Australian Prime Minister Julia Gillard has suffered her most serious rebuff since she assumed the leadership of the Labor Party in the June 23-24, 2010 coup against former Prime Minister Kevin Rudd.

On Monday night, Gillard, apparently without any serious consultation with Foreign Minister Bob Carr, told a cabinet meeting that Australia would line up behind the US and Israel to vote “no” to a resolution before the United Nations general assembly to upgrade Palestinian membership of the UN. Carr had replaced Rudd in the foreign minister’s post in February, following Rudd’s failed challenge to Gillard’s leadership.

As a result of dissent in the cabinet, led by Carr, and in the face of opposition from the Labor Party’s parliamentary backbench, which could have overturned her decision, Gillard was forced to back down. She agreed that Australia should abstain on the vote to grant Palestine non-member observer status in the UN.

After the decision, Carr attempted to put the best face on the situation, denying that the prime minister had been rolled. He said Gillard had been “open to discussion” with her colleagues and that the reversal of the decision was a “tribute” to her. It was a textbook case of a leader heeding the party, he said.

Carr’s efforts to pour oil on troubled waters cannot cover over the significance of the divisions in the Labor government, which go back to the circumstances of Gillard’s coming to power.

Gillard’s first action on becoming prime minister was to indicate unwavering support for Washington in the face of clear concerns in the Obama administration over Rudd’s attempt to alleviate the growing tensions between the US and China, via his proposal for the formation of an Asia-Pacific community.

This proposal conflicted with the US administration’s more aggressive policy toward China, which was enunciated in the so-called “pivot” to Asia set out in a major speech delivered by the US president to the Australian parliament last November. Obama had previously cancelled two previous visits to Australia in an obvious sign of displeasure with Rudd’s orientation.

Since the “pivot” was announced, there have been growing concerns within Australian ruling circles that unequivocal support for the US policy may jeopardise Australia’s relations with China, its largest market. Former prime ministers Malcolm Fraser (Liberal) and Paul Keating (Labor) have both warned that the US policy could lead to a war with China.

In an interview last November, Keating said there was a danger of replicating the situation in Europe prior to World War I, when failure to accommodate Germany led to the outbreak of war. Fraser warned in a speech in September that Australia’s support for the US against China could even make it the target for a nuclear attack.

While questions of Middle East policy, rather than China, sparked this week’s opposition, it reflected deeper concerns about the slavish pro-US foreign policy as a whole, in which the question of China is paramount.

When Gillard announced her decision on the UN vote, ten cabinet members are reported to have opposed it. Only two members, Workplace Relations Minister Bill Shorten and Communications Minister Stephen Conroy, both members of Labor’s Right faction from the state of Victoria, supported her.

The opposition to Gillard came from both pro- and anti-Rudd ministers. It was led by Carr who has been reported as saying he would not have been able to support her original decision—tantamount to a threat to resign.

According to an article by Sydney Morning Herald journalist Peter Hartcher, following the cabinet meeting, Carr began a campaign among Labor MPs to win support for his position. According to one, unnamed, factional convenor quoted by Hartcher: “I’ve never seen a cabinet minister stand up to a prime minister like that.”

Gillard’s position became untenable when it was revealed that a motion would come before the Labor parliamentary caucus yesterday calling for a “yes” vote on the UN resolution, and that the prime minister could not rely on the undivided support of Labor’s New South Wales (NSW) Right faction, on which she is dependent.

One Labor MP told the Australian that the lead-up to the UN abstention decision was a “very, very tense” 12 hours and Gillard had come “perilously close to losing the leadership.”

The Murdoch-owned press has cited concerns by Labor MPs in Sydney over the reaction to a “no” vote from Middle Eastern populations in their electorates. But that was not Carr’s motivation. Having just led a campaign to have Australia appointed to a two-year membership of the Security Council, he clearly was anxious not to be seen joining only eight countries expected to vote with Israel and the US.

Before his appointment to the Senate and the foreign ministry, Carr, who had retired as NSW premier in August 2005, had posted several items on his blog critical of the Gillard government’s support for the Obama “pivot.”

He removed these posts upon his appointment, saying his previous opinions were those of a “private” citizen and that he now upheld the government’s views.

After the abstention decision was announced, Carr said it would not be seen as anti-US or anti-Israel, and there had been no adverse reaction from the US.

Notwithstanding Carr’s reassurances, the divisions in Australian ruling circles over relations with the US are not going to disappear, because they are rooted in deep-seated geo-political tensions. They stem from the fact that for the past 70 years the Australian political establishment has formed a strategic alliance with the US and depends on American support to maintain its position in international relations. On the other hand, Australian capitalism has become ever-more reliant economically on China, which is increasingly the target of the US “pivot.”

Commenting on the outcome, an Australian editorial said Gillard should have exercised her authority to “defend and to advance Australia’s national and international interests.” The decision to abstain on the UN vote, it said, had left Australia “on the opposing side of our critical security alliance partner, the US.”

The intractable foreign policy dilemmas have produced the first serious division in the Gillard government. It is unlikely to be the last.