Indonesia to trade rubber for Russian jets worth US$1.1 bn deal

September 1, 2017

rubberIndonesia will be exporting rubber to Russia as part of its payment for 11 Russian Sukhoi fighter jetsworth US$1.1 billion, Indonesia’s defense and trade ministries announced.

The announcement follows a memorandum of understanding signed between Indonesian and Russian state-owned companies in Moscow earlier in August. Indonesian Defense Minister Ryamizard Ryacudu said his country agreed to pay half of the total, or US$570 million, in the form of commodities.

But he added that the exact type of goods, their prices and the transaction method are still being discussed and that negotiations are set to continue until October. Indonesia appointed state-owned trading company Perusahaan Perdagangan Indonesia to handle the transactions.

While Russia wants rubber, Indonesia has offered a variety of other goods as well, including palm oil, coffee, tea and furniture.

Indonesia is looking to boost its defense capabilities amid rising tensions surrounding the South China Sea. The resource-rich country also wants to ramp up agricultural exports to accelerate its economic growth. It is already one of the top exporters of rubber, palm oil and coffee, but Trade Minister Enggartiasto Lukita said trade with Russia is “very low compared to its potential.”

“The opportunity is now very open because Russia is facing a trade embargo from the US, the European Union and their allies over security and territorial issues,” Lukita said.

The trade agreement also requires Russia to allocate 35% of the project’s value toward supporting the transfer of technology to Indonesia in such forms as appointing local companies to develop maintenance centers or supply spare parts.

Indonesia may still end up paying the full amount in cash and exporting US$570 million worth of commodities separately. Some previous deals with Russian companies have faced roadblocks after an initial agreement, such as an oil refinery project involving Russia’s Rosneft and Indonesia’s Pertamina.

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International Rubber Prices
(as of 15, September 2017)

Monthly The prices shown above do not include VAT @4% on purchase and expenses towards packing, transportation, warehousing  and other incidentals


Source: India Rubber Board

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