Berichte

Between Economic and Security Interests: Russia’s Return To the Indonesian Archipelago

03. November 2007

By Dr. Ingo Wandelt
Federal Language Office
Hürth, Germany

Paper held at the Panel Discussion Economy and Security: Prospects for Indonesia’s Democratization Process
At Giessen University, Department of Political Science Saturday, 3 November 2007

President Vladimir Putin’s one-day visit to Indonesia on September 6, 2007, signalled the return of an active Russia to Insular Southeast Asia’s largest state. The signing of eight bilateral agreements between the two governments in key fields of strategic cooperation throws some light on the strategic interests of both Russia and Indonesia. Although the consequences will be long-term and hardly earth-shaking, the agreements will contribute to an ongoing process of post Cold-War developments in a multi-polar world. Insular South East Asia has become an arena of international competition in various sectors, and Indonesia is keen to take advantage of the situation in her quest for a more self-determined position in world politics.

PutinThe global post Cold-War order has not brought about “the end of history” 1, it has meant the end of familiar certainties. The collapse of the Soviet Union led to the disintegration of established spheres of influence and threw the world order into the “chaos” of a multi-polar world as a “A World without Order” 2 or a “world-risk society” 3. New political orientations have resulted in the return of geo-politics and geo-strategy as Denkbilder and guides for lost influence. As political leaders of all persuasions have finally come to realize that natural resources are finite and the environment is vulnerable, access to natural resources has become a strategic political factor tempting analysts and observers to speak of an emerging “new Cold War” for energy and resources. 4

During the Cold War the Malay Archipelago was firmly within the West’s sphere of influence. This era is now finally over. First Malaysia’s Prime Minister Mahathir steered his country clear off unilateral commitments, and then the late Indonesian President Suharto attempted to distance his country from the Schutzmacht, the United States of America. After years of internal turmoil following the transition to parliamentary democracy, the governments of Megawati Sukarnoputri (2001-2004) and Susilo Bambang Yudhoyono (since 2004), have begun to put Indonesia on a new path toward a more self-determined position in the multi-polar world order, thereby following the direction given by the country’s foreign policy motto bebas dan aktif (“free and active”).

The emerging Russian-Indonesian cooperation is a convenient case-study of how a resurgent former-Empire establishes footholds in the largest state of the archipelago that once was firmly in the Western sphere of influence. Here Russia is following in the footsteps of China, which entered the country’s industrial and resource sectors just a few years ago. The advent of the two European-Asian powers, however, won’t change Indonesia’s geopolitical outlook for the time being. The country, its elites and security forces will remain in the Western camp. But the feeling of certainty that this will remain so indefinitely has been lost. Markets dominate the multi-polar world and Indonesia, with some help from her new friend Russia, has got the message.

The event

On Thursday, 6 September, Russia’s President Vladimir Putin paid a 20-hour official visit to Indonesia en route to Australia to attend the Asia-Pacific Economic Cooperation (APEC) Forum in Sydney, Australia. He was the first Russian President to visit Indonesia since Soviet leader Nikita Sergeyevich Khrushchev did so in 1960. During Putin’s visit, Indonesia and Russia signed eight bilateral cooperation agreements covering fields ranging from security, counter-terrorism, the economy and banking, to education and sports.

Russian-Indonesian relations were at their peak in the late 1950s when the Soviet Union provided the bulk of the Indonesian military hardware and large weapon systems, making Indonesia, then under President Sukarno, the most well-armed country in the region. Bilateral ties cooled after anti-communist former president Suharto came to power, and Indonesia’s security sector came under the tutelage of the United States, where it has remained until the present day. President Putin reaffirmed historical ties in his address to his host, President Yudhoyono, when he referred to the early 1960s as “the golden age of Indonesian-Russian relations.” 5 The historical reference in a sense also reaffirmed what was once a major weapons buying relationship between the two countries, indicating that the relationship cannot be seen as purely economic. 6

The Putin visit came at a time when U.S.-Russia relations were markedly chilly, and Indonesia’s relations with the one remaining post-Cold War superpower remain reserved. Both Russia and Indonesia oppose Washington on many key international issues, sharing a common view on such issues as Iran, North Korea, the Palestinian territories and fighting separatism and terrorism. Indonesia has gained in international stature, reputation and influence, as it was elected a non-permanent member of the UN’s Security Council 7 and has engaged in UN peace missions, i.e. in Lebanon and the Congo. After the peaceful solution of the Aceh conflict, internal peace and security seem restored, and President Yudhoyono on 16th August, 2007 declared the successful end of the country’s fight against terrorism. Indonesia’s economic outlook is generally seen in a positive light.

