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US sanction threat spurred Indonesia to drop Russia, China weapons deals

South China Morning Post - March 15, 2020

The Trump administration pressured Indonesia into dropping deals to buy Russian-made fighter jets and Chinese naval vessels, part of a global effort to prevent its top adversaries from eroding the US's military superiority.

Indonesia recently decided against moving ahead with a plan to procure 11 Sukhoi Su-35 fighter jets for about US$1.1 billion, according to an official familiar with the matter, who asked not to be identified because the details of discussions remain private.

As recently as last month, the official said, the US also pressured Indonesia into walking away from talks with China to procure several naval patrol vessels for about US$200 million.

The move to set aside the deals came after US officials made it clear Indonesia could face sanctions for dealing with Russia, the official said.

President Joko Widodo's administration was also worried the US would take punitive actions on trade if it went ahead with the China deal, the official said.

The moves illustrate how the US is having some success – at times by using financial and economic levers – deterring countries from dealing with Russia and China, which the Trump administration has identified as the biggest threats to American national security.

The US has not fared as well trying to convince countries to avoid using China's Huawei for 5G mobile networks, with the UK most notably rebuffing President Donald Trump's entreaties.

The US has publicly sparred with Turkey over Russian weapons, particularly its plan to activate an advanced S-400 missile defence system. It has also pressured India to cancel a contract worth more than US$5 billion to buy the S-400 system.

Under a barter deal announced in August 2017, Indonesia planned to purchase the 11 Sukhoi Su-35 fighter jets in exchange for Russia buying goods such as rubber, crude palm oil, coffee, tea, furniture and spices. The agreement was eventually signed by former Indonesian Defence Minister Ryamizard Ryacudu in February 2018.

While doubts have persisted for some time over whether the deal had been shelved, last month The Jakarta Post reported that the deal was in limbo and a final decision would be made later. Dahnil Simanjuntak, a spokesman for Defence Minister Prabowo Subianto, declined to comment when contacted on Thursday.

"It is not a secret that the United States exerts undisguised pressure on countries who intend to buy Russian defence equipment," Lyudmila Vorobieva, Russia's ambassador to Indonesia, said in a statement provided via text message. "The aim is clear – to make these countries refuse to get arms from Russia and turn to Washington instead. Of course it is unfair competition that violates rules and norms of transparent and legitimate business."

In several meetings with US counterparts, including the secretary of defence, Indonesian officials repeatedly asked why they were being told not to buy the Russian fighter jets, the official said. The Americans said simply it was their policy, the official said, adding that Indonesia suspected it was also because the Russian fighters would provide an edge over neighbours Australia and Singapore.

The Americans instead told the Indonesians to consider buying American-made F-16 Vipers, the official said. However, the official said, Indonesia is instead looking to negotiate the purchase of F-35 aircraft developed as part of the multi-nation Joint Strike Fighter programme. The JSF programme, headed by the US, includes the UK, Italy, Netherlands, Australia, Canada, Denmark and Norway. Singapore recently agreed to purchase aircraft under the programme, while Japan is the largest foreign buyer of the jet.

The official said the US made clear that Widodo's government risked being penalised for purchasing the Sukhoi fighter jets under the Countering America's Adversaries Through Sanctions Act, or CAATSA, which applies to Russia and several other countries. The direct threat for purchasing the Chinese vessels was less clear, the official said, but the government saw itself as vulnerable on trade.

The US is unable to comment on private diplomatic conversations, a State Department spokesperson said by email. The US urges all allies and partners to avoid new transactions of Russian military equipment to avoid sanctions under CAATSA, the spokesperson said, adding that the goal of American policy is to deny Russia the revenue it needs to continue its "malign influence."

The decision to scrap the deals was made after Indonesian officials concluded it would be a misstep to get on the wrong side of the US, the official said. Indonesia's Minister of Finance Sri Mulyani Indrawati and Foreign Minister Retno Marsudi, in coordination with Prabowo, decided it would be dangerous to risk the trade relationship, the official said.

Senior members of Widodo's administration have expressed concern in recent years that Trump would target Indonesia over its trade surplus with Washington, which amounted to about US$10.7 billion in 2018, according to data compiled by Bloomberg.

The coronavirus further threatens economic damage: Indonesia's stocks have tumbled into a bear market and its currency has been Asia's worst performer in the past month.

For Indonesia, the competition between the US and China is a sensitive balancing act. While China has offered cheap financing for much-needed infrastructure such as railways, ports and power plants through its Belt and Road Initiative, the US remains a key export market and a valuable strategic hedge against China, particularly in contested waters.

Indonesia has faced criticism over its willingness to do business with Huawei, with Australia warning late last year that it would impact intelligence sharing with its northern neighbour.

Indonesian Communications Minister Johnny G. Plate said in an interview the government had no intention of banning Huawei, and would be guided only by its own national interest.

The Indonesia deal for Chinese naval patrol vessels was discussed during a visit to China by Prabowo. It was one of several recent trips made by the former special-forces general as part of a scouting tour to procure weapons systems and other hardware. He has also visited Russia, Turkey, Germany and France.

Source: https://www.scmp.com/print/news/asia/southeast-asia/article/3075238/us-sanction-threat-spurred-indonesia-drop-russia-china