New Sustainable Sea Route Offered to Indonesia
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15 February 2024 15:54 WIB
TEMPO.CO, Jakarta - Russia is among the top ten suppliers of petroleum products to Indonesia. The demanded resource will be also delivered by the relatively new yet promising Northern Sea Route (NSR). The NSR will expand Indonesia's opportunities in terms of sea route diversification and further strengthen the country's position in the Asia-Pacific region.
Asia-Pacific region rapidly developing and needs active trade
The Asia-Pacific region (APR) is enormously important in the global context, as it includes such countries as Japan, Australia, China, India, and Indonesia. Major economic centres are situated here; the region is also characterized by a significant concentration of trade and professional organizations — over 1000. The most prominent of them are ICCA, Pacific Community, ASEAN, APEC, Pacific Basin Economic Council, Walhi. The region is home to more than half of the world's population, and the International Monetary Fund estimates that in 2024 the GDP growth rate of APR countries will reach 4.2%.
The demand for resources is also growing. Thus, the APR consumes 35% of the world's oil. According to the International Association of Oil & Gas Producers, this indicator has increased by one third over the past decade. High demand requires active cooperation in building relations with other countries. And the trade sector is looking for new routes to optimize shipping costs.
Over the past 10 years, the global transportation and logistics landscape of the APR has expanded significantly. Transport corridors such as China–Europe and China–Central Asia have appeared along with the Trans-Caspian International Transport Route, the International North–South Transport Corridor, the New International Land-Sea Trade Corridor, the Northern Sea Route, etc.
Indonesia — a maritime logistics leader
Indonesia is one of the leading economies in the region, entering the world's top 20 countries in terms of economic growth: in 2022, its GDP grew by 5.31% to $1.3 trillion. Due to the country's geographical position — it ranks seventh among countries with the longest waterways — and with its ambition to become “the world's maritime axis” Indonesia cannot ignore logistical changes. On the contrary, it is eager to take full advantage of the opportunities that open up in this regard.
Indonesia is interested in maintaining its leading position in the Asia-Pacific economy and leverages all opportunities to ensure a stable flow of commodities both in and out of the country. This is further facilitated by its participation in a number of associations, such as APEC, OPEC, and ASEAN. Multimodal routes for European and Chinese goods have been laid to Indonesia, which makes it possible for Indonesian products to enter new foreign markets.
In 2022, the country shipped 26.1% more goods worldwide than in 2021. Mineral fuels, including oil, are among the most significant export goods. In 2022, their exports amounted to $71 billion (24.3% of the country's total exports). Coal also remains popular. By the end of April 2023, sea exports of Indonesian coal exceeded 170 million tons, which is 32% more than in the same period last year.
Further development of the global transport infrastructure will enable Indonesia to diversify the sea routes and further strengthen its position in logistics and the economy of the region as a whole.
One more stable route
Today Indonesia produces less oil than it needs: the country's oil consumption has already grown from 1,400 million barrels per day in 2020 to 1,585 million barrels in 2022. And, as the 2022 report of the Directorate General of Oil and Gas states, meeting this demand requires oil imports. Russia has the potential to become one of the key suppliers of raw materials to the country. From January to August 2023, the Russian Federation exported $259 million worth of petroleum products to Indonesia. Last year, the trade turnover between the countries increased by more than 50%.
Indonesia pursues a “free and active” foreign policy, putting its own interests at the forefront. President Joko Widodo told the Financial Times that Indonesia is considering buying oil in Russia, and Minister of Tourism Sandiaga Uno informed that Indonesia was offered Russian oil at a 30% discount. Indonesia may actually start purchasing Russian oil, so it will be necessary to organize competent and stable logistics between the countries.
The bulk of supplies can be transported via the Suez Canal. But Russia is able to offer an additional and fairly stable route for merchant vessels — the Northern Sea Route (NSR). Its length is approximately 5,600 km; the route runs along the northern coast of Eurasia, connecting Europe, Russia, and the ATR countries. China and India, the strongest global economies in the Asia-Pacific region, have already shown interest in the NSR. It is quite reasonable: for example, the distance from St. Petersburg to Beijing along the NSR is 7,300 km, while the route between these two cities via the Suez Canal is 11,200 km long.