The Deal done

The most important part of the bilateral agreements is a defence equipment deal for Indonesia to buy US $ 1 billion worth of yet unspecified Russian weapons within the next 15 years. More immediate are Indonesia’s plans to purchase heavy armaments at a total value of US $ 850 million. According to sources, this package is to include ten Mi-17 U-5 carrier helicopters and one Mi-35P combat helicopter (other sources speak of five units) for the Army/ground forces, and twenty BMF-3F amphibian tanks and two submarines for the Navy. No actual contracts for arms deliveries were signed, however . The most valuable package for Indonesia’s defence capabilities, however, is for the Air Force and Navy. Six units of Sukhoi combat planes – three Su-27 type and three Su-30 – will add to the two Su-27s and two Su-30s already purchased by the previous Megawati Sukarnoputri administration.

One month earlier, on August 21, and following the establishment of initial working contacts with Indonesia’s Department of Defence, Russia agreed to provide loan funding of US $335 million for the purchase of another six Sukhoi fighter planes. Indonesia’s original plans to buy 12 more Su-27s were shelved in favour of an order of five years’ worth of spare parts and other supplies instead. Indonesia originally planned the purchase of twelve units, but settled for ten. The Army recently announced plans to purchase 13 helicopters.8 The $335 million deal, financed by a Russian bank loan, includes state-of- the-art avionics and weapons systems, items that were inexplicably missing from the original (Megawati) order. The new purchases are being paid for under a five-year $3.7 billion export credit budget – approved foreign exchange set aside for high-grade military equipment in 2004.

Indonesia plans to buy four Kilo-class 636 submarines and two slightly smaller Lada-class submarines, and its navy reportedly wants to buy up to 12 boats by 2024, finances allowing. The diesel-powered Kilo boats are among the quietest conventionally powered submarines in service anywhere and are capable of being equipped with advanced weaponry, including anti-ship and land-attack cruise missiles with a range of up to 275 kilometres. These submarines would be among the most advanced conventional submarines in Southeast Asia.

Indonesia’s desire to acquire new submarines is not entirely a surprise. Its military had wanted to replace its two German-built submarines Type 209 as far back as the 1990s, but the 1997 Asian financial crisis put that on hold. Defence circles in Asia regard submarines as the most urgent naval weapon system and have made great strides in obtaining them on the international markets for military technology. Indonesia’s navy with just two obsolete German submarines purchased in the 1980s has been left behind in submarine capacities that its neighbours have acquired over the past years. The purchase of more Kilo Class diesel submarines will not upset the military balance in the region, but may accelerate the regional arms race.

The overall deal benefits all three branches of Indonesia’s National Armed Forces (Tentara Nasional Indonesia, TNI) equally. The figures on the number of units purchased which were released immediately after President Putin’s visit were later reduced. Indonesia is buying ten, not twenty helicopters; six Mi-35 gunships, to go with the four it already has and four Mi-17 troop-carriers, which will double the existing fleet. Instead of twenty BMP-3 infantry fighting vehicles for the Navy’s Marine Corps, as was widely reported, the Navy is actually acquiring just twelve.

The consequence left unnoticed: the end of the West’s security sector reform policy

Although Washington lifted the ban on arms sales to Indonesia on November 22, 2005 and resumed military cooperation a year later, the U.S. and its Western and Asian allies remained united in maintaining a quarantine of the Indonesian Army (ground forces), refusing to supply them with advanced equipment. 9 Reasons for this were a lack of trust in the Indonesian Army 10 based on its history and the misplaced hope that a boycott might force the Army to go forward with an internal reform process towards a professional force modelled on the U.S. Army. With the Navy already back on good terms with European security circles and the Air Force following in the Navy’s footsteps, the Indonesian Armed Forces have finally regained their position as a respected partner and customer in global arms trade.

