Newsletter No. 396
News-Analysis
October 3, 2006

 

The following newsletter has been contributed by Sandra R. Leavitt (Shingetsu Member No. 55). She is based at Georgetown University.

INDONESIA SENDS MIXED SIGNALS TO JAPAN

As Indonesia announced cutbacks in much-needed liquefied natural gas (LNG) exports to Japan beginning in 2010, it also encouraged Japan’s leadership role in the Southeast Asia region, including security cooperation.

Cutbacks in LNG to Japan

Japanese companies were notified last week that LNG imports from Indonesia will be halved when current long-term export contracts expire between 2010 and 2011. Negotiations over the exact terms and amounts have been ongoing since last year. The expected decrease will force Japan to look elsewhere to fill its energy needs. Negotiations are now focused on limiting losses to the announced 50% reduction.

Indonesia’s decision was precipitated by several factors. First, the world demand for LNG is rising as the price of crude oil remains at historic highs and energy consumers search for better-priced alternatives. Rising concerns over environmental problems, such as the effects of global warming, are also increasing global demand for LNG, a cleaner fuel than crude. Second, Indonesia’s domestic demand for LNG is increasing as the country’s economy develops. Third, production from Indonesia’s gas fields has been waning, putting additional pressure on Indonesia’s domestic energy market.

Until the 1990s, Japan faced little competition for Indonesia’s LNG. Today, however, demand is high, especially from the United States, South Korea, and China. Given that Indonesia is expected to increase exports of LNG to China beginning in 2009, negotiations between Japan and Indonesia will be complicated and may become politicized.

Indonesia Supportive of Increased Security Role by Japan

At the same time Indonesia’s government was curtailing the energy trade with Japan, its defense minister was encouraging Japan to take a more active and normal security role. Indonesian Defense Minister Juwono Sudarsono stated, “I think a forceful and assertive Japanese role in East Asian security would be welcome. It would provide a good balance.” The reference to balancing implies increased competition for regional influence between big and/or rising powers, such as Japan, China, India, and the United States.

In his comments, Sudarsono focused on states’ shared economic interests: “What we can do in Southeast Asia is to work together principally through the coordinated maritime patrols of Singapore, Indonesia and Malaysia, so that this lifeline for the powerhouses of the East Asian economies will not be disrupted,” he said.

Japan’s balancing role in regional security is becoming more important to Southeast Asian states as China rises and U.S. influence is mitigated by resource constraints and the ongoing conflicts in Iraq and Afghanistan.

Multi-State Anti-Piracy Cooperation

Indonesia and Malaysia are also supportive of a Japan-initiated multilateral program to increase cooperation to combat piracy. Eleven of sixteen countries have currently ratified the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia, which allowed the pact to come into effect as of September 2006. Ratifying states include Japan, Cambodia, Laos, Singapore, Thailand, the Philippines, Myanmar, South Korea, Vietnam, India and Sri Lanka.

The agreement, designed to improve operational cooperation between states, marks the first regional government-to-government pact for cooperation against piracy and armed robbery at sea in Asia.