Russia Prepares to Ban Indonesian Palm Oil

TEMPO.CO, Jakarta - The Russian government is attempting to limit the import of Indonesia’s palm oil into its country. Last April, Russian authorities submitted a notification to the World Trade Organization (WTO), which stated that the hydrogen peroxide content of Indonesia’s palm oil must not exceed 0.9 percent upon arrival at Russian ports.

"There are indications that Russia is deliberately doing so in order to further justify its imports from the Netherlands, which is cheaper," said Togar Sitanggang, a corporate affairs officer from PT Musim Mas, a palm oil exporter, yesterday.

Togar said Russian authorities knew that Indonesia could never meet such stringent requirements, because the average hydrogen peroxide concentration in Indonesian palm oil hovers around 5 percent. During the transport process, the concentration usually rises up to 8-9 percent. "The Russia's demand is unreasonable", said Togar. It must be noted that the average concentration of hydrogen peroxide in Indonesia’s palm oil has met the 5 percent international standard set by Codex.

The notification is expected to go into effect in October 2014. Palm oil exporters are beginning to look at other markets to keep the impact of the Russian import restriction to a minimum, said Togar.

The notification will only affect palm oil imported from Indonesia and Malaysia - which means that Russia could still import palm oils out of Rotterdam in the Netherlands, despite the fact that the average Dutch palm oil contains the same amount of hydrogen peroxide as Indonesian and Malaysian palm oil.

Togar concedes there might be other rationales behind the Russian move. For example, Russia might be considering to switch to soy oil, which has more usage than palm oil. What is clear, is that if the notification is approved by the WTO, then Indonesia needs to look at other markets, unless producers are willing to build palm oil refineries overseas to help ensure that the hydrogen peroxide concentration does not significantly increase during transport.

Previously, the directorate general of international trade at the Ministry of Trade Bachrul Chairi said Russia had a lot of potential to become one of Indonesia’s major trading partners. In 2013, Russia ranked as number 29th export destination for Indonesia, while trade volumes between Indonesia and Russia grew at an astonishing average rate of 45.1 percent per annum between 2009-2013.

As per 2013, Indonesia’s main exports to Russia include palm oil and its derivatives, footwear, coffee, copra, and rubber. On the other hand, Indonesia imports steel and/or iron and their derivatives, aircraft spare parts, military equipments, asbestos, and wheat.

Togar predicted that the notification will bring about a negative impact on Indonesia-Russia trade balance. Around 100,000-150,000 tons of palm oil needs to be exported elsewhere once the notification comes into effect.

YOLANDA RYAN ARMINDYA