In August 1975, a civil war broke out between two opposing political parties in Portuguese Timor: the conservative Timorese Democratic Union (UDT) and the left-leaning Revolutionary Front for an Independent East Timor (Fretilin). The war took place within the context of decolonisation, as the post–Carnation Revolution Portuguese government sought to give independence to much of the Portuguese Empire. UDT and Fretilin were formed in May 1974, following the legalisation of political parties in Portugal. UDT initially advocated for continuing ties to Portugal, before shifting to promoting a gradual independence process that maintained existing institutions. Fretilin sought independence with a new political system that would address a widespread lack of development in the territory. Also formed during this time was the Timorese Popular Democratic Association (Apodeti), which advocated for an Indonesian annexation of the territory, although Apodeti gained far less popular support than the other two major parties.

Discussions about the future of East Timor took place within the context of the views of neighbouring Indonesia. The Indonesian government saw an independent East Timor with a potentially communist government as a security risk. This view found receptive ears among Western governments affected by the recent loss of the Vietnam War. As the left-leaning Fretilin established itself as a popular political force, Indonesia applied pressure on Portugal and the other East Timorese political parties to find a pathway excluding Fretilin. The UDT and Fretilin found common ground and made a joint proposal to Portugal in January 1975 on a path to independence. However, deep mistrust between the parties, especially between their more radical wings, eventually led to a breakdown of relations.

Tensions between UDT and Fretilin came to a head on 11 August 1975 when UDT forces took control of key points in the cities of Dili and Baucau. Although this was successful and caused Fretilin leaders to flee, Fretilin began a counter-attack on 20 August. After retaking the two major cities, Fretilin continued its military campaign, and took control of most of the country by early September. The conflict exacerbated existing local tensions throughout the territory, and between 1,500 and 3,000 people are thought to have been killed during this period by both forces and in other acts of violence. The remaining Portuguese authorities retreated to the island of Atauro, while UDT leaders fled to Indonesia, leaving Fretilin as the effective government. Fretilin called for the return of Portuguese authorities and a resumption of decolonisation discussions, while setting up a caretaker government to manage the territory in the meantime.

UDT leaders who had retreated to Indonesia began to advocate for Indonesian annexation, and Indonesia provided them with training and other military support. Indonesian special forces worked with the UDT to carry out attacks near the border, making limited gains in October. On 20 November a new offensive was launched with more significant Indonesian support. Following the refusal of Portuguese authorities to return, and losing ground to the combined UDT–Indonesian offensive, Fretilin hastily declared the independent Democratic Republic of East Timor. Indonesia responded by publicly coming out in favour of annexation, launching a full-scale invasion on 7 December, and setting up the Provisional Government of East Timor led by its allied political parties. Indonesia formally annexed East Timor on 17 July 1976.

Background

New Portuguese political system Portuguese presence on the island of Timor started sometime in the 16th century. In the 20th century, anti-colonial movements in Portuguese Africa prompted the emergence of a national identity in East Timor. Portuguese Timor was still a relatively peaceful colony under Portuguese rule when the 25 April 1974 Carnation Revolution overthrew the previous Portuguese regime, despite armed rebellion occurring in other Portuguese colonies. The new government was nonetheless committed to the decolonisation of East Timor. Governor was instructed to prepare for decolonisation while maintaining a good relationship with Indonesia. He created the Timor Commission for Self-Determination on 13 May 1975. Self-determination for its colonies was enshrined in the Constitution of Portugal around this time.

Political parties aside from the former National Union were legalised, and five parties formed in East Timor. The two largest were the Timorese Democratic Union (UDT) and the Revolutionary Front for an Independent East Timor (Fretilin). The Timorese Popular Democratic Association (Apodeti) emerged as a third party, while the minor Association of Timorese Heroes (KOTA) and Timorese Labour Party (Trabalhista) did not gain traction. The three major parties were all formed in May, UDT on 11 May, Fretilin (as the Timorese Social Democratic Association) on 20 May, and Apodeti on 27 May.

Political developments occurred in the shadow of the interest of neighbouring Indonesia, who controlled the western side of Timor island. When Suharto took control of Indonesia in 1966 the Indonesian military launched some minor attacks in the isolated Oecusse enclave, which were stopped by Portuguese forces. In April 1972, the Indonesian foreign minister Adam Malik stated that Indonesia was open to supporting anti-Portuguese activity.

UDT formed from members of the former National Union party, and was linked to government officials, police, local rulers, the Catholic church, and Portuguese and Chinese businessmen. It was conservative and sought to protect the middle class of Dili, advocating for an undisruptive transition that maintained existing government systems and close links to Portugal. There was some internal division about the timeframe of future independence, although the party did shift from its initial position of autonomy to supporting full independence at a later time. The first UDT leader, Mário Viegas Carrascalão, was a coffee magnate seen as close to the previous regime. He was soon replaced by , director of the newspaper.

