How Geopolitics Is Complicating the Move to Clean Energy
The fate of Indonesia’s unrivaled stocks of nickel — a critical mineral used to make batteries for electric vehicles — is caught in the conflict between the United States and China.
He is known as the Minister for Everything. From the government offices of Indonesia’s capital to dusty mines on remote islands, Luhut Binsar Pandjaitan commands authority as the nation’s essential power broker.
A four-star general turned business magnate turned cabinet officer, Mr. Luhut’s paramount aspiration is transforming Indonesia into a hub for the production of electric vehicles. But as he pursues that goal, he and his country are increasingly vulnerable to geopolitical forces beyond their control. Though this archipelago nation has long sidestepped entanglements in ideological rivalries, it is increasingly caught in the conflict between the United States and China.
At stake is control over nickel, a mineral used to make batteries for electric cars and motorcycles — a central component of the mission to limit the ravages of climate change.
Indonesia boasts the earth’s largest reserves, making it something like the Saudi Arabia of nickel. But harvesting and refining those stocks is largely dependent on investment and technology from Chinese companies. And that has limited Indonesia’s access to the United States.
In Washington, the Biden administration has proffered tens of billions of dollars in tax credits to spur electric vehicle manufacturing. To qualify, cars sold in the United States must include an increasing share of parts and materials produced either in domestic factories or in countries deemed friendly to American interests.
In recent months, Mr. Luhut — formally, Indonesia’s coordinating minister for maritime affairs and investment — has implored the Biden administration for a trade deal covering minerals in an effort to secure his country’s status as a friendly country. That would generate greater demand for its nickel by making it eligible for the American tax credits under the Inflation Reduction Act. Companies around the globe would presumably gain incentive to erect smelters and electric vehicle factories in Indonesia, enhancing the nation’s technological prowess, and creating jobs.
But Mr. Luhut, the government’s de facto lead official on trade matters, has been repeatedly rebuffed because of American concerns about Chinese investment in Indonesia’s nickel industry, as well as unease over working conditions and environmental standards. In Washington today, countering China’s technological ascendance is that rare objective that captures support on both sides of the political aisle.
Some within the Biden administration argue that this stance is shortsighted. Climate change is an existential threat. Nickel is a central component of the transition away from fossil fuels, making access to Indonesia’s stocks an objective of greatest urgency. But that logic has failed to win over powerful administration figures — especially on the National Security Council — who maintain that nothing should be subordinated to limiting China’s might.
All of which explained Mr. Luhut’s tone of weary indignation on a recent morning as he held court in his glass-fronted office at his residence in Jakarta, Indonesia’s teeming capital. Outside in his garden, magpies whistled emphatically in cages hung from orchid trees. Inside, the Minister for Everything lamented the pernicious misconceptions separating his nation from its destiny.
“America doesn’t understand what Indonesia is doing,” he said. “It’s frustrating.”
Money and Power
At 76, Mr. Luhut remains wiry, spry and prone to nationalist pique. He vehemently rejects the notion that Indonesia — a country of nearly 280 million people — must pick a side or imperil its business with the United States.
“This country is too big to lean toward any superpower,” he said.
The animosity between the United States and China was not the only issue causing him angst. He was incensed by the stance of the European Union, which has challenged a key tenet of Indonesia’s industrial designs: a ban on the export of nickel ore.
In refusing to sell its raw nickel to the world, Indonesia has drawn more than $14 billion in investment, primarily from Chinese companies, into smelters that process it into products used to make stainless steel and E.V. batteries. Since the ban was introduced in 2014, Indonesia’s exports of nickel products have multiplied more than tenfold, exceeding $30 billion last year, according to government data.
The European Union asserts that its companies are being deprived of a fair chance to import nickel ore. It brought and won a case at the World Trade Organization, gaining the power to apply punitive tariffs on Indonesia’s exports even as the country appeals.
Key Takeaways 1. President Joe Biden has decided to have the fewest offshore oil and gas leases in history as he will only hold 3 over 5 years—far fewer than the 47 sales proposed by […]
Biden is no Putin. With this wild week of divisive, threatening speeches from Biden with a questionable backdrop to Putin not turning the Nord Stream 1 back on. The difference is that Putin knows what […]
Treasury Secretary Janet Yellen on Wednesday pushed back against a GOP congressman who voiced skepticism about the threat of climate change, suggesting the issue was being used by the Biden administration to secure funding and […]
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.OkNoPrivacy policy