YUDHOYONO'S VISIT TO RUSSIA: DEFENSE COOPERATION

C O N F I D E N T I A L SECTION 01 OF 04 JAKARTA 013498 SIPDIS SIPDIS E.O. 12958: DECL: 12/13/2016 TAGS: PREL MASS MARR EINV EIND ENRG SOCI ID RS SUBJECT: YUDHOYONO'S VISIT TO RUSSIA: DEFENSE COOPERATION AND MORE Classified By: Political Officer Daniel Turnbull, for reasons 1.4 (b an d d). ¶1. (C) Summary: Indonesia and Russia signed a range of intergovernmental and other agreements during the visit of Indonesian President Yudhoyono to Russia November 29-December ¶1. Foremost among these were two agreements on military and technical cooperation, as well as space exploration, nuclear energy and commercial activities. Yudhoyono, accompanied by several senior military leaders, visited Russian naval facilities and Russia announced a grant of $1 billion in credits for Indonesian purchases of military hardware, including Sukhoi fighters. DCM discussed these and related developments with Russian DCM Barsky on December 8. Barsky said Yudhoyono had met with senior executives of Alfa Bank, which was planning to invest $2 billion in communication technology in Indonesia, as well as RusAl (Russian Aluminum), Lukoil and gas pipeline manufacturers. Barsky said Russia expected to coordinate closely with Indonesia during Indonesia's upcoming rotation on the UN Security Council, had an active interfaith dialogue with Indonesian Muslim leaders, and was preparing further agreements on military-to-military cooperation and counter-terrorism. In related developments, Russian hardward predominated at recent defense expositions in Jakarta, and Indonesian Defense Minister Sudarsono emphasized Indonesia's intention to diversify its acquisition of military equipment to avoid becoming overly dependent on the United States. End Summary. ¶2. (C) DCM met with Russian DCM Kirill M. Barsky on December 8 to discuss Russian- Indonesian relations and the recent visit of Indonesian President Yudhoyono to Russia, November 29- December 1. Barsky provided background and commentary on ten agreements signed during the visit, seven of them inter-governmental. The Joint Statement from the visit, issued December 1, lists the agreements. ¶3. (C) Barsky said the visit, which he described as friendly and substantive, had been Yudhoyono's first and the first visit by an Indonesian head of state since President Megawati's in April 2003. The last visit of a Russian president lay even further in the past. President Putin had planned to visit Indonesia in 2006 and, when Putin had canceled those plans, Yudhoyono had offered to travel to Moscow instead. The visit reflected the progress made since Megawati's visit, when the two countries had signed a Declaration of Fundamental Principles of Amity and Partnership. Key areas in which agreements had been signed during Yudhoyono's visit were military and technical cooperation and trade and investment. Major issues discussed by the two presidents included the Korean peninsula, the Middle East, Iran, the situation in Iraq and integration of the Asia-Pacific region. Military cooperation figured prominently, but the relationship was much broader, as reflected by the other agreements concluded. MILITARY AND TECHNICAL COOPERATION ¶4. (C) In the area of defense cooperation, the two sides signed agreements "On Protection of Intellectual Property in Military- Technical Cooperation" and "On Assistance in Implementation of Military-Technical Cooperation during 2006-2010." ¶5. (C) Russian-Indonesian military cooperation, Barsky noted, dated from the 1950s, in the era of President Sukarno but had subsequently ebbed. In the 1990s, under President Suharto, several exchanges had occurred and plans for other activities had been drawn up, but had been overtaken by the financial crisis of 1997-1998, which had led to the end of the Suharto regime. Since Megawati's visit in 2003 and Indonesia's purchase of four Sukhoi fighters, an Inter-Governmental Commission had worked out the legal basis for protection of classified information, intellectual property and other elements necessary for military and technical cooperation. Yudhoyono's visit had finalized these. Several months ago Russia and Indonesia had initialed a program for cooperation during 2006-2010, including a list of the military equipment Indonesia wanted to purchase. ¶6. (C) Arms deals were high on the agenda, Barsky acknowledged, but this represented only a part of their far JAKARTA 00013498 002 OF 004 more comprehensive bilateral cooperation. The first step would consist primarily of