Russia to sell Indonesia fighter jets for palm oil

Russia has signed a contract to sell Indonesia 11 Su-35 fighters, Interfax news agency reported, citing a source in Jakarta. The negotiations which lasted nearly four years have resulted in a deal that will be partially realized as a barter.

The latest fighters, the closest to the fifth generation among the Russian aircraft, will be exchanged for batches of palm oil, crumb rubber, and other Indonesian goods. These goods will cover roughly half of the contract’s value ($1.1 billion), a source close to Rosoboronexport told Vedomosti.

The barter agreement was reached in August last year, and helped to bring the negotiations out of a deadlock: Indonesia did not want to pay with currency, and offered settlement in kind, a spokesperson for Rosoboronexport explained.

Indonesian Minister of Trade Eggartiasto Lukita explained that both parties have plenty of experience working with palm oil, which gave Jakarta the idea “to suggest the creation of a Russian-Indonesian vegetable oil association” (citation according to the press service of the Ministry of Industry and Trade).

The fact that part of the contract will involve commodities does not mean that the deal is unprofitable for Russia, said Konstantin Makienko, expert from the Center for Analysis of Strategies and Technologies. Such a practice existed before the sanctions, and is customary for this region.

Another customary practice is for Russia to issue the weapons customer a loan to the value of the purchase amount, observed Andrei Movchan, director of the Economic Policy program of the Carnegie Moscow Center. “Most such loans are never returned,” he added.

This year Yemen stopped paying, Deputy Finance Minister Sergei Storchak reported on January 19. Last year it was necessary to give Venezuela permission to postpone the repayment of $1 billion.

According to the Stockholm International Peace Research Institute, Russia holds the third place in weapons sales in the world, and Rosoboronexport’s order portfolio has exceeded $50 billion.

  Indonesia, Russia, palm oil