Indonesia Reduces Gas Supply to Singapore, Citing Domestic Energy Needs – The Diplomat

“In the short term, the prices would not really affect that much,” he said. “I would like to urge all of our fellow Singaporeans: keep calm and carry on. We have dealt seamlessly with such reductions in the past without any incident, and the government will continue to ensure the reliability and the resilience of Singapore’s energy supply.”

The gas supply cut is consistent with Indonesia’s long-standing policy of prioritizing the use of natural resources for its domestic needs. Under Jakarta’s regime of Domestic Market Obligations, producers of key natural resources and commodities are required to reserve a specific portion of their production for the local market at below-market prices, before being allowed to export the remainder. For instance, in January 2022, the Indonesian government banned coal exports for a month after supplies at domestic power plants ran low.

Indonesia has also banned the export of unprocessed nickel, bauxite and raw copper to encourage companies to refine minerals domestically and boost the local economy.

The gas cut was foreshadowed by Indonesian Energy Minister Bahlil Lahadalia, who told reporters on October 21 that Indonesia would not hesitate to prioritize natural resources for its own domestic needs and that President Prabowo Subianto had ordered Indonesia “to adopt a survival-oriented approach amid geopolitical tensions and global energy challenges,” in the words of the Jakarta Globe.

The following day, he said that the government might also cut off supplies to nations that did not respect Indonesia.

“Don’t come asking for help only when you’re in need, but when other issues that can actually be discussed arrive, act like you have no sense of propriety, like someone who doesn’t know how to conduct yourself properly,” Bahlil said, as per the South China Morning Post.

The minister’s remarks were cryptic, and he made no mention of Singapore, but they come at a time of growing friction between the two neighbors due to the toxic haze resulting from months of Indonesian wildfires, and the recent turbulence in the Indonesian stock market.

In recent weeks, Singaporean citizens have grown increasingly frustrated with the haze, a result of raging forest and peatland fires in Sumatra and Kalimantan, and the apparent inaction of the Indonesian authorities – a sentiment that has not been helped by the defensive statements of some Indonesian officials.

Singapore’s government, too, has begun to express its discontent with Jakarta over the haze, albeit in much more measured language. On October 15, Prime Minister Lawrence Wong said that the government was looking into Indonesian companies that could be responsible for the fires in Indonesia, and potentially take action under its Transboundary Haze Pollution Act.

Senior Minister K Shanmugam said on October 19 that Singapore will “sustain pressure” on these companies even after the haze passes. “If companies refuse to cooperate, regardless of whether they have a presence in Singapore or do not have a presence in Singapore, we will use every legal and regulatory lever at our disposal to exert pressure where it matters,” he said.

There have also been tensions related to the recent threat of global index provider MSCI to downgrade Indonesia to “Standalone Market” status due to a lack of transparency in its stock market. The possible downgrade, which was announced on October 16, led to an immediate plunge in the Indonesian stock market, which shed 15 percent of its value over two days of trading.

In the aftermath, Indonesia’s former Trade Minister Muhammad Lutfi claimed on social media last week that the Singaporean state investment firms GIC and Temasek had pressured MSCI to downgrade Indonesia in order to suppress stock prices. The two firms have denied his claims. Prabowo himself responded to the downgrade threat with strident nationalism, claiming that MSCI “intended to intimidate us.”

Prabowo’s two years in office have been marked by increasingly strident nationalism and rhetoric about national self-sufficiency, which have resulted in ever-more overt state involvement in the economy. While this policy may serve to safeguard Indonesia’s domestic energy and food security in the short term, the longer-term impact will be to undermine business confidence and potentially to generate friction with Indonesia’s neighbors. In this particular instance, it is hard to see that Indonesia’s main regional economic partners will begin to look elsewhere for their energy supplies, as indeed, Singapore is already doing.