hardware sales, but this would entail training in maintenance and servicing and the establishment of a maintenance center in Indonesia. The second stage would feature the transfer of technology, including Russian investment in Indonesian defense industries and possibly co-production as well. Indonesia had skilled defense enterprises to offer in Bandung, and shipyards in Surabaya, he noted. ¶7. (C) Barsky said Indonesian interest in Russian arms sales was evident from the visit. Yudhoyono had brought two top defense officials: Director General at the Department of Defense LTG Syafrie Syamsuddin (effectively the deputy of Defense Minister Sudarsono) and Commander of the Armed Forces Air Chief Marshal Djoko Suyanto. ¶8. (C) Barsky confirmed that Russia conducted a significant number of ship visits, exercises and other forms of defense cooperation and said the two sides were working on a defense cooperation agreement which would stipulate the terms and conditions for such activities. (Note: Barsky did not use the term "Status of Forces Agreement" and asked about the reference to a SOFA in the Bush-Yudhoyono Joint Statement of November 20.) Humanitarian assistance and disaster relief, however, would be handled through a separate agreement, i.e., they were not regarded as a military activity. The two sides also planned to conclude an agreement on environmental assistance along the lines of Russia's recent provision of assistance in the form of airplanes to combat forest fires. ECONOMIC COOPERATION ¶9. (C) Several agreements in the economic and commercial sphere had been signed during the visit, Barsky confirmed, including "On the Exploration of Outer Space for Peaceful Purposes" and "On Peaceful Uses of Atomic Energy." In addition, the respective chambers of commerce had concluded an agreement regarding the exchange of business information. In addition, a Russian- Indonesian Business Forum had been organized, attended by over 100 business leaders from both countries. Yudhoyono had met with the leaders of Alfa Bank, which planned to invest $2 billion in the Indonesian telecommunications sector, and the leaders of RusAl (aluminum),Lukoil and gas pipeline producers as well, for similar reasons. (Note: Russian Ambassador Bely told Ambassador Pascoe separately that Lukoil was seeking an oil concession in Indonesia and that the Russian Gasprom was negotiating with the Indonesian Bakrie Brothers concerning gas pipelines in Kalimantan.) The space agreement provided for construction of a cosmodrome on the island of Biak (near Papua). Russia and Indonesia were major energy producers and wanted to cooperate on a range of energy sources, including peaceful nuclear energy. Indonesia intended to announce a tender for the construction of a nuclear power plant in 2008 for completion in 2016-2017, Barsky noted. (Note: Indonesian Minister of Energy and Minerals Yusgiantoro has said Indonesia planned to construct its first nuclear power plant by 2015.) Competitors included South Korea, Japan and France; DCM confirmed the U.S. was also interested in cooperation in this sector. ¶10. (C) Barsky averred Russian investors were concerned about the investment climate in Indonesia, including corruption, the rule of law and predictability. Yudhoyono had anticipated this in his opening speech by highlighting what Indonesia was doing to improve the investment climate, Barsky suggested. The issue was admittedly not as acute for Russian businessmen as it was to U.S. counterparts, but this would change once the volume and range of investment and trade increased. DCM responded that the addition of Russia's voice to the chorus on this issue would be welcome. OTHER AREAS: COUNTER-TERRORISM AND INTERFAITH DIALOGUE ¶11. (C) Russia was interested in cooperating with Indonesia in other areas as well, Barsky affirmed. The two countries were working on an agreement on counter-terrorism, which would establish a bilateral working group. Strengthening direct links between the respective security agencies would be a part of this effort. Russia was already cooperating with ASEAN on counter- JAKARTA 00013498 003 OF 004 terrorism, Barsky said. (Note: Pre-visit media reports had listed counter-terrorism among those to be signed at the visit.) ¶12. (C) Interfaith dialogue was another area where Russia and Indonesia were already cooperating, and which was high on Russia's agenda. Some joint events had been held in regional fora. Indonesian Muhammadiyah leader Din Syamsuddin had traveled to Russia twice to participate in the