Indonesia barters with Russia

Indonesia will be bartering commodities like palm oil and coffee with Russia in exchange for Russian fighter jets.

The Indonesian trade ministry has announced that it has signed a preliminary deal to trade Sukhoi SU-35 jets.

Background

The Soviet Union was one of the first countries to recognize Indonesia’s independence from the Netherlands. The two countries enjoyed a strong bilateral relationship during the Cold War era. In 1965, General Suharto overthrew then President Sukarno. Post the 1965 unrest, relations significantly deteriorated. Relations were once reaffirmed under Gorbachev and have remained stable in the subsequent years.

Currently, Russia is one of the major arms supplier for Indonesia. Arms exports from the region include Sukhoi Su-27, Mil Mi-35 and BMP-3.

Analysis

An MoU (Memorandum of Understanding) has been signed between PT Perusahaan Perdagangan Indonesia and Russian state conglomerate Rostec in Moscow. The Indonesian ministry has said that further details regarding the barter will be released by Indonesian trade and defense ministers.

Commenting on the deal, Indonesia Trade Minister Enggartiasto Lukita said, “This barter under the supervision of both governments hopefully will soon be realized through the exchange of eleven Sukhoi SU-35s and a number of Indonesian exports, starting from coffee and tea to palm oil and strategic defense products.”

Rostec has released a statement saying that the MoU will provide for “co-operation in the implementation of [a] bilateral trade programme under the contract for the sale of Su-35 fighters to Indonesia.” It added, “The Russian party will have the right to choose Indonesian goods and manufacturers to act as trading partners. The agreement is structured to promote exports of advanced goods produced by Indonesian companies to Russia.”

Indonesia is the largest producer of palm oil products in the world and is trying to promote the commodity in Europe, where demand is decreasing. As of 2014, it was the fourth largest producer of coffee. The country hopes that the sanctions that have been imposed on Russia by the US and other countries of Europe will work to its advantage. Trade Ministry spokesman Marolop Nainggolan was quoted by AP as stating, “This is an opportunity that should not be lost from our grasp.”

Assessment

Our assessment is that Indonesia is cleverly maneuvering through global geopolitics and is taking advantage of opportunities that have arisen. The barter deal will be a catalyst for the country to promote its goods in Europe. For the Russians smarting under the current sanctions by the US, this is a way out to expand the trading frontiers.