The purchase of crude oil from Russia has become a bitterly sarcastic, textbook embodiment of the adage "laughing oneself to death, the Russian way" (mati ketawa cara Rusia). President Prabowo Subianto's claim of massive windfalls from a new oil source – secured after Iran blockaded the Strait of Hormuz amid the war against the United States and Israel – has instead turned into a massive loss. Prabowo secured the deal following a meeting with Russian President Vladimir Putin in April 2026.
The Research and Development Center for Oil and Gas Technology (Lemigas), a public service agency newly mandated to import oil, agreed to purchase 740,338 barrels of Eastern Siberia-Pacific Ocean (ESPO) crude from Russia. According to the agency's procurement documents, the ESPO price for June-July 2026 is much higher. Russia is asking for an additional US$9.50 per barrel on top of the benchmark price of Brent crude, not including shipping and distribution costs to Pertamina's refineries.
Using the benchmark price of Brent crude oil as a base is odd to begin with. Oil traders in Russia, a country under long-standing sanctions from the US and its European allies, typically offer prices that are 30 to 50 percent lower than Brent, a light crude oil that serves as the global oil price benchmark. Currently, Brent costs around US$83 to US$85 per barrel, meaning Russia's oil should cost between US$41 and US$58 per barrel. Notably, ESPO oil has been under US sanctions since 2025.
There is also the issue of Russian oil's reputation for having a high sulfur content. According to Lemigas' testing results, the Russian oil they purchased had a sulfur content of 0.65 percent. This level places ESPO oil's quality in the poor-quality category, as it exceeds the 0.5 percent threshold. High-sulfur oil requires more complex processing, driving up costs and causing greater corrosion to refinery equipment.
Another odd thing is that the oil is to be paid for in Indonesian rupiah. If Lemigas receives the oil when the rupiah's exchange rate plummets against the US dollar, the agency will incur even greater losses from the Russian oil transaction. Earlier this week, the rupiah depreciated again, trading above Rp18,000 per US dollar.
Indonesia's bad end of the deal does not stop there, though. On June 28, 2026, the MV Sierra, a Cameroon-flagged shipping vessel, unloaded Russian oil at a Pertamina port off the coast of Lawe-Lawe in East Kalimantan. The MV Sierra appears on the blacklist of several European countries.
By purchasing problematic crude oil, the Indonesian government risks exposure to sanctions from the United States, the European Union, and even the United Kingdom. Pertamina, which will store and process the oil, could also suffer consequences. Western countries could freeze Pertamina's bonds and securities, which will hurt the company's ability to fund oil processing.
The high price of Russian oil stems from Presidential Regulation No. 26/2026, which mandates direct procurement by Lemigas under the pretext of shortening the supply chain. Purchasing without a tender leaves Lemigas with no way to compare prices with other types of oil.
Under such a chaotic scheme, the Russian oil purchase has become an even worse deal than the oil import scandal of Pertamina Energy Trading Limited (Petral), a Pertamina subsidiary in Singapore. In many legal cases, such as the Zatapi oil imports in 2008, Petral rigged oil import prices to benefit suppliers, allowing the money to be siphoned off through corruption.
– Read the complete story in Tempo English Magazine
Source: https://en.tempo.co/read/2114876/crude-awakening-russias-costly-oil-dea