PUTIN'S INDONESIA TRIP EXPANDS RUSSIAN ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 004447

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/07/2017
TAGS: PGOV PREL EINV ASEAN ID RS
SUBJECT: PUTIN'S INDONESIA TRIP EXPANDS RUSSIAN ECONOMIC
TIES WITH SOUTHEAST ASIA

REF: JAKARTA 02475

Classified By: Pol M/C Alice D. Wells for reasons 1.4 (b/d).


1. (C) Summary: Russian President Putin's September 6 visit
to Indonesia is indicative of the Russian goal of expanding
economic ties with Southeast Asia through key industries --
energy and military -- considered crucial both to Russian
economic growth and to exerting influence abroad. The
presidential visit included the signing of agreements for
Russian companies to invest $4 billion in Indonesian energy
and mining projects and an arms deal worth $1 billion. The
prospect of a future sale of a Russian nuclear reactor to
Indonesia was also held out. Putin's visit, which was light
on political agreements but heavy on trade and investment, is
a likely blueprint for Russian diplomatic activity in SE
Asia. End summary.

Trade and Investment the Russian Goal in SE Asia
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2. (C) President Putin's one-day visit to Indonesia provided
Russia with an opportunity to further its economic
relationship with SE Asia, which is the GOR's priority in the
region, according to Dimitry Lukiyantsev of the MFA
Department of ASEAN and Asia Pacific Regional Affairs.
Lukiyantsev characterized the Indonesian visit as part of the
larger GOR goal of expanding the economic side of Russian
foreign policy. During the September 6 visit, Putin signed
agreements to sell $1 billion in arms to Indonesia and for
Russian businesses to invest nearly $4 billion in Indonesian
energy and mining projects (reftel). While Indonesia did not
purchase a Russian nuclear reactor, reports suggest that such
a deal may be made in the future.

Increasing Bilateral Economic Ties
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3. (C) The Russian-Indonesian relationship is largely
economic, meeting both the Russian goal of increasing its
foreign investments and the Indonesian goal of attracting
investors, explained Indonesian Political Counselor J.B.
Widodo. Putin's visit was the latest step in a reinvigorated
relationship that began in 2003 with the visit of Indonesian
President Sukarnoputri to Moscow. In 2004, the
Russian-Indonesian Joint Commission on Economic and Technical
Cooperation began meeting annually and became the focus of
the bilateral relationship and laid the groundwork for the
agreements signed in Jakarta. While Russian investment in
Indonesia is good for both sides, Widodo argued that the
growing economic relationship was weighted in Russia's favor,
with Indonesia and other SE Asian countries typically
consumers of Russian products.

GOR Interest in SE Asia: "Russia Wants to Sell Us Something"
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4. (C) The one-way nature of Russian economic expansion in SE
Asia was highlighted by Singapore DCM Christopher Cheang, who
told us Russia "really wants to sell us something" and was
less interested in genuinely assisting regional development.
Cheang explained that the GOR had talked for years about an
assistance program for SE Asia and established the
ASEAN-Russian Cooperation Fund, but had left the mechanism
unfunded. Only in August, during the ASEAN Regional Forum
meeting in Manila, did the GOR contribute an unimpressive
$500,000 to the fund. SE Asian diplomats told us that
instead of demonstrating concern for the region, the GOR had
used meetings with ASEAN to present sales pitches for Russian
products. Both Cheang and Indonesian DCM Widodo related that
during a July meeting of the ASEAN-Russian Joint Working
Group on Science and Technology in Moscow, Russian diplomats
turned the floor over to representatives of Russian companies
who tried to sell high technology products that few ASEAN
nations need or can afford. (Note: Singapore has played a
key advisory role in the development of Russian Special
Economic Zones that could help SE Asian businesses become
more active in the Russian market should the zones become
operational. End note.)

Russian Ties With SE Asia Still at a "Low Level"
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5. (C) While SE Asian diplomats offered mild criticism of
Russian engagement in the region, the MFA's Lukiyantsev cited
FM Lavrov's high-profile role at the August 1-2 ASEAN
Regional Forum as an indicator of the importance the GOR
places on improving ties with the region, which are
acknowledged to be underdeveloped. Russia currently has a
"low level" relationship with the region and still has work
to do, offered Gennady Chufrin, Deputy Director of the

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Institute of World Economy and International Relations, a
think tank linked closely with the MFA. Russian trade with
the region is minimal, about $4 to 5 billion a year, and
limited largely to selling arms. The analyst cited the $1
billion loan the GOR has extended to Indonesia, as part of
the arms deal signed by Putin, as evidence of Russian
dependence on military sales. A real "breakthrough" would be
for Russia to sell civilian nuclear technology to Indonesia
and open a new avenue for Russian economic engagement in SE
Asia, Chufrin told us.

Comment
--------------


6. (C) Putin's Indonesia trip confirms what diplomats and
analysts have been telling us about Russia's economic
intentions in SE Asia. Trade and investment appear to drive
a Russian policy that has minimal involvement in regional
politics or development issues. Russia is likely to
intensify its economic activity in the region and capitalize
on the interest of several Asian countries to turn to nuclear
power to meet their energy needs.
Burns