The ownership of Pasir Island around the NTT and Australia areas becoming a polemic that is still happening in Indonesia. Various demands from the people of the island of Rote who think that the Pasir Island belongs to Indonesia have criticized the Australian side for their actions stating that the Pasir Island is their external territory, which is called Ashmore Reef. According to the MoU between Indonesia and Australia, that the Pasir Island is a nature conservation area which is listed in the description of the MoU Box in the map presented. However, the capture of traditional fishermen sailing in the area by Australian troops has drawn criticism from Indonesians. Moreover, oil and gas exploration by the Australian government in a cluster of Pasir island poses a certain threat to Indonesia in the national defense sector. Based on the findings in this paper, the large amount of oil and gas around the sand island has caused the Australian side to prohibit Indonesian fishermen from making a living in the area even though the 1974 MoU allows this. Therefore, elements of state defense need to be aware of this considering that natural resources, both in relation to the treatment of citizens and exploration areas, are the threats to the Indonesian government, especially to the sovereignty of the state. Thus, the Indonesian side needs to make new laws or regulations that are free from various interests, such as presidential regulations or other regulations that can also accommodate the economic, social and cultural rights of indigenous peoples. Furthermore, it is necessary to have a dialogue with the Australian government regarding the dispute, especially in the context of affirming or realigning the 1974 MoU which could accommodate Indonesia's interests, prior to international arbitration if necessary.