Boosting Indonesia’s Naval and Air Defenses in the South China Sea

Until September, Indonesia seemed sure to increase its defense budget in the coming year.  Rising concern over Chinese actions in the South China Sea had already prompted Indonesian leaders to pledge themselves to do more to safeguard Indonesia’s maritime claims in the region.  Indonesian President Joko “Jokowi” Widodo promised to turn the Indonesian military into “a regional maritime force respected by countries in the East Asia region.”  A senior Indonesian military official was more direct—putting China on notice that Indonesia would defend its maritime space around the Natuna Islands, including those parts that fall within China’s nine-dash claim line in the South China Sea.[1]

Indonesia China Claims in the South China Sea

But to properly defend Indonesia’s maritime interests, the Indonesian military has had to reorient itself onto what it calls a “maritime axis.”  That process was formalized in its 2010 Strategic Defense Plan.  It detailed what Indonesia would need to do to modernize its long-neglected navy and air force.  Since 2011, both have begun to procure newer equipment.  The navy ordered three Type 209/1400 diesel-electric attack submarines from South Korea, two Sigma-class corvettes from the Netherlands, and a number of fast attack craft from Indonesian shipyards.  It also acquired three small British-built frigates.  Meanwhile, the air force acquired the first of 24 retired American F-16C/D fighters, which will be refurbished and outfitted with new radar systems to give them better maritime and strike capabilities.

However, the momentum of Indonesia’s military procurement seemed to have faltered in September, when Joko’s government submitted its proposed 2016 state budget to the Indonesian People’s Representative Council (DPR).  In that budget, the government cut the defense allocation by 6.3% from Rp 102.3 trillion ($7 billion) to Rp 95.8 trillion ($6.5 billion).  A few weeks later, the government awarded a $5 billion high-speed railway contract to a giant Chinese state-owned enterprise.  Some wondered whether Indonesia had