 

Russian energy deals and energy security

The purchase of Russian weapons systems is to be paid for by Indonesian energy resources, allowing Russia access to Indonesia’s vast natural and energy resources and benefiting Russia’s national industrial and energy security interests. During Putin’s visit, Russian and Indonesian firms signed mineral resources and oil-and-gas contracts worth US $5.5 billion. One of Russia’s largest oil companies, Lukoil, is to explore for oil and gas off Papua in eastern Indonesia to be exported to South Korea. South Korean banks are expected to finance further Indonesian arms purchases from Russia. An Indonesian mining company PT Aneka Tambang and the Russian aluminium giant UC Rusal, the world’s largest alumina and aluminium producer, signed a memorandum of understanding (MoU) to set up a US $3 billion joint venture to develop bauxite deposits and build a smelter grade alumina processing plant in West Kalimantan. Following a feasibility study, the proposed project might process 3.6 million wet metric tons (wmt) of washed bauxite per year into 1.2 million tonnes of smelter grade alumina per year. Altimo, the telecommunications business of the Alfa (Bank) Group, will move into Indonesia’s telecommunication market with an investment commitment of US $2 billion. This group, controlled by the 41st richest billionaire in the world, Mikhail Fridman, is to enter Indonesia’s banking sector through Alfa Bank, the largest private bank in Russia. Alfa will cooperate with Bank Mandiri and plans to open branches in Indonesia.

Russia’s geo-strategic policy

Both Russia and Indonesia may be seen as loser nations in the Cold War, but there the similarities between the two vast territorial states end. The implosion of the Soviet Empire left Russia as an imperial power without an empire and as a state and nation which lost its history. 11 From the remnants of a past glory – the inherited state administration and military-industrial complex – Russia set out under the Kremlin’s leadership to re-invent its state and nation. Petrodollar revenues from oil and gas and the sale of military hardware to states that cannot afford US American weapons form the material basis for Russia’s ascent. A self-confident, enormously rich and globalizing modern oligarchy shapes the country’s image according to a new brand of nationalism that shares some striking similarities with Indonesia’s post-Suharto neo-nationalism. 12 As a territorial empire 13 Russia feels encircled by mighty and dangerous neighbours: the continually rising China-cum Japan and South Korea to the east, the volatile Turkish-Islamic world to the South, and the NATO alliance and winners of the Cold War to Russia’s West. Adding insult to injury, Central Asia, the former Soviet zone of influence, sees US-American and Western intrusions in the quest for influence. Russia wants very much to break free of this jebakan (Indonesian for “Zangengriff” 14) by being present in the countries and regions to the south of her direct neighbours and by establishing good relationships and strategic military capacities of force projection in the Indian and Pacific Ocean region.

Indonesia left the first post-Cold War decade very much traumatized. Its armed forces lost the trust of the former superpower friend and model nation, and the sudden turning away of the U.S. and other Western allies from the national father figure Suharto left a deep mark of betrayal and the feeling of having been treated unfairly among the country’s army and elite. Nowadays Indonesia’s elite follows a general belief that their country, like Russia, is encircled by hostile neighbours threatening Indonesia’s existence as a territorial unity and nation. Indonesia desperately yearns for military strength that the limited state budget does not allow them to create.

Russia, after beating a strategic retreat from the Asia-Pacific Region following the break-up of the Soviet Union in 1991, is making a steady comeback. The Russian resurgence is still in its infancy, but could have a significant long-term strategic impact on Asia and the Pacific. President Putin has set the course for Russia to become a Pacific player 15, where it will encounter the U.S. American fleets. He has announced ambitious plans to restore the blue water capacities of Russia’s Far East forces and the Pacific Fleet based on the Kamschatka peninsula 16, that had deteriorated after the Cold War. To project the Navy into the Pacific and the Indian Ocean, Russia needs to create a friendly environment with regional powers, mainly India, Myanmar, Malaysia and Indonesia. The two latter nations hold a strategic position as littoral states on the vital Malacca Straits line of maritime transport and communication. Russia needs to establish friendly and lasting relations with them and project a picture of the non-aggressive nature of their military presence to secure friendly passage for their Pacific Fleet once Russia expands its naval presence into the Indian Ocean.17 In addition to the international Straits of Malacca, Indonesia offers its three north-south routes of passage as alternatives to the Malacca Straits 18, which are also of great interest to nations developing their own naval force capabilities in the Pacific, such as China, Japan and South Korea.