Fretilin was formed by former independence activists. It was led by individuals including Francisco Xavier do Amaral, a government official, José Ramos-Horta, a reporter for A Voz de Timor who had previously been exiled for political reasons, and Nicolau dos Reis Lobato, a teacher. Some members had engaged in previous discussions with Indonesia regarding support for an armed independence movement. Originally a social democratic party that formed trade unions, Fretilin adopted a broader ideology (and renamed itself from the initial "Timorese Social Democratic Association") called "mauberism" to gain appeal outside of urban areas. This new ideology was an anti-poverty platform seeking to improve the lives of poorer East Timorese. Fretilin sought to establish a new political system based on local councils, with other levels of government formed by delegates from lower levels, and where national government leaders would be required to maintain links to rural areas and would not be allowed ostentatious possessions. The party explicitly distanced itself from communism and sought a non-aligned foreign policy based on relationships with nearby countries and links to ASEAN and the Portuguese-speaking world. While seeking to expropriate large land-owning Portuguese-run businesses, Fretilin did not seek to disrupt Catholic and ethnic Chinese schools and businesses.

Neighbouring Indonesia had pledged to respect East Timorese self-determination so long as it did not threaten Indonesian stability. The third major party, Apodeti, advocated for a full union with Indonesia. However, it gained little support outside of Atsabe Administrative Post. UDT viewed their proposed pathway of a smooth transition that opened East Timor up to foreign investment as likely acceptable to Indonesia. Fretilin did not advocate for links to communist countries such as China and the Soviet Union to avoid antagonising Indonesia. Apodeti received financial and communications assistance from Indonesia. Apodeti was led by , and other members included , the ruler (Liurai) of Atsabe, and José Abílio Osório Soares. The development of a paramilitary wing within Apodeti was followed by similar developments in UDT and Fretilin.

Having recently lost the Vietnam War, Western anti-communist countries were wary of the spread of communism further into Southeast Asia, and saw Indonesia as an ally in this regard. Indonesia did not have a policy to annex East Timor, but the possibility had been raised at various points in the past and the possibility on the minds of both Indonesian and Portuguese authorities. Many countries also shared economic ties with Indonesia, or simply did not view the territory as a viable independent state. East Timor received much less attention both in Portugal and in international circles than Portugal's other colonies, which were also undergoing decolonisation.

The Portuguese minister for inter-territorial coordination, António de Almeida Santos, visited the region in October 1974, for meetings in East Timor, Australia, and Indonesia to discuss the future of the territory. In November 1974 Mário Lemos Pires, a military officer linked to the new Portuguese regime rather than the overthrown one, was appointed Governor of East Timor. He tried to create an advisory council, however Apodeti would not participate, and Fretilin later withdrew.

UDT-Fretilin coalition and rising tensions While the UDT was initially the strongest party and was favoured by Portuguese authorities, its hesitation to embrace the idea of independence led majority support to shift to Fretilin. In December 1974 Malik was reported to have stated that independence was not an option for East Timor, prompting discussions between UDT and Fretilin on potential cooperation. The two parties reached agreement on a number of policy points relating to independence, including the continued use of Portuguese as an official language, a democratic system, independence within a few years, and opposition to a merger with Indonesia. In January 1975 the two parties created a joint coalition and requested that Portugal treat this coalition as representing East Timor, and called upon the United Nations to begin overseeing a decolonisation process. This was aimed at establishing the coalition as a government before elections, thus undercutting Apodeti, although the joint platform called for a good relationship with Indonesia. The proposal was greeted favourably by the Portuguese, as it would ease the decolonisation process. However, it was objected to by Indonesia, who insisted on the inclusion of Apodeti in any independence negotiations. Indonesia held a number of meetings with Portuguese officials beginning in March, exploring the option of the transfer of sovereignty from Portugal to Indonesia, and discouraging the involvement of the United Nations in the territory.

The joint policy platform was unable to overcome increasing tensions between the UDT and Fretilin, especially between the more radical wings of each party. UDT was accused of secret collusion with Indonesia, and of being treated preferentially by the Portuguese. Fretilin was becoming more radical with the inclusion of new members such as students linked to the Portuguese Communist Party, and was seeking support from overseas trade unions. Both political parties issued identity cards, which were used to pressure others to prove allegiance. Indonesian authorities met with representatives of both parties, and spread disinformation through radio broadcasts sent from their part of the island. Domestic Indonesian media reported about "leftist" influence in East Timor, insinuating that even the Portuguese authorities were communists. Throughout early 1975, Indonesian increased its military forces stationed near East Timor.