On November 28, 1975, Fretilin made a unilateral declaration of independence of the Democratic Republic of East Timor (Republica Democrática de Timor Leste in Portuguese). This was not recognised by either Portugal, Indonesia, or Australia. Fretilin’s Francisco Xavier do Amaral became the first President, while Fretilin leader Nicolau dos Reis Lobato was Prime Minister. Indonesia’s response was to have UDT, Apodeti, KOTA and Trabalhista leaders sign a declaration calling for integration with Indonesia called the Balibo Declaration, although it was drafted by Indonesian intelligence and signed in Bali, Indonesia not Balibo, Portuguese Timor. Indonesian academic George Aditjondro described this as the ’Balibohong Declaration’, a play on the Indonesian word for ’lie’.

On December 7, Indonesian forces launched a massive air and sea invasion, known as Operasi Seroja, or ’Operation Lotus’.

On the day before the invasion, US President Gerald Ford and Henry Kissinger met with Indonesia’s Suharto. According to declassified documents released by the National Security Archive (NSA), in December of 2001, they gave a green light for the invasion. In response to Suharto saying "We want your understanding if it was deemed necessary to take rapid or drastic action [in East Timor]." Ford replied, "We will understand and not press you on the issue. We understand the problem and the intentions you have." Kissinger similarly agreed, though he had fears that the use of US-made arms in the invasion would be exposed to public scrutiny, talking of their desire to "influence the reaction in America" so that "there would be less chance of people talking in an unauthorised way" (http://www2.gwu.edu/~nsarchiv/NSAEBB/NSAEBB62/).

Similarly, Australian governments protested loudly in public after the event but had already provided private assurances that no substantive action would be taken. This was an unpopular policy with the Australian public, as the heroic actions of the Timorese people during World War II were well-remembered, and vigorous protests took place in Australia, but to no avail. It is widely believed that the primary motivating factor for the Whitlam and Fraser governments lack of opposition was the possibility of oil being found in the waters between Australia and Timor.

During the invasion mass killings and rapes took place: 60,000 Timorese were dead by mid-February. A puppet Provisional Government of East Timor was installed in mid-December, consisting of Apodeti and UDT leaders. Attempts by the United Nations Secretary General’s Special Representative, Vittorio Winspeare Guicciardi to visit Fretilin-held areas from Darwin, Australia were obstructed by the Indonesian military, which blockaded East Timor. On May 31, 1976, a ’People’s Assembly’ in Dili, selected by Indonesian intelligence, unanimously endorsed an ’Act of Integration’, and on July 17, East Timor officially became the 27th province of the Republic of Indonesia. Although the United Nations had turned a blind eye to the Indonesian annexation of West Irian some years previously, the occupation of East Timor remained a public issue in many nations, Portugal in particular, and the UN never recognised either the regime installed by the Indonesians or the subsequent annexation.

In fact on December 12, 1975, the United Nations General Assembly approved a resolution according to which, "having heard the statements of the representatives of Portugal, as the Administering Power, concerning developments in Portuguese Timor...deplores the military intervention of the armed forces of Indonesia in Portuguese Timor and calls upon the Government of Indonesia to withdraw without delay its armed forces from the Territory...and recommends that the Security Council take urgent action to protect the territorial integrity of Portuguese Timor and the inalienable right of its people to self-determination".

However, Daniel Patrick Moynihan, the US ambassador to the UN at the time, wrote in his biography that "the United States wished things to turn out as they did, and worked to bring this about. The Department of State desired that the United Nations prove utterly ineffective in whatever measures it undertook [with regard to the invasion of East Timor]. This task was given to me, and I carried it forward with not inconsiderable success." (A Dangerous Place, Little Brown, 1980, p. 247) Later, he admitted that as American ambassador to the UN, he had defended a "shameless" Cold War policy toward East Timor.

Western governments were criticized during the war for their role in supporting the Indonesian government, for example with arms sales. The U.S. had supported Suharto’s regime in Indonesia during the Cold War as it was seen as a bulwark against communism and it continued the practice during the invasion of East Timor. While the U.S. government claimed to have suspended military assistance from December 1975 to June 1976, military aid was actually above what the Department of State proposed and Congress continued to increase it.

The U.S. also made four new offers of arms, including supplies and parts for OV-10 Broncos which, according to Cornell University Professor Benedict Anderson, are "specially designed for counter-insurgency actions against adversaries without effective anti-aircraft weapons and wholly useless for defending Indonesia against a foreign enemy", adding that the policy continued under the Carter administration.

