Australia has cancelled the passport of an ex-spy who was about to give evidence at an international court, claiming a $A40 billion oil and gas treaty was bedevilled by spying.
East Timor's government is to argue at a court in the Hague that Canberra got an unfair advantage in the treaty talks in 2004 by spying on it.
The ABC reports the ex-spy has signed an affidavit that is understood to say the spying was "immoral and wrong" because it served big oil and gas, not the national interest.
That affidavit was seized on Tuesday in a raid by Australia's domestic spy agency on the Canberra offices of East Timor's lawyer, Bernard Collaery.
Mr Collaery says the ASIS agent decided to blow the whistle on the 2004 operation because former foreign minister Alexander Downer become a lobbyist for Woodside after leaving politics.
Prime Minister Tony Abbott has defended the raid, saying Australia will always act to uphold its national interest.
The ABC reports the existence of the whistleblower, a former director of technical operations at the the Australian Secret Intelligence Service, was a secret known to only a handful of officials and lawyers until the raids on Tuesday.
On Wednesday afternoon, prime minister Xanana Gusmao of East Timor issued a statement calling on Mr Abbott to explain himself and guarantee the safety of the whistleblower.
"Raiding the premises of a legal representative of Timor-Leste and taking such aggressive action against a key witness is unconscionable and unacceptable conduct,'' he said.
"It is behaviour that is not worthy of a close friend and neighbour or of a great nation like Australia."
Mr Guterres said East Timor understands the need for spying in issues of national security, but that was not the case here.
"What we are engaging here is purely a commercial issue," he said.