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Russian Fighter Deal Reflects Indonesia’s Goal of a ‘Sanctions-Proof’ Economy

Republished By Plato
Republished By Plato

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Indonesian Ambassador to Russia Jose Tavares confirmed last week that a $1.14 billion contract signed for the acquisition of 11 Su-35S fighter aircraft from Russia remains in force, in spite of widespread unconfirmed reports and speculation since early 2019 that it had been terminated due to threats of sanctions by the United States Treasury Department. The ambassador added that Jakarta was waiting for the situation to become “more accommodating” before returning to implementation of the contract, stating that it was “put on hold to avoid certain potential inconveniences” – which was seen to refer to the threat of sanctions and other forms of Western pressure. The acquisition of a new generation of Russian fighters would end the hopes, widely expressed in the Western world, for the Indonesian Air Force to operate a fully NATO-compatible combat fleet. The deal has potentially significant strategic implications amid growing uncertainty regarding Jakarta’s future geopolitical alignment.

Indonesia placed its first order for Russian fighters in 1997 and was expected to become a major client for the Su-35’s predecessors, the Su-27 and Su-30, before the Asian Financial Crisis forced it to curb acquisitions to a small fraction of planned numbers. The country acquired a small fleet of 10 Su-27s and Su-30s during 2003-2010 followed by six Su-30MK2s in 2013, with these continuing to represent its most capable and by far its longest-range combat jets. An order for 11 Su-35s was finalized in February 2018, with the aircraft representing a heavily enhanced Su-27 derivative with three electronically scanned array radars, a much longer range, and other significant improvements across all performance areas. While the Indonesian Defense Ministry cited the class’ significant commonality with the Su-27 and Su-30 the Air Force already operated as cause for selecting it over competing offers of the Western Eurofighter, Rafale, F-16, and Gripen, further central factors in the decision were thought to include the Su-35’s range, which at well over double that of competing aircraft was valuable for patrolling Indonesia’s vast archipelago, and, perhaps most importantly, the need to avoid over-reliance on Western suppliers.

A central factor leading Indonesia to first acquire Russian fighter aircraft in the 1990s was a growing perception that diversifying away from Western aircraft was critical to the country’s security interests. Following a military takeover in 1965-66, which was supported and heavily facilitated by the U.S., Britain, and Australia, Jakarta significantly downgraded ties with the Soviet Union and China and went on to exclusively operate Western combat aircraft, while selling its most capable pre-coup Soviet fighters to the U.S. for adversary training purposes. This dependence on Western aircraft proved devastating for Indonesian combat aviation capabilities in the 1990s, when the U.S. and its European allies imposed multiple rounds of arms embargoes on the country over its occupation of East Timor. This grounded the majority of the Indonesian fleet and further expanded the superiority of Australian aviation in the region, as Canberra moved to bring East Timor into its sphere of influence. The country’s Su-27 acquisition in 1997 was accordingly referred to in the New York Times headline at the time as a “slap at [the] U.S.”

Aside from the risk of embargoes, the U.S. has also consistently offered Indonesia lower-end combat aircraft than those it has supplied to Singapore and Australia, with this mirroring Washington’s guarantee of conventional superiority to Israeli forces in the Middle East and similarly ensuring the perpetuation of a balance of power favorable to the interests of its closer security partners. Thus, much as has been the case for multiple Arab states, Indonesia has seen acquisitions of Russian equipment as the only way to break away from these artificial restrictions, with military officials in the country having repeatedly expressed reservations regarding American armaments due to Washington’s unwillingness to provide its more capable systems, as Russia was. For example, America’s top fighter, the F-35, is off the table for Indonesia, and even if provided would not be built to the same standard as those supplied to Singapore or Australia, while remaining far more likely to be embargoed than the fleets of its two closely U.S.-aligned neighbors. Having placed no comparable restrictions and shown no remotely comparable propensity to embargo Indonesia, Russia has accordingly long been valued as a dependable supplier.

While Indonesia’s historical experience with U.S. and Western equipment provides a strong incentive for de-risking its combat aviation, the future of the country’s fighter fleet remains highly uncertain as the country has agreed on deals for four different fighter classes: the Su-35, the U.S.-South Koran KF-21, and more recently, the French Rafale and American F-15. While it is unlikely to move ahead with more than two of these, the Su-35 retains a unique strategic advantage, as the only “sanctions-proof” fighter that is not built to a NATO standard, and does not rely heavily on American inputs.

Indonesia’s continued interest in the Su-35 notably fits into a broader emphasis on “sanctions proofing” its economy, which reflects the country’s “free and active” foreign policy, and its desire to remain aloof from the growing competition between the U.S. and its partners on the one hand, and China and Russia on the other. The perceived need to insulate its economy from possible Western sanctions appears to have intensified as Western pressure on the country has grown over its economic ties to Beijing and Moscow. While a growing number of countries across the non-Western world have since early 2022 taken significant steps to insulate themselves from possible Western sanctions, after unprecedented sanctions were placed on Russia after the escalation of war in Ukraine in February, Indonesia has been one of the few countries where officials have specifically cited the sanctions regime against Moscow as a reason for doing so.

A notable example was President Joko Widodo’s call in March 2023 for his country to abandon the use of Western payment networks like MasterCard and Visa, asking the public to use the Domestic Government Credit Card payment system implemented 12 months prior. “Be very careful. We must remember the sanctions imposed by the U.S. on Russia. Visa and Mastercard could be a problem,” he warned, adding that without them “we can be independent.” “If we use our own platforms, and everybody is using them, from ministries and local administrations to municipal governments, then we can be more secure,” he added.

The president’s statement came five months after Bank Indonesia had urged a transition to the use of alternative national currencies for international payments to reduce Indonesian financial markets’ reliance on the U.S. dollar. As Nugroho Joko Prastowo, the head of the  Bank Indonesia’s Solo Representative Office, said at the time, “About 90 percent of export-import payments are conducted in U.S. dollars, while the share of Indonesian direct exports to the U.S. is estimated at only 10 percent, and U.S. imports account for 5 percent.” The two-way payment systems based on national currencies, which Nugroho proposed had already been implemented with China, Japan, Thailand, and Malaysia. In March 2023 Indonesia hosted a meeting of ASEAN finance ministers where discussions focused on measures to reduce the dependence of financial transactions on Western currencies and increase the use of local ones. This followed multiple steps in this direction in the preceding years, including an agreement with Malaysia, Thailand, the Philippines, and Singapore to link their fast payment systems, which allowed them to bypass the need for any foreign currencies in cross-border transfers. Much like India, which had also made reduced dollar trade an explicit policy goal, Indonesia’s position was a key indicator of geopolitical trends among the silent majority of states.

A further notable example where the Western sanctions regime against Russia was specifically cited as a reason to insulate the economy was the president of the Indonesian Credit Cards Association, Dodit Proboyakti, who was among multiple local sources to note that Indonesia would draw on Russia’s experience developing the Mir payment system to insulate itself from Western sanctions. Development of the payment system in Russia had been accelerated in 2014, and provided a key means of insulating the country after Western economic warfare efforts were significantly escalated in 2022, with the U.S. Treasury referring to it as having “permitted Russia to build out a financial infrastructure that enables Russian efforts to evade sanctions and reconstitute severed connections to the international financial system.”

Ultimately Indonesia’s efforts to “sanctions proof” its economy and to “embargo proof” its air force go hand in hand, with the possibility remaining highly significant that the U.S. and other Western states will seek to further escalate pressure on the country over its continued close ties with China and Russia. Indeed, the conclusion that the threat of sanctioning Indonesia over its Su-35 acquisition had alienated the country from Washington fit into a much broader trend, as Western analysts widely warned that a vast array of secondary sanctions on Russian trading partners were alienating much of the non-Western world.

Much as Jakarta resisted Western pressure to shun Moscow, so too has it flatly resisted pressure over relations with China, a notable example being the U.S. pressure to limit ties with Chinese telecoms giant Huawei. The Indonesian government has instead continued to plan new collaborative “strategic projects” with the firm, while relying on China as its largest and fastest-growing trade and investment partner, dimming Western hopes that Jakarta would align itself against Beijing. Considering the precedents of Western countries sanctioning their adversaries’ trading partners – the imposition of secondary sanctions on Russian trading partners from India to the United Arab Emirates being recent cases in point – Jakarta has significant grounds to be wary of future Western efforts to target its economy.

As the trend towards sanctions proofing the Indonesian economy has continued to strengthen Jakarta’s position to go ahead with a Su-35 deal, the “right conditions” Ambassador Tavares referred to are more likely to emerge. Expected increases in Western pressure over Indonesia’s ties with China are set to stimulate this process. Both historical precedents and geopolitical and economic trends thus indicate that Indonesia is unlikely to allow itself to again become fully reliant on Western combat aircraft, although while the Su-35 was Russia’s most capable fighter on offer for export in 2018, by the time a deal goes forward it is also highly possible that the Indonesian Defense Ministry will come to favor a new enhanced variant of the Su-35, or perhaps the fifth generation Su-57, neither of which were previously available.

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