The Sydney Morning Herald reports that if Australia fails to knuckle under, the PNG regime will accept less aid from Australia (!).

PAPUA New Guinea is threatening to dramatically reduce the money it receives from Canberra, suspend all official visits by Australians or impose onerous travel restrictions, and recall its high commissioner.

Whether it does so, the Herald understands, depends on what response it receives to a strongly worded aide-memoire delivered to the deputy secretary of the Department of Foreign Affairs, David Ritchie, yesterday afternoon.

The diplomatic note demands an explanation for the bans Australia put on visits by PNG’s Prime Minister, Sir Michael Somare, and its Defence Minister, Mathew Gubag, as well as its decision to cancel the next ministerial forum between the two countries. The letter also expresses disappointment at the “unilateral” actions taken by Australia.

The bans were announced by the Foreign Minister, Alexander Downer, a fortnight ago, after the escape of the Australian fugitive and Solomon Islands attorney-general designate Julian Moti on a PNG military aircraft.

The aide-memoire gives the Australian Government a week to respond. If no satisfactory response is forthcoming, PNG will retaliate, instituting a range of measures that promise to create havoc for Australia’s $300 million annual aid program to PNG.

The most serious step being contemplated is the suspension of significant elements of Australian aid deemed not essential to PNG, the Herald understands.

Holy mackerel! Do you suppose if tensions increase, Papua New Guinea will escalate and proceed to devastate its adversary by actually sending money back to Australia?

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Hat tip to Memeorandum.