Russia’s arms diplomacy by strategic design

Weapons exports have so far spearheaded Russia’s engagement across the region. Besides having helped to sustain the Russian defence industry, they have been a strategic means of rebuilding diplomatic relationships and gaining leverage in the region. Major regional customers for various types of Russian arms systems include Malaysia, Vietnam, Myanmar, Bangladesh, Laos and South Korea, with deals that usually offer terms favourable to the buyers. 19 This creates a strong client base that can later expand to larger relationships. Arms sales are frequently linked to energy and other deals establish customer relations with closer, but strictly limited military contacts. Russia works very hard to avoid giving the impression that it uses arms sales to create military-technological dependencies and further Russia’s strategic interests. Russian weapons sales exploit market niches left open by the unavailability of certain arms systems from either U.S. or Western European industries for potential customers in Asia and help to open doors for Russia’s export industries.

The volume of Russian-Indonesian bilateral trade so far remains low. Last year, it reached only US $689 million. During Putin’s visit to Jakarta, both sides expressed hope that it would soon reach US$1 billion. Russian investment in Indonesia is even more marginal, with only US$ 110,000 realized so far. But this figure has now become meaningless. During Putin’s visit, Russian entrepreneurs promised cooperation deals worth US $4 billion outside the arms sector. This development shows that Indonesia and Russia’s other partners are no longer dealing with the Soviet-style state-industrial complex, but with self-confident Russian entrepreneurs, their money, wealth and a style of negotiating which are now responsible for Russia’s global economic expansion. Their interests lie in exploiting Indonesia’s markets with its population of 230 million potential customers for their profit. Indonesia, on the other hand, views Russia as a trustworthy country with a high level of industry and technology and a valuable partner for filling gaps in its defence equipment arsenal left by the U.S.’s refusal to sell state-of-the-art weapon systems.

Russia’s arms diplomacy to Indonesia capitalized on the country’s being cut-off from access to U.S. military equipment in 1992, when Washington objected to the Indonesian army’s human rights record in then-occupied East Timor. The ban lasted for over one and a half decades and left Indonesia’s armed forces virtually isolated in the military world and depleted of state-of-the-art military technology. Indonesia was forced to scrap much of its military equipment because of a lack of spare parts. After the country’s transformation to parliamentary democracy, severe budget restraints hampered the armed forces’ modernization. Although the United States has restored limited military ties to Indonesia in recognition of the way it has handled the tsunami disaster, cooperated in the war on terror and implemented military reform, Indonesia’s security circles seek alternative suppliers to avoid the dependence on Western military products that the ban exposed. Indonesia never fully understood the West’s concern about human rights after the end of the Cold War and continues to interpret actions taken against its armed forces in terms of tribal relations of broken loyalty and trust. The trauma 20 created by the abandonment of their former Indonesian army friends still haunts Indonesian military circles and presumably won’t heal soon.

Indonesia had been searching for arms supplies with no strings attached since 2003, but given the limited budget failed to get market access to first-class military hardware. Enter Russia with good quality offers, favourable repayment conditions and a clear statement of non-interference in internal affairs, and it is easy to understand the psychological impact Putin’s offer had on the Indonesian state and army leadership.

Roots to Branches: from weapons to markets and partnerships

The transformation of the Soviet Union into Russian-style democracy 21 turned the former Communist nomenclatura into an ultra-capitalist oligarchy, but left most of the former state and security apparatus intact. This allows Russia to move into Asian and Southeast Asian markets with a two-pronged approach, which consciously avoids any impression of the former Soviet empire. Nowadays it is not the Soviet Union-turned-neo-Russia which turns its attention to the Southern Seas, but a mercantile industrial and energy complex looking for business opportunities and markets and offering unique products like advanced arms technology in exchange. The Russian state provides diplomatic services and opens doors otherwise left closed, and leaves the business aspects to the tycoons. These display the self-consciousness of newly rich capitalists who want success, and have financial power at their disposal that others lack. Much less bound to rules of transparency and restraint than their Western competitors, who have grown complacent on Indonesia, they are able to penetrate emerging markets with an awe-inspiring thrust. It might well be that Russia’s system of pairing harsh rule with business opportunities will eventually become a model for Indonesia’s oligarchy, but that is still far off. Indonesia’s patriarchal and family-style political-administrative system, bound by considerations of status, age and descent 22, is unable to produce a Putin-style ruler, and its apparatus lacks the discipline and self-control of their Russian counterpart.

