On February 28, Indonesian President Abdurrahman Wahid appointed an unusual new advisor: former US Secretary of State Henry Kissinger.
Kissinger has agreed to accept the position "free of charge." Yet he is hardly a disinterested, third-party observer. Kissinger serves on the board of US multinational Freeport-McMoran, which operates one of the world's largest gold and copper mines in Indonesia's Irian Jaya province. The new advisor's first advice? Wahid should respect the contract with Freeport-McMoran.
The government in Jakarta is renegotiating contracts with the foreign giants that mine the rich mineral, oil and gas resources concentrated in Indonesia's restive provinces. President Suharto designed the contracts to funnel money into the pockets of his cronies and to allow companies such as Freeport-McMoran a controlling stake and a lion's share of the profits.
Wahid's overture gives Freeport-McMoran the opportunity to carve out the same degree of influence it enjoyed under Suharto. Wahid may see this as a welcome opportunity; his leadership revolves around cementing friendships with a small circle of elites and then persuading this network to serve his agenda. So far, the strategy has been effective, but this particular deal risks making the president look like a tool of foreign commercial interests. Political opponents – such as the populist Democratic Party of Struggle (PDI-P) – may conclude that he is sacrificing the country's welfare to foreign interests.
The Indonesian government has argued for months about the Freeport-McMoran contract. Some elements, including the environment minister and mines and energy minister, are anxious to evaluate possible environmental damage from the mine. They have also questioned whether the company has done enough to improve the quality of life in Irian Jaya, where most of the 2 million inhabitants live in poverty.
Jakarta will likely use these facts to force Freeport-McMoran to give the government a larger stake in the deal than the 9 percent it now controls; the company owns more than 80 percent. PT Indocopper Investama Corp. owns the remaining shares – but Indocopper itself is 49 percent owned by Freeport and 50.48 percent controlled by an old Suharto ally, Mohammad "Bob" Hasan.
Wahid appears prepared to work with the company. This approach may produce better results than threats. By working directly with Kissinger, Wahid may make some headway in efforts to increase Jakarta's share of the riches. However, the political backlash could be dangerous. Wahid's adversaries could accuse him of selling Indonesia short.