Those Iranians are back at it again, attempting to use oil as a carrot to seek support in furthering their nuclear ambitions. A few weeks ago, they dangled it in front of the Japanese (OGJ, Mar. 20, 2006, p. 31). Now they’re trying the Indonesians, too. Everyone knows that the Indonesians are having economic woes, especially from falling production rates in their oil and gas industry coupled with rising demand at home.
That means the Indonesians must import expensive supplies of refined product and crude to meet rising domestic demand, while trying to subsidize the difference between world prices and local rates.
Then, too, the Indonesians have had problems supplying natural gas to their international customers, especially in Japan, Taiwan, and South Korea. Absent domestic supplies, they have resorted to the pricey spot market to avoid defaulting on their export obligations.
Enter Iran
Indonesia’s wobbly economy has set the scene for the entry of the Iranians, and their cue came as the permanent members of the United Nations Security Council-the US, Russia, China, Britain, and France-plus Germany held talks to work out a united front to deal with Iran’s nuclear ambitions.
In the face of such opposition, Iran is seeking allies to support its nuclear program. That’s why Iranian President Mahmoud Ahmadi-Nejad began a 3-day visit to Indonesia, replete with large carrots for the Indonesians to nibble on.
Indeed, the two countries were expected to sign a deal to develop a refinery in Java at an estimated cost of $4-5 billion, which would process some 300,000 b/d when it comes on line in 2010.
While financing had yet to be worked out, a minimum of 100,000 b/d of crude would be provided by Iran for the project for 20 years, with 70% of the refined product going for exports and 30% for domestic consumption. Are the cash-poor Indonesians falling for the Iranians’ ploy?
Saudi deal
The most the Iranians got was a bit of lip service.
Indonesia said it believes Iran’s nuclear program to be peaceful and that all problems related to it can be solved “in a good manner and diplomatically by involving many parties in the international community.”
The Indonesians were surely too canny to cast their lot in with the Iranians entirely, a point underscored by Foreign Minister Hassan Wirajuda, who said that Jakarta wanted Iran to be “more transparent” in the development of its nuclear program.
If anyone wants to know where Indonesia’s resolve came from, they might consider the trip to the Middle East-especially to Saudi Arabia, Iran’s chief political competitor-taken earlier this month by Indonesian President President Susilo Bambang Yudhoyono.
That trip resulted in the signing of energy and investment agreements worth billions of dollars, strengthening the economic hand-and with it the political resolve-of the Indonesians ahead of last week’s visit by the Iranian delegation.
