must be stopped. Cooperation with Indonesia on that agenda was desired.
Indonesian leaders were stranded between desire to annex ET and desire not to turn Australia into enemy and maybe even start a war with Australia.