FREEPORT SEES LOOSE-KNIT GROUP BEHIND PAPUA

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 003690

SIPDIS

NOFORN
SIPDIS

C O R R E C T E D C O P Y(ADDED CLASSIFIED BY)

E.O. 12958: DECL: 03/27/2016
TAGS: ECON EMIN ENIV PGOV ASEC ID
SUBJECT: FREEPORT SEES LOOSE-KNIT GROUP BEHIND PAPUA
PROTESTS

REF: A. A. JAKARTA 03484 (TENSION HIGH IN ABEPURA)


B. B. JAKARTA 03404 (DEMONSTRATIONS TURN VIOLENT)

C. C. JAKARTA 02492 (FREEPORT MINE CLOSED BY
ILLEGAL MINERS)
Classified by Econ Officer Kurt van der Walde for reasons 1.4 (b) and
(d)

1. (C/NF) Summary. Calm returned to the Indonesian province
of Papua over the March 18-19 weekend following the deaths of
four security officials during a March 16 rampage by
anti-mining protestors. A disparate group of political and
economic actors with varied agendas use anti-Freeport
sentiment to fuel their pursuit of political power or

JAKARTA 00003690 001.2 OF 002

economic profit, according to PT Freeport President Director
Adrianto Machribie, who briefed the Ambassador, March 20.
Machribie described recent protests at ExxonMobil,s Cepu
site and the weekend destruction of a Newmont Mining company
exploration camp on the island of Sumbawa as a continuation
of this possibly orchestrated backlash against Western
investors. The Ambassador and Machribie agreed to explore
whether the GOI might create an independent body, similar to
the Agency for Reconstruction and Rehabilitation (BRR) in
Aceh, to administer at least some of the Special Autonomy
monies paid by Freeport. End Summary.


2. (C/NF) Calm returned to the Indonesian province of Papua
over the March 18-19 weekend following the killing of four
security officials on March 16 during a rampage by
anti-Freeport protestors. Police have made 14 arrests and
questioned more than 80 in connection with the violence,
according to news reports. President Susilo Bambang
Yudhoyono has called for calm in the restive province.
Security Coordinating Minister Widodo replaced the police
commander in Jayapura, which seems to have lowered the
tension in the provincial capital. The deaths of the
security officials at the hands of protestors culminated a
series of protests throughout the country which ignited when
illegal local miners began a blockade of the Freeport
facility at milepost 74 on February 22. The illegal miners
continue to protest for increased economic benefits,
including the right to sift the Freeport mine tailings in
search of trace gold and access to Freeport community
development funds, according to Freeport.

Freeport: Disparate Group Behind Protests
--------------


3. (C/NF) Protests around the country--in Jakarta, Manado,
Northern Sulawesi and the Papuan provincial capital Jayapura
as well as the violent attack on the Sheraton Hotel in Timika
near the Freeport mine Checkpoint 1--result from a disparate
group of economic and political actors seeking power or
economic enrichment or both, according to Machribie. He
said, however, that Freeport and the GOI still are trying to
figure out who provides leadership and resources to the
protests.


4. (C/NF) Machribie speculated that several streams appear
leading and feeding resources to the protests. First, former
presidential candidate and past speaker of the People,s
Consultative Assembly (MPR) Amien Rais seems to see fomenting
ultra-nationalist sentiment as a way of unifying his National
Mandate (PAN) political party behind him as he prepares to
make another run at the presidency in 2009. Machribie did
not accuse Rais of inciting the violence, only that he used
it opportunistically. He said PAN had split before Rais
began his most recent round of attacks in the beginning of
the year, but it now seems firmly behind him. Machribie
added that the Muslim-based United Development Party (PPP)
recently issued a statement that condemned Rais indirectly
and called on all parties to show restraint in the wake of
the anti-mining protests.

Jakarta Elite Want a Stake on the Cheap
--------------


5. (C/NF) The second stream feeding the protests, according
to Machribie, seems to flow from the Jakarta politica lite
whohpe t use the tumult to make a tidy short-term profit
on PTFI shares, or better yet to gain a sizeable chunk of the
company on the cheap. Machribie showed the Ambassador a
letter to Freeport-McMoRan written on behalf of local
businessman Peter Sondakh. Sondakh offered to purchase a
significant, non-controlling share of PTFI equity. Machribie
speculated that Sondakh might represent the interests of
Coordinating Minister for Peoples, Welfare Aburzial Bakrie
and Vice President Jusuf Kalla.


6. (C/NF) Machribie said Sondakh,s offer does not come close

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to representing a controlling interest in PTFI. He expressed
puzzlement over Sondakh,s offer to buy a non-controlling
stake in PTFI instead of shares in parent company
Freeport-McMoRan, much more liquid and actually cheaper than
PTFI equity. He said he has heard rumors for some time that
members of the Jakarta elite might try to use the protests to
make short term profits by depressing the stock price of
Freeport McMoRan. The shares did fall 14 percent during the
initial protest in February though they have since recovered
to pre-strike levels. (Comment: We have heard rumors along
these lines as well, but the logic eludes us. Trying to
depress the price of a minerals company for a quick
short-term profit during a historic boom in global prices
does not seem the best strategy to maximize return on
investment. Peter Sondakh might serve as a front for Bakrie
and Kalla, but Machribie offered no proof. It seems just as
likely, however, that he seeks somewhere to invest the USD
800 million in cash that he got last year for selling his
telecommunications company. End comment).

Papuan Separatists See an Opening
--------------


7. (C/NF) A third stream feeding the protests seems to come
from the Papuan separatist camp. Machribie noted that the
March protests took place as the Papuan separatist cause
gained a higher international profile. London-based NGO
Tapol plans to take the issue of Papua,s 1969 annexation
under the Act of Free Choice to the International Court of
Justice in The Hague, using the Drooglever report
commissioned by the Dutch parliament. Machribie added that
anger over rampant corruption among provincial and regency
officials has stoked Papuans, disenchantment. Average
Papuans see few benefits from the royalty and tax payments by
Freeport and other extractive industries that should go to
the province under the Special Autonomy law. This corruption
hurts Freeport,s image with Papuans as well. Machribie and
the Ambassador saw as worthwhile to propose that the GOI
create an independent body, similar to the Agency for
Reconstruction and Rehabilitation (BRR) in Aceh, to
administer at least some of the Special Autonomy monies in a
more transparent and independent way.


8. (C/NF) Machribie said PTFI thinks it has support from the
President after a long meeting with SBY last week. He added
that PTFI also got support from Minister of Energy and
Mineral Resources Purnomo. Machribie hoped that PTFI,s
troubles would lead to a demand within Indonesia for greater
transparency in the distribution of extractive industry
revenue. He sees foreign investors in the energy and mining
sectors facing tumultuous months and perhaps years. Machribie
described protests at ExxonMobil,s Cepu site and the
destruction of a Newmont exploration camp on the island of
Sumbawa as a continuation of an orchestrated backlash against
Western investors.


9. (C/NF) Comment: Machribie did not offer a grand
conspiracy theory, nor did he imply that all the actors
described worked in concert, only that they opportunistically
jumped on the bandwagon. This seems plausible since we find
it unlikely, for example, that Amien Rais would work with
Bakrie and Jusuf Kalla. While we find it unlikely that Amien
is able to orchestrate attacks against Western businesses, we
do find it plausible that he would use the Freeport issue to
gain populist support.
PASCOE