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USAT Liberty was a 120 meter long United States Army cargo ship that left the coast of Australia in January 1942 to transport railways parts and rubber to the Philippines. As it was passing in between the islands of Lombok and Bali, it was torpedoed by a Japanese submarine I-166 on January 11th. The hull was leaking but there was an attempt to tow her to Singaraja, the Balinese capital at the time, in order to get her repaired. However, the USAT Liberty was sinking rapidly and had to be beached halfway through, in the small fishing village of Tulamben. The cargo was emptied and left to be dismantled by the local population.
For the next 20 years, she was left there, being slowly eaten away by the inhabitants as the raw material it was made of was quite precious to build houses and other things. But in 1963, the nearby volcano, Mount Agung, erupted. The tremors associated with the eruption caused the USAT Liberty to slide into the water. It now lies on the black sandy bottom of the Tanjung Muntik bay of Tulamben, at a depth between 7 and 35 meters, and became an extremely popular dive site.