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Indonesia-Russia: Arms, atoms and oil JAKARTA - The United States, China and now a resurgent Russia are all competing for regional influence in Southeast Asia, and Indonesian President Susilo Bambang Yudhoyono is shrewdly playing his diplomatic cards among all three suitors.

Yudhoyono visited Moscow early this month and signed a wide raft of bilateral agreements, including big new arms, energy and trade deals. Most significant was a broad agreement to develop stronger military cooperation over the period spanning 2007-10, an arrangement that, if fully implemented, promises to tip the region's current strategic balance.

According to news reports, Jakarta has expressed its desire to purchase about US$3 billion worth of Russian armaments, and Moscow has provisionally offered $1 billion in five-year loans to facilitate the purchases. The multibillion- dollar arms deal is expected to be finalized when Russian President Vladimir Putin visits Indonesia next June.

The agreement follows up on a $192 million bilateral deal in 2003, where Jakarta purchased assault rifles, armored personnel carriers, military helicopters, and Sukhoi fighter jets, some of the most sophisticated aerial defense technology available on global markets. The new multibillion- dollar deal includes plans for purchasing six more Sukhoi jets, submarines, amphibious tanks and anti-aircraft missiles for the Indonesian navy.

To be sure, major Russian-Indonesian arms deals are nothing new. In the 1950s, Indonesia was almost totally reliant on the Soviet Union for its arms supplies. After the 1965 coup that replaced independence leader Sukarno with military general Suharto, Indonesia's military was firmly reoriented toward the West. Data from the New York-based Arms Trade Resource Center show that as of the mid-1980s, Indonesia relied on the US and Europe for more than 90% of its armaments.

In 1991, Indonesian military abuses in the occupied province of East Timor prompted the US to impose restrictions on arms sales and military-to- military cooperation with the Indonesian armed forces. Russia, one of the world's largest arms dealers, was set to fill Indonesia's arms gap in 1997 when the regional financial crisis depleted Jakarta's national coffers and put various half-negotiated deals, including for fighter jets, on hold.

The US scaled back military cooperation with Jakarta again in 1999, after Indonesia-backed militias and security forces killed thousands of people during the aftermath of East Timor's 1999 vote for independence from Indonesia. When Indonesia's economy started to bounce back in 2003, Moscow restarted previous stalled negotiations, which resulted in the fighter jet, armored personnel carriers and assault helicopters brokered under president Megawati Sukarnoputri' s administration.

In November 2005, the US lifted its arms embargo on Indonesia after Jakarta showed a stronger commitment to US counter-terrorism policies in the region, including the recent imprisonment or killing of more than 200 suspected Muslim militants. Washington has since dangled the prospect of new arms deals, but so far Jakarta has received the offer coolly.

Defense Minister Juwono Sudarsono said last month that the planned Russian purchase would wean Indonesia from its historical dependence on US military products, which he noted was compromised by the United States' 1991 and 1999 embargoes. Indonesia's top generals have long been frustrated by the US embargoes, which have hindered their ability to acquire spare parts for crucial military equipment.

Moreover, they have frequently complained that complex US-manufactured hardware is prohibitively expensive and difficult to maintain compared with equivalent Russian armaments. Yudhoyono has recently also pushed for defense-cooperation agreements with other nations, including China, to reduce dependence on US and European weapons systems. Beijing has recently supplied Jakarta with short-range missile technology. And the recently proposed $3 billion arms deal will tie Jakarta to Moscow closely in a long-term supplier and technical-assistance relationship.

Currently, US-armed Singapore is widely believed by strategic analysts to have the strongest power-projection capabilities in the region, particularly with its F-18-ready air force. Singapore's leaders have repeatedly expressed their strategic concerns about possible Muslim terrorist attacks, including from the Indonesia-based militant group Jemaah Islamiyah, which allegedly plotted a foiled multi-target attack on Singapore in January 2001.

As US-China competition heats up in the region, Indonesia's strategic significance is growing - and Russian arms dealers are set to profit. China has repeatedly expressed its concerns that in a potential regional conflict, the US Navy would likely attempt to choke Chinese fuel shipments from the Middle East in the narrow Strait of Malacca, through which an estimated 80% of China's energy imports now flow. Indonesia, which represents one of the strait's land barriers, would be crucial in that hypothetical strategic scenario.

