American Indonesian Chamber of Commerce


War In Ukraine

March 2022


Some tell me the current thinking in Jakarta is that the Ukraine War is a two-month affair, a view I suspect may be wishful thinking. The conflict may not be affecting Indonesia yet, but it will have to navigate a riskier environment, especially the longer the war lasts. No matter how long the war lasts, Indonesia should move away from its normal neutral posture and play on Broadway rather than in regional theaters. Let me explain.

Indonesia’s initial reaction to Russia’s invasion was lukewarm in US eyes. While the use of force against a sovereign nation was strongly opposed Indonesia’s diplomatic statement did not mention Russia specifically. Indonesia’s statement was: “Indonesia is very concerned about the escalation of armed conflicts in Ukraine which poses great threats to the safety of the people and the stability in the region. Indonesia, condemns every act which is a clear violation of territorial integrity and sovereignty of a country and urges all sides to prioritize negotiation and diplomacy to stop conflict and put forward a peaceful resolution.” The second part of the statement concerned sanctions: “We will not blindly follow the steps taken by another country. We will make a decision based on our domestic interests and (the consideration) of whether sanctions would solve anything. We see time and time again that sanctions do not mean the resolution of a particular issue.”

I believe the statement reflects Indonesia’s longstanding “free and active” foreign policy paradigm; it doesn’t want to be seen to be in any superpower’s camp. However, a time may come sooner than Indonesia’s leaders think to re-evaluate that non-aligned stance, especially in this case. The immorality of Russia’s invasion will continue to resonate unpredictably, and Indonesia does not want to be caught up in the blowback. It may be asked by other EU nations and the US to take a stand.

Indonesia’s main ties to Ukraine are its wheat, crude oil and steel; the two countries overall trade figures are very modest. In 2021 Indonesia imported 26% of its wheat from Ukraine, the most of any country. Even if it lost this supply, which is mostly from eastern Ukraine, it has other regular partners (Australia, US, Canada, Argentina). The same would hold for steel and crude oil. On the export side, the main product is crude palm oil; secondary products include clothing, coffee, and spices. According to official figures Ukraine purchases only .18% of Indonesia’s exports. The total is probably higher as many transactions to Ukraine go through European trading houses. Trade with Russia is also relatively small.

The principal economic effect of sanctions will be higher inflation from rising global energy prices. Militarily, Indonesia could have difficulty importing spare parts for the Russian Sukhoi fighters already in its fleet, some of which could be prevented from flying to Russia for repairs, especially if US sanctions increase. However, Indonesia has also turned away from Russian aircraft in favor of US F-15s and French Rafale, partly in reaction to previous sanctions.

Indonesia is proceeding with its plans to host the G20 and B20 meetings. If hostilities persist Its hard to see the US and its NATO allies (and perhaps companies) participating if Russia remains an invitee. The US may be thinking that Indonesia needs to be more forceful to stand up to Russian aggression, especially now that China has signaled its support for Russia. Indonesia may be wondering if the US focus will ever get back to Asia. Neither position in my opinion is accurate. The US sent a high-level defense delegation last week to Taiwan; the symbolism of that needs to be understood by Indonesia. Indonesia, for its part, voted in support of last Wednesday’s emergency UN general assembly resolution condemning Russia’s invasion of Ukraine (China abstained) and it is probably correct that Ukraine is not completely analogous to Taiwan.

I agree with the view that China is the country in the best position to pressure Russia on Ukraine. A corollary is that Indonesia can influence China on Russia. Given its population is nearly twice that of Russia, Indonesia is much more key to China’s future. Indonesia should consider some sanctions and work diplomatically with China to urge it to do the same. After all Germany and Japan surprised the world by boldly committed to rearming and sending military support. One has to look all the way back to the days of President Soekarno to see Indonesia under the klieg lights of the world stage. I have always said our good friends are ready to play Broadway rather than regional theater and this crisis could be the occasion for the move.