Testifying before Congress, the Deputy Legal Advisor of the State Department, George Aldrich aid the Indonesians "were armed roughly 90 percent with our equipment. ... we really did not know very much. Maybe we did not want to know very much but I gather that for a time we did not know." Indonesia was never informed of the supposed US "aid suspension". David T. Kenney, Country Officer for Indonesia in the State Department, also testified before Congress that one purpose for the arms was "to keep that area [Timor] peaceful."

The invasion was not given much coverage by the U.S. media. When the subject was covered, the deaths were attributed to the preceding civil war. This caused some to later accuse the media of blatant bias, because coverage of the genocide in Cambodia under the Khmer Rouge was much more common.

In 1992 the United States ended its military training programme in Indonesia, and in 1994 the United States banned the export of small arms and riot control equipment to that country. Nevertheless, organisations monitoring trade in arms have estimated that between 1992 and 1997 the United States sold more than $1 billion worth of arms to Indonesia. In 1995 the training programme was resumed but included lessons about human rights and the control of civilian crowds. The Joint Combined Exchange Training program managed by Green Berets and Air Force commandos continued until 1996 without the knowledge of Congress. The fact that some of the aircraft sold to the Indonesian army were not designed for offensive purposes did not prevent them from being so used. Arms sales to Indonesia remained suspended until a promise was received that lethal weapons and helicopters would not be used in East Timor. The UK government is also known to have allowed the sales of arms to be used in East Timor.

Towards independence

Several Timorese groups fought a resistance war against Indonesian forces for the independence of East Timor, during which many atrocities and human rights violations by the Indonesian army were reported. A sad highpoint was the killing of many East Timorese youngsters (reportedly over 250) at a cemetery in Dili on November 12, 1991. In total, estimates of the number of deaths in the war range from 100,000 to 350,000—out of a total East Timorese population of only 800,000. The Dili Massacre was to prove the turning point for sympathy to the East Timorese cause in the world arena as, with the dissolution of the Soviet Union that same year, the "Marxist bogey" that Indonesia had often used against the idea of an independent East Timor had vanished.

The Dili Massacre (known in Portuguese has Massacre de Santa Cruz) had profound effect on the Portuguese people, especially after images showing East Timorese praying in Portuguese while repressed by the Indonesians. The effect was so large that Xanana Gusmão was seen has an hero in Portugal. In fact, the visit of Xanana Gusmão and Dom Ximenes Belo to Portugal was the biggest popular moviment in the country after the Carnation Revolution. Portugal started to apply internationally unsucessfully, Portuguese diplomats said the other diplomats simply ignored the Portuguese. The Portuguese politians started to question if Portugal should finance or provide weapons to the Timorese Guerilla. Indonesians and Indoneasian products were forbidden to enter in Portugal.

In 1996, Bishop Carlos Felipe Ximenes Belo and Jose Ramos-Horta, two leading East Timorese activists for peace and independence, received the Nobel Peace Prize.

Due to problems in Indonesia, Portugal started to gain some political allies firstly in the European Union, and after that in other places of the world to pressure Indonesia.

In 1998, following the resignation of Suharto and his replacement by President Habibie, Jakarta moved towards offering East Timor autonomy within the Indonesian state, although ruled out independence, and stated that Portugal and the UN must recognise Indonesian sovereignty. However in 1999, the Indonesian government decided, under strong international pressure, to hold a referendum about the future of East Timor. The referendum, held on August 30, gave a clear majority (78.5%) in favor of independence, rejecting the alternative offer of being an autonomous province within Indonesia, to be known as the Special Autonomous Region of East Timor (SARET).

Directly after this, paramilitaries backed by Indonesia as well as actual Indonesian army forces carried out a campaign of violence and terrorism to reverse the referendum. According to Noam Chomsky, "In one month, this massive military operation murdered some 2,000 people, raped hundreds of women and girls, displaced three-quarters of the population, and demolished 75 percent of the country’s infrastructure" (Radical Priorities, 72).

Activists in Portugal, Australia, the United States, and elsewhere pressured their governments to take action, with US President Bill Clinton eventually threatening Indonesia, in dire economic straits already, with the withdrawal of IMF loans. The Indonesian government consented to withdraw its troops and allow a multinational force into Timor to stablilize the area.