Indonesia's decision to acquire Russian rather than US arms represents a significant diplomatic hedge, one that apparently aims to keep warming diplomatic and trade relations with China on track. The Russian deal also appeases a growing domestic constituency, including significantly among moderate politicians, that favors distancing Indonesia from the US administration' s current policies in the Middle East. President George W Bush's stopover visit here last month was highly unpopular and sparked protests across the country.

Nuclear ambitions

Indonesia also parts ways with the United States' tough stand on Iran's nuclear program. Yudhoyono has repeatedly offered to insert himself as an honest broker between Washington and Iran, and he has offered to play a negotiating role in the Israel-Palestinian conflict. At the same time, Indonesia has expressed interest in Russian-made nuclear-energy technology, similar to what Moscow has supplied to Iran and other countries. Putin said the two countries had "considerable opportunities" to work together on nuclear power.

Russian nuclear-energy agency Rosatom announced plans to tender a bid to build Indonesia's first nuclear power plant, a proposed $1.66 billion, 1,000-megawatt facility set to be built at Ujung Lemah Abang on the Muria Peninsula in Central Java. Construction is set to commence in 2010 and the facility is scheduled to be up and running by 2017. Indonesia has long sought to establish nuclear-energy facilities to diversify its present reliance on fossil fuels.

Popular opposition and discovery of large new reserves in the Natuna gas field put those plans on hold more than a decade ago. To allay those concerns, Indonesia has reportedly expressed interest in the possibility of developing a Russian-designed floating nuclear power station, which would be the world's first such facility.

Southeast Asia is currently a nuclear-weapons- free zone, and it's altogether unclear how other countries in the region would react if Indonesia went nuclear with Russian assistance. Defense Minister Sudarsono told reporters on December 4: "For the time being we will not establish nuclear cooperation for defense purposes, but only for peaceful purposes." He also said Indonesia would focus on nuclear cooperation with "several countries for peaceful purposes", including the eventual development of a national defense industry, he said.

The two sides padded last week's blockbuster arms agreement with other commercial initiatives, including a government-to- government vow to double bilateral trade quickly from $500 million to $1 billion per year. Soon thereafter, Russia's Alfa Group, an industrial and financial holding company, announced plans to invest up to $2 billion in Indonesia's telecommunications sector after a closed-door meeting with Yudhoyono. In an apparent related development, the two countries are negotiating to develop jointly Indonesia's Biak Island as a launch pad for commercial satellites.

Stronger economic ties could translate into new philosophies surrounding Indonesia's management of its bountiful natural resources. Noting that Indonesia is currently the biggest supplier of energy to Asia, Putin said: "We believe it is extremely important to coordinate our actions on world energy markets so that there is no damage but instead to boost cooperation. "

Russia's return to global prominence stems largely from its immense oil and gas assets, and Moscow has recently peeved Western countries through plans to redirect its energy flows away from Europe and toward Asia. Indonesia and Russia are now set to sign an agreement for Russian energy giants Gazprom and Lukoil to take part in oil and gas projects in Kalimantan, the the Indonesian section of Borneo island.

That could open the way for Russian companies to secure more lucrative natural-resource deals, which until now has long been the domain of US and other Western resource giants such as Texaco, ExxonMobil, Unocal and Conoco. Russia has moved to get a strategic foothold for Gazprom in the Sakhalin-2 project, which is now 55% controlled by Royal Dutch Shell Pcl, and is estimated to have total reserves of about a billion barrels of oil and 500 billion cubic meters of gas, which, once operable, would make it one of the world's largest combined oil and gas projects.

While many of these bilateral deals are still at the negotiation stage, what's certain is that Russia is moving aggressively to re-establish its post-Cold War stature in Southeast Asia through closer strategic and commercial ties with Indonesia. As those arms, energy and other business deals are completed, the emerging bilateral relationship promises to have a profound impact on the region's strategic and economic balance.

Posted in Military @ 13 December 2006 by Jeroen · 'Blog' RSS feed · permalink

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