Friday, June 14, 2024

Indonesia may be a viable alternative for Russia after Western sanctions

Reading Time: 4 minutes
Gusty da Costa





As a result of the Western countries’ sanction to Russia due to the latter’s invasion to Ukraine, the economic situation may present an opportunity for Indonesia and Russia to foster business relations.

Russian Ambassador to Indonesia Lyudmila Vorobieva stated that while it was too early to assess the impact of the Russia-Ukraine conflict on the bilateral relationship between Indonesia and Russia, there was a window of opportunity for Russian companies to turn their attention to Asian countries, including Indonesia. 

“Indonesia is a key partner for Russia among Asian countries, in Southeast Asia and the Asia-Pacific region. So, I hope our business will be able to take advantage of these opportunities. Indonesia has a significant potential and we can see it,” Vorobieva told Indonesia Business Post in an interview on March 21, 2022. 

Sanctions imposed by the United States and other Western countries have affected Russia’s economy and financial system. Among the sanctions are the ban on Russian oil and gas imports, the ban on exporting luxury goods to Russia, the freezing of Russian bank accounts and wealthy individuals’ assets and the exclusion of Russia from the Swift system. 

Facilitating B-to-B cooperation

In terms of investment in Indonesia, Russia ranks 37th. In 2021, the country signed and committed to 280 projects worth US$9.2 million. The trade turnover between Indonesia and Russia increased by 40% in 2021 to US$3 billion. Indonesian President Joko Widodo and Russian President Vladimir Putin have agreed to achieve a US$5 billion trade surplus by 2020 during a meeting in Russia’s popular tourism destination city of Sochi.  

Vorobieva said Indonesian businesspeople and the government were reluctant to cut off all contacts and ties with Russia despite much pressure from Western countries.

A Russia-Indonesia Joint Commission on Economic and Technical Cooperation offers excellent opportunities for Russian businesses to come to Indonesia directly. Industry and Trade Minister of Russia, Denis Valentinovich Manturov, and Indonesia’s Coordinating Economic Minister Airlangga Hartarto co-chair the joint commission.

“We scheduled to meet early this year since there had been the COVID-19 pandemic and the increasing cases of Omicron coronavirus. However, we had to postpone the meeting,” Vorobieva said, adding that hopefully the commission would hold its meeting by the end of 2022.

Government officials have the opportunity to participate in the commission’s meetings and discuss ways to strengthen economic, trade and investment cooperation. They can also bring businesspeople together for a business forum which allow them to make contacts. 

“Our challenge is that we do not have enough information on how to do business in Indonesia or vice versa. This type of meeting facilitates the direct contact and distribution of information. As a result, we must pass this until the situation has calmed down and the crisis has more or less been resolved. Thus, after the military operation in Ukraine has ended, we will have this opportunity and the joint commission will convene. Then we will provide more information regarding our businesses,” Vorobieva explained.

Indonesia and Russia have also agreed to hold the large-scale international industrial exhibition Innoprom in Jakarta in autumn 2022. Around 200 businesspeople from Russia, five countries of the Eurasian Union and ASEAN countries will attend the event.

Prospects in energy sector

The Russian ambassador said Innoprom would focus on several sectors including energy, shipbuilding, civil aviation, pharmaceuticals, IT and agriculture, among others.

“There are many opportunities. We can have excellent cooperation and I believe that in the year to come, there will be many newer possibilities for our countries to cooperate,” Vorobieva said.

Russia is constructing nuclear facilities in more than 12 foreign countries as part of a joint project in the energy sector. Russia is happy to assist if Indonesian built a nuclear facility. 

However, Vorobieva wished to know first whether there were any concerns about nuclear technology in Indonesia before beginning the project. In Russia, public opinion is overwhelmingly in favor of the technology since it is five times safer than the technology used in Fukushima, Japan. Nuclear power is, in essence, a green technology. 

“We are ready to assist Indonesia in energy-related areas, including nuclear, conventional, green and renewable energies. These technologies are available in Russia. We have hydropower plants in our rivers in Siberia. This is one of the areas we can assist,” she said, adding that Russian oil company Rosneft and Indonesia state-owned oil and gas firm PT Pertamina are partnering on a refinery in Tuban, East Java. 

In the upstream oil and gas sector, Russian oil and gas company Zarubezhneft is part of a consortium of oil and gas companies under British Petroleum (BP), exploring oil and gas fields around the waters off the island of Natuna.

“However, the project is still at the stage where an assessment is being completed. Now, they will assess whether it is even commercially feasible to move forward, to continue to work in this region,” she added. 

Indonesia and Russia can also cooperate in civil aviation. Vorobieva said Russia has developed a medium-range aircraft, the Irkut MC21, which can be used in Indonesia to transport people and supplies among the islands.

In digital technology, Russia is also developing the ride-hailing app Taxi Maxim. Currently, Taxi Maxim are available in 60 cities across Indonesia.

Trade mission

As an ambassador, Vorobieva said one of her main duties was to facilitate cooperation in all areas, ranging from political dialog, trade, investment, culture and humanitarian contact. 

In trade and investment, she said that Russia had a trade mission in Jakarta. The trade mission and the embassy try to identify investment and trade opportunities that will of interest for Russian businesses. 

“For instance, we can send more beef. We are working with trade and agriculture to bring beef from Russia to Indonesia. That’s one of the results of the sanction actually,” she said, adding that until 2014 Russia still imported beef. 

Russia sees Indonesia holds a strategic position especially with its rapid developing economy and has a leading position in ASEAN. With 231 million of 270 million population are Muslims, Indonesia is one of the leading Islamic countries in the world.

“Russia also has 20 million Muslims, or more than 10% of our populations. They were mostly migrants but have been living in Russia for centuries,” Vorobieva said. “Of course you’ve heard about Tatarstan, Chechnya, Dagestan. These are nine regions in Russia that are predominantly Muslims. So, of course that makes Indonesia very important.”

Indonesia as G20 presidency

The year 2022 marks Indonesia’s position as the G20 presidency. It is also very important because the voice of the developing economy would be heard louder in this grouping and Russia supports the priority of Indonesia’s presidency. 

“Our president [Putin] has been invited to attend the G20 Summit [in Bali in November] and I hope he will come to Indonesia. So, of course, Indonesia is very important in all senses. And if our president comes to Indonesia, we hope that he will sign the correctional strategic partnership,” Vorobieva concluded.

Widodo traveled to Ukraine and Russia late June 2022 to try his hand at peace mediation, meeting with Ukraine President Volodymyr Zelensky first and Putin in his capacity as G20 president. Widodo also asked Russia to allow the shipment of wheat and fertilizer, which were badly needed to address the increasing global food shortage.

Gusty da Costa






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