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Russian President Vladimir Putin stopped in Indonesia to finalize a $1.2 billion defense agreement and to strengthen economic ties. Indonesia has begun buying Russian equipment, including the recent $335 million purchase of more SU-27/30 Flanker family fighters, but Defence Ministry spokesman Edy Butar Butar told Reuters that no banks had stepped forward yet to finance the deal. The Russian defense package opens a line of credit that will allow Indonesia to buy Russian military equipment during the next 15 years, something they can afford as natural resources have made Russia the world’s second-largest holder of foreign currency reserves after China. A pair of SSK Kilo Class attack submarines, 20 armored vehicles, and 15-22 helicopters are reportedly on the shopping list, as part of larger modernization efforts; meanwhile, President Yudhoyono was blunt about their other reasons for accepting:

“We want to diversify the sources of our equipment. Russia is offering us a generous package, and Russia also does not attach any conditions whatsoever. Russia is all business and does not attach any political conditions and that is the way we like it, and that is why we took up the offer.”

Indonesian Defence Minister (and blogger) Juwono Sudarsono was even blunter:

Indonesia

“Requirements for purchasing arms from Western countries are complicated, with pre-conditions attached such as human rights, accountability, not to mention licensing…. In our past experience with Britain, we were not allowed to use Scorpion tanks in Aceh, even though we were facing armed separatists.”

Arriving on the eve the APEC 2007 trade conference held in neighbouring Australia, the Russian leader was accompanied by a delegation of oil, energy, and banking officials. The visit also included pledges of a $1.2 billion investment in Indonesia’s state oil and gas exploration firm, and a $3.6 billion investment in bauxite exploration and aluminum production.

Meanwhile, it sounds like security at the APEC summit could use a boost. Mr. Bin Laden of Canada?!?

UPDATES:

June 18/08: According to this RIA Novosti report, the total number of Mi-35 helicopters appears to be 8:

“The Indonesian Armed Forces will soon receive a delivery of six Russian Mi-35 Hind attack helicopters…. 15 Indonesian pilots and technical specialists have been undergoing training at the Kazan helicopter manufacturing plant in Russia’s Volga area since March 2008. He said the delivery of six helicopters was due in July…. “The delivery date will be established after the parties finalize certain contract terms,” he said. Russia delivered the first two Mi-35 helicopters to Indonesia in September 2003.”

Sept 10/07: A DID reader writes to inform us that: “The 20 armoured vehicles are in fact BMP-3Fs for the Indonesian Marine Corps with option for another 100. The helicopters are five Mi-35s [DID: attack helicopters derived from the Mi-24 “Hind”], and the rest (17) being Mi-17s.”

Additional Readings & Related News

• Kremlin (Sept 6/07) – Press statement by Russian President Putin

• Voice of America (Sept 11/07) – Indonesia-Russia Arms Deal Raises Concern. In the region, as nations like Japan ask Indonesia to explain its intentions. Is Indonesia just buying replacement for worn-out equipment and diversifying suppliers? Putting itself at the center of a quiet Asian arms race? Both?

• Sydney Morning Herald (Sept 4/07) – Jitters as Indonesia Buys Russian Subs | and Sept 7/07: The Russians Are Coming

• Reuters India (Sept 6/07) -Indonesia, Russia seal defence deal on Putin visit

• Washington Post (Sept 6/07) – Russia, Indonesia Set $1 Billion Arms Deal: Moscow Seen Trying to Boost Clout in Asia

• Voice of America (Sept 6/07) – Indonesia, Russia Sign Trade and Defense Deals