Having unlocked doors to the arms and military technology markets, Russian entrepreneurs are now preparing to open Indonesia’s “Great gates of Kiev” to the markets that really count. Russian energy and resource-extraction giants are about to establish footholds and bases, as are the Russian banking telecommunication sectors, closely guided and guarded by Russian state facilities. A look at the agreements signed by the two governments reveals the wide range of cooperation agreed upon: 23

Agreement 1: On State financial audits between the Indonesian State Audit Board (BPK) and the Russian Chief of the Account Chamber of the Russian Federation.

Agreement 2: On the reduction of negative impacts on the environment.

Agreement 3: Signing of a Memorandum of Understanding for Russian assistance to Indonesia’s efforts to improve its performances in sports.

Agreement 4: On the promotion and protection of Russian investment in Indonesia.

Agreement 5: On cooperation in the fight against terrorism.

Agreement 6: On Russia extending loans to the Indonesian government.

Agreement 7: On cooperation in culture and cinematography.

Agreement 8: On technical procedures for placing and managing Indonesia’s credit budget.

This wide range of agreements combines Russian hard and soft power, as a closer look reveals. Agreement no. 2 on the environment is self-explanatory in its practical and symbolic relevance. Agreement no. 7 links the cultural and arts scenes of both countries, whose relevance to giving modern cultural expression and direction in both societies is often overlooked in the West. Agreement no. 3 on sports touches a very sensitive nerve in Indonesia’s collective pride, the lack of success in international sports. Russia demonstrates and operates skills of cultural understanding that for decades was the domain of the West, and where the West will now find competition: arts, culture, sports and cultural (and nationalist) sensitivity. Russia once promoted these skills in Soviet times, and it is interesting that it is reviving them in times when the West appears to be turning away from soft power. China promotes the Chinese language in Indonesia as well as the Indonesian language in China, while here in Germany cultural and language institutions studying and working with Southeast Asia and Indonesia are downsized or scrapped altogether. 24

Instead of a conclusion

The message given by the Russian and Indonesian presidents is clear: Russia has arrived in the Archipelago and its largest state and is there to stay. Russia is a welcome partner for seeking alternatives to and more independence from past ties. Established may disintegrate, but the archipelago will diversify and rise to become an arena for international competition in many fields.

Russia has the potential to challenge the established position of the West in Indonesia. It has successfully established footholds in key markets in Indonesia and outlined a long-term strategy to become a player in the Indonesian economy. Russia won’t change Indonesia’s complexion over night, but will make its mark felt in the very long run. Its approach to win “the hearts and minds” of the Indonesian leaders and their society is worth close observation.

It is far too early to outline the extent of changes Russia will bring to the region. But it is enlightening to understand the consequences for Indonesia’s stand in the region. The country has been given alternatives to Western military products and will use that to establish a more distanced policy towards the West. Whether the newly emerging powers that are currently leading to multi-polarity in the region, will replace old dependencies with new ones, and to what extent Indonesia will become more independent by exploiting the multi-polar world order, remains to be seen. But whatever the outcome, Southeast Asia demands our attention.

 

1 Francis Fukuyama, 1992, Das Ende der Geschichte. Wo stehen wir?, München

2 Michael Stürmer, 2007, Welt ohne Ordnung. Wer wird die Erde erben?, Wiesbaden

3 Ulrich Beck, 2007, Weltrisikogesellschaft. Auf der Suche nach der verlorenen Sicherheit, Frankfurt a.M.

4 Erich Follath und Alexander Jung (Hrsg.), 2006, Der neue Kalte Krieg. Kampf um die Rohstoffe, München

5 “Putin: Relasi Rusia-RI Meraih Momentum Baru, bertemu Presiden Yudhoyono di Istana Negaka Kamis Ini,” in: Kompas, 6 September 2007

6 President Suharto in 1997 sent a letter of intent to buy a squadron of Sukhoi fighter jets to Moskow. The purchase materialized seven years later under President Megawati Sukarnoputri.

7 The UN General Assembly on 16 October 2006 elected Indonesia, Belgium, Italy and South Africa, as non-permanent members of the UN Security Council, with their terms beginning January 1, 2007

8 Specified as ten MI-17 and three MI-35 helicopters, see “Army to buy 13 helicopters from Russia,” Antara, 24 October 2007. One day later, Army Chief of Staff Djoko Santoso reported that that the number had been raised to six Mi-35 attack helicopters, see “Army to buy more Russian choppers,” The Jakarta Post, 25 October 2007.

9 The United States and Australia resumed contacts and limited cooperation with the Army’s top commands of Kostrad (Army Reserves) and Kopassus (Army Special Forces), but European forces strictly limited their contacts to the Indonesian Navy and Air Force, leaving the Army as the “Schmuddelkind” (‘mucky child’)

10 Western restrictions on arms sales included in sales contracts mandated the use of combat equipment strictly to non-combat missions, a restriction often disregarded by the Indonesian Armed Forces, for which the Army still has to pay the price. To my understanding, the Indonesian Army still encapsulates the typically Indonesian warrior spirit and mentality most, which is totally alien to Western European professional armies.

 

11 This passage follows the geopolitical argumentation of Stürmer, 2007, in his chapter “Russland: Imperialmacht ohne Imperium” (Russia, imperial power without an empire), pp. 94-102.

12 It is tempting to suggest that Indonesia’s political and security oligarchy could find the new Russia a suitable role-model for their own country’s and society’s direction, but here the dissimilarities between the two societies came to the fore. Indonesia’s political system, dominated by old leaders, almost rules out that an Indonesian Putin-figure can rise to the top. The country’s administration and security apparatus lack the coherence and discipline that marks Russian state and security machinery inherited from the Soviet past.

13 It needs to be clarified to non-German speaking readers that the English word empire translates into both German Reich and Imperium, which hold quite different meanings and connotations. I personally prefer to speak of a Russian Reich instead of an Imperium.

14 Referring to the German popular journalist and author Peter Scholl-Latour’s diction of Russland im Zangengriff.

15 This year Putin signed a US$200 billion, seven-year rearmament plan for Russia’s military that laid emphasize on rebuilding the Armed Forces global strategic capabilities.

16 See http://russianforces.org/navy and http://en.wikipedia.org/wiki/Pacific_Ocean_Fleet_(Russia)

17 Considering that Singapore as probably the most well-equipped military state in the region, remains the main military hub of the United States and Europe, including Germany.

18 The ALKI (Alur Laut Kepulauan Indonesia), the Indonesian Archipelagic See Lanes, are Indonesian waters open to international sea passage, while the Malacca Straits has an international status.

19 A report to the U.S. Congress by the Congressional Research Service said that between 1998 and 2005, Russia struck agreements for $29.1 billion in arms sales to Asian countries. Russia’s arms sales efforts beyond China and India are focused on Southeast Asia, the report said. Russia had agreed to flexible payment terms including counter-trade, offsets, debt-swapping and licensed production agreements to make weapons deals more appealing to relatively poor customers.

20 A British security expert once spoke to me about the Indonesian army’s “lost-lover syndrome” with the essence that despite the common in the Armed Forces that they had been treated badly by their former ally and friend, they still adore the US Army and keep them as their military model.

21 To mention the label of Demokratur, a German word combination of democracy and dictatorship, that an author attaches to Russian democracy under President Putin. See Boris Reitschuster, 2006, Putins Demokratur, Wie der Kreml den Westen das Fürchten lehrt, Econ Verlag

22 bapakisme (“Father-ism”), kekeluargaan (family-ism) and the role of dynasties.

23 “Russia-Indonesia signed 8 Cooperation Agreements in New Relations,” Indonesia Digest, No. 24.07, Dated: 12 September 2007. Those agreements do not mention bilateral military cooperation in officer exchange and education in training that have been reported in the media before the Russian president’s visit.

24 A recent report on the contribution of culture and arts on the Indonesian economy and its future potentials, see “Jakarta Sees Future for Creative Industries,” Financial Times (UK), Friday, October 26, 2007. In the declining relevance of the Indonesian language, see “Foreigners show ‘less interest’ in Bahasa Indonesia,” The Jakarta Post, 27 October 2007.

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