Indonesian President Joko Widodo under pressure to import Russian oil

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Indonesian President Joko Widodo has said the country must look at “all options” as it considers joining other Asian economies, including India and China, in buying Russian oil to offset rising energy costs.

Indonesia It hasn’t imported significant amounts of oil from Russia for years, but Widodo’s government is under increasing pressure to curb rising costs after being forced to raise prices of some fuels by as much as 30 percent this month. .

Any move to buy Russian oil at a price above a limit established by the G7 countries could leave Indonesia vulnerable to US sanctions as it prepares to host a G20 summit in Bali in November. Widodo has invited world leaders such as Russia’s Vladimir Putin and Ukraine’s Volodymyr Zelenskyy to the meeting.

“We always monitor all options. If the country exists [and] they give a better price, of course,” Widodo said in an interview with the Financial Times in response to a question about whether Indonesia would buy Russian oil.

“There is a duty to [the] government to find various sources to meet the energy needs of its people. We want to find a solution,” added Widodo, known as “Jokowi,” speaking at the presidential palace in Jakarta.

Widodo’s comments underscored the difficulty for many countries in trying to navigate geopolitics and energy crisis hitting homes and businesses around the world.

Indonesia, Southeast Asia’s largest economy, has long pursued a policy of non-alignment with superpowers, with Widodo visiting Moscow and Kyiv in June, just months after Russia’s invasion of Ukraine in February, to personally invite their leaders to the G20 summit.

“It would be bad public relations actually if the government did it. [bought Russian oil] as Indonesia is a non-aligned nation and was even one of the founders 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 lower than the international market price, according to the country’s tourism minister. Pertamina, Indonesia’s state oil company, said in August that it was reviewing the risks of buying Russian oil.

But the US last week threatened to impose sanctions on Russian oil buyers who did not observe a planned price cap and who used Western services in the transactions, raising the potential risk for countries dealing with Moscow.

Indonesia’s decision to cut energy subsidies this month was prompted by a threefold increase in the cost of fuel subsidies from the original budget, to 502.4 trillion rupees ($34 billion).

Indonesia’s economy has 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. Over the previous year.

However, rising fuel prices are expected to push up inflation and force the central bank, Bank Indonesia, to raise interest rates, which could hurt economic growth.

“Energy is closely related to people’s best interests,” Widodo said.

If Indonesia were to join India and China in buying Russian oil, it would further help Moscow offset much of its lost revenue from a drop in shipments to Europe.

A 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, compared to the first quarter.

Indonesia and Russia also have several big energy projects planned, including a $16 billion refinery in East Java being built by Russia’s Pertamina and Rosneft. Russia’s state-owned company Zarubezhneft holds half the shares in the Tuna oil and gas exploration block in the South China Sea, an area close to Indonesia’s maritime border with Vietnam.

With respect to G20 Summit in BaliWidodo said that along with Putin and Zelensky, world leaders expected to attend the event include Chinese President Xi Jinping and US President Joe Biden, adding that there is a possibility that the Ukrainian president will deliver his speech virtually.

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