Indonesia-Russia relations given a boost with visit by Putin

Updated On: Sep 07, 2007

Looking at the renaissance in relations between Indonesia and Russia, one can safely opine that the new assertive Putin-era Russia has arrived in Southeast Asia.

What could be more assuring to a friend when someone extends 1 billion USD worth of credit to for purchasing arms. Russia’s generous offer to Indonesia was announced by Indonesian Presidential spokesman Dino Patti Djalal. Indonesian Defense Minister Juwono Sudarsono said that the fund would be used for buying two submarines, four attacking helicopters for the army and six war-vehicles for marine. These purchases are additional to the six Sukhoi jet-fighter purchased from Russia in August 2007.

Indonesian Foreign Ministry`s director for Central and East European Affairs, Hamirzan Pohan said the Russian credit line which carried an interest rate of 2-3 percent with a grace period of 15-20 years would be disbursed by the Indonesian government after consultation with the parliament.

Russia’s agenda is not just military in nature. President Vladimir Putin is visiting Indonesia with a high-powered team of energy, banking and arms officials to discuss deals on natural resources. Some of the business transactions include Indonesian mining company Aneka Tambang's US$3 billion deal with Russian aluminium giant United Company Rusal, and state-owned oil firm Pertamina's US$1 billion deal withRussia's LukOil. Russian investment and credits are badly needed by Indonesia which has obsolete and ageing mining and oil facilities.

In April 2007, Indonesia and Russia signed a Memorandum of Understanding (MoU) on the establishment of a trading house for exchange of information on investment, trade procedures and cooperation prospects. In that MoU, the Russian side bore the signature of Olimar President Director Andrey Zubkov who represented Russia for the MoU while President Director of PT Fajar Sarana Bersama Suryo Susilo represented Indonesia.

The Indonesian Investment Coordinating Board BKPM`s Investment Promotion Deputy Darmawan Djajusman said Russia had made an investment in several regions including Jakarta (100 thousand dollars) ; Bali (330 thousand dollars), West Kalimantan (12.8 million dollars) and South Sulawesi (530 thousand dollars). Russian Ambassador to Indonesia Mikhail Bely said "We not only want the relations between the two countries to be enhanced, but our partnership as well, because the value of our two-way trade is still far below the potentials we have".  Indonesia and Russia therefore agreed to double their trade currently standing at US$500 million per year in the next two years.

Some Indonesians also hope to invest in Russia. One of them was Uthan A Sadikin of Multistrada, a car tire producing company in Indonesia. He was convinced of this business decision when he noticed the large number of cars on the roads in the big cities of that country, and resulting traffic congestions especially during rush hours.

The economic and military ties constructed during this trip will be significant as it will be forged between a rising energy power with strong military credentials and the world's most populous Muslim country. The Putin tour is a massive Russian effort to expand diplomatic influence in Asia and the Middle East using its oil and energy and the thriving arms trade as leverages.

Russia is a quiet and growing regional power. Its newfound wealth helps. Russian foreign exchange reserve stood at US$250 billion, much higher than that of Taiwan, and is believed to be the fourth biggest in the world. Russia also has a stabilization fund of UD$60 billion to improve the life of its people.

Such developments must have earned the attention of the US which has been looking forward to more commercial deals with the Indonesian military after it lifted the ban in 2005 on exporting weapons toIndonesia that was imposed in 1999 over human rights concerns. The episode proved to be a sore point for some and Jakarta has continued to look elsewhere for military hardware since then.

However, Russia still has some way to go before it can displace traditional Western European powerhouses much less a superpower like the US. As much as 20 percent of the Russian population is still living under the poverty line. Its external debt is significant although Russia has the biggest gas reserve in the world and is also ready to settle its debts with the IMF. (6 September 2007)


Putin visits Indonesia today to discuss trade and weapons deals  (Straits Times, 6 September 2007)

Russia to extend 1 bln USD credit to Indonesia for purchasing arms (People’s Daily, 5 September 2007)

IndonesiaRussia agree to increase trade (Antara, 5 September 2007)

RussiaIndonesia to Sign Trade Deals (AP, 4 September 2007)

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