Indonesian President Joko Widodo said the country must consider “all options” as it considers joining other Asian economies including India and China in buying Russian oil to offset rising energy costs.
Indonesia it has not imported significant amounts of oil from Russia for years, but Widodo’s government is under increasing pressure to rein in rising costs after it was forced to raise the price of some fuels by up to 30 percent this month.
Any move to buy Russian oil at a price higher than a the limit set by the G7 countries Indonesia could be vulnerable to US sanctions as it prepares for November’s G20 summit in Bali. Widodo invited world leaders to the meeting, including Russia’s Vladimir Putin and Ukraine’s Volodymyr Zelensky.
“We are always looking at all options. If there is a country [and] they give a better price, of course,” Widodo said in an interview with the Financial Times when asked if Indonesia would buy Russian oil.
“There is an obligation for [the] government to find different sources to meet the energy needs of its people. We want to find a solution,” Widodo, who is known as “Jokowi,” added at the presidential palace in Jakarta.
Widodo’s comments underscored the difficulties of many countries trying to navigate geopolitics and energy crisis affecting households and businesses worldwide.
Indonesia, Southeast Asia’s largest economy, has long maintained a policy of non-engagement with the superpowers, with Widodo visiting Moscow and Kyiv in June, just months after Russia invaded Ukraine in February, to personally invite their leaders to the G20 summit.
“It would be bad public relations for the government to do that.” [bought Russian oil] because Indonesia is a non-aligned nation and was even the founder of the non-aligned nations movement,” said David Sumual, chief economist at Bank Central Asia in Jakarta.
Moscow has offered to sell oil to Indonesia at a price 30 percent below the international market rate, the country’s tourism minister said. Pertamina, Indonesia’s state oil company, said in August it was reviewing the risks of buying Russian oil.
But the US last week threatened to impose sanctions about buyers of Russian oil who failed to comply with the planned price ceiling and used Western services in their transactions, which increases the potential risk for countries dealing with Moscow.
Indonesia’s decision to cut energy subsidies this month was precipitated by a tripling of fuel subsidy costs from the original budget to 502.4tn ($34bn).
Indonesia’s economy weathered the energy crisis thanks to strong domestic consumption and high prices for two of its biggest exports, coal and palm oil, with gross domestic product growing 5.44 percent in the second quarter from a year earlier.
But rising fuel prices are expected to push inflation higher and force central bank Bank Indonesia to raise interest rates, which could hit economic growth.
“Energy is closely related to the best interests of the people,” Widodo said.
If Indonesia were to join India and China in buying Russian oil, it would help Moscow offset much of its lost revenue from a drop in supplies to Europe.
An FT analysis of Chinese and Indian customs statistics showed that countries imported 11 million tons more oil from Russia in the second quarter of 2022 than in the first quarter.
Indonesia and Russia are also planning several major energy projects, including a $16 billion refinery in East Java being built by Pertamina and Russia’s Rosneft. Russia’s state-owned Zarubezhneft has a half stake in an oil and gas block for tuna fishing in the South China Sea, an area near Indonesia’s maritime border with Vietnam.
Regarding G20 summit in BaliWidodo said that along with Putin and Zelensky, world leaders expected to attend the event included Chinese President Xi Jinping and US President Joe Biden, adding that there was a chance the Ukrainian president would deliver his speech virtually .