July 25, 2024
JAKARTA – Government officials have denied plans for Indonesia to buy Russian oil but do not rule out such purchases in the future.
News agency Reuters reported on Tuesday that state-owned oil and gas company Pertamina had added Russian oil grades to its tender lists for September restocking, citing three anonymous traders.
Coordinating Economic Minister Airlangga Hartarto told reporters at his office on Tuesday that there was “no plan yet” to import oil from Russia.
Likewise, Trade Minister Zulkifli Hasan told The Jakarta Post “not yet” when asked about such a plan on Tuesday, suggesting that no decision had been made on the matter but not ruling out future purchases.
Earlier this month, Zulkifli spoke about the matter before Commission VI of the House of Representatives, which oversees trade, among other matters.
The minister said Indonesia would not breach any “international rules” should Jakarta greenlight purchases of Russian oil.
“Why don’t we want [to buy Russian oil]? [Because] we’re afraid. There’s no room for being afraid in trade. How can one conduct trade if one is afraid?” He said on July 8.
Zulkifli said buying crude from Russia was an “opportunity”, given that Indonesia could score a bargain because of the price cap imposed on Russian oil by the Group of Seven (G7) member states, Australia and the European Union.
The measure was taken as a sanction against Moscow over its attack on Ukraine in 2022 with the intention to reduce Russian state revenue and hence Moscow’s ability to finance the war.
The cap has been sitting at US$60 per barrel since December 2022, far below market prices for oil.
The price of Brent crude has moved between $73 and $122 since the invasion began and was near $82 on Wednesday.
The price cap coalition reviews the level every two months to make sure it stays at least 5 percent below the average market price for Russian crude. The cap has remained unchanged for 20 months despite crude price fluctuations in the market.
The Russian Embassy in Jakarta noted “the news about Pertamina including Russian Urals and Sokol oil in its September tender lists” but said “the plans of Pertamina to buy Russian oil under the so-called ‘price cap regulation’ seem to be unduly high-flying.”
The statement sent to the Post on Wednesday added: “As far as we can see, the Indonesian company is trying to maneuver between [the] benefits from potential cooperation with Russian exporters and complying with the illegal sanction regime imposed by the West.”
Vladimir Furgalsky, a Russian government official, claimed in November that more than 99 percent of Russian oil was traded “well above the $60 per barrel ceiling”, according to a separate article from Reuters.
Pertamina neither denied nor confirmed the report, but Hermansyah Nasroen, a corporate secretary at one of Pertamina’s subsidiaries, told the Post on Tuesday that, if the state-owned enterprise were “to buy crude oil from Russia, it will be done with the price cap mechanism”.
Reuters’s anonymous sources said two of Pertamina’s tenders had closed recently, but the results were yet to be announced. Furthermore, one of the sources said Pertamina might only buy Russian oil if it was sold under the price cap.
Indonesia, which is import-dependent, has not bought any oil from Russia in more than a decade.
Muhammad Habib, a researcher from the Centre for Strategic and International Studies (CSIS) in Jakarta, said Indonesia did not have an upper hand in such transactions, and Moscow would sell its oil to the top bidder.
“Communication about our intent to follow [the] price cap is one thing, and what happens during the transaction is another. Russia is a rational actor. If Indonesia does not want to buy the oil according to the market price, they will sell it to others who want to pay more,” Habib told the Post on Wednesday.
Bank Permata chief economist Josua Pardede said the transactions would be dictated by market mechanisms, whereby Indonesia could get Russian oil cheaply if demand for the commodity faltered, particularly from China and India, Russia’s biggest oil customers.
“With the oil price being relatively high now, Indonesia needs an alternative [import source] to press down energy subsidy spending,” Josua told the Post on Wednesday, interpreting the move as a beneficial way to diversify supply and help reduce subsidies without a harmful effect on inflation.
However, he advised against buying Russian oil at the market price and making it the main source of imported oil, since that might lead to diplomatic pressure from Russia’s adversaries like the United States and the EU, who could alter their trade and investment policies in a way that would “negatively affect Indonesia’s economy going forward”.
Habib and Josua agreed there were geopolitical risks associated with purchasing oil from Russia, though the level of the risk could be minimized depending on the specifics of such trade.