Strategic Vision Group, a dialogue which focused on tolerance and mutual understanding, he said. There was also a Russian Corner at the Syarif Hidayatullah University similar to the American Corner there. Russia encouraged direct links between Islamic leaders. Yudhoyono had visited the Cathedral Mosque, one of the largest in Europe, in St. Petersburg, he noted. CLOSE COOPERATION ON UN SECURITY COUNCIL ¶13. (C) Russia was looking forward to Indonesia's participation in the United Nations Security Council during 2007-2008, Barsky stated. Russia had supported Indonesia's candidacy for a nonpermanent seat and expected to coordinate closely with Indonesia. Russia's and Indonesia's positions on many issues were very close, if not identical. Russia valued Indonesia's past and current contributions in the international arena and welcomed indications that Indonesia wished to play a more prominent role internationally. Indonesia's approach to issues was balanced and it represented a moderate voice within the Islamic world. Indonesia's contributions in international peacekeeping, including the recent UNIFIL deployment, were "very commendable." ¶14. (C) Russia had an ongoing dialogue with Indonesia at the director level on human rights, Barsky claimed, and was "very satisfied" with the results. In 2005 there had been discussions at the deputy minister level, and these were scheduled to occur again in 2007. As young democracies, Russia and Indonesia faced many of the same problems and challenges. TRUMPETING DEFENSE COOPERATION ¶15. (C) Apart from our conversation with Barsky, two recent developments in Jakarta underscore the mutual Russian and Indonesian interest in arms sales. Shortly after the Yudhoyono visit, Indonesia announced that Russia had offered Indonesia a $1 billion line of credit for the purchase of military hardware. Indonesian Defense Minister and Indonesian Director General for Defense Means Rear Marshal Slamet Prihatino have both subsequently announced Indonesia's intention to acquire two Sukhoi jet fighters in the next two to three years, adding to the four it already owns, and buy another four later. According to some reports, Indonesia will use $200 million of the credits to buy Mi-17 combat helicopters. Russian Ambassador Mihkail M. Bely told Ambassador Pascoe on December 13, however, that Russia had received the Indonesian letter of request for credits but had not officially granted the credits. Bely also said only the sale of two Sukhois had been agreed. He noted that the hardware on the Indonesian wishlist had a total price tag of far more than $1 billion. ¶16. (U) Seeking to capitalize on the announcement of Russia's grant of $1 billion in military credits, Bely contributed an op-ed to the local English-language Jakarta Post newspaper on November 28 titled "Birds of a Feather Flock Together." In it, Bely stressed Russia and Indonesia were large, multi-ethnic and multiconfessional countries with governments desiring to bridge "gaps between civilizations." Russia and Indonesia were the largest producers and exporters of oil and gas in the Asia- Pacific Region. On defense cooperation, Bely asserted that Russian military sales came with "no political strings attached" and were, for Russia, "a matter of principle." ¶17. (U) Indonesia recently held two back-to-back official defense fairs: the Indo-Aerospace Expo and Forum (November 19-22, 2006) and the Indo-Defense Expo and Forum (November 22-25, 2006). At the two events, which were organized by the Indonesian military, Russian companies had by far the largest JAKARTA 00013498 004 OF 004 footprint of the over 400 represented from 30 countries. (U.S. companies generally stayed away.) Russia also has a permanent office in Jakarta for defense sales. DEFENSE MINISTER STRESSES DIVERSIFICATION ¶18. (C) Indonesian Defense Minister Sudarsono has made several public statements recently underscoring Indonesia's desire to diversify its defense acquisitions, away from the heavy reliance on the United States in the past to a broader range of suppliers. Sudarsono has referred to what he calls the unreliability and inconsistency of U.S. sourcing, a reference to the arms embargo imposed on Indonesia during the late Suharto years because of human-rights violations by the Indonesian military in East Timor and elsewhere. The normalization of military ties and the resumption of military exchange programs, financing and sales should not lead, in his opinion, to a return to Indonesia's former dependence on the United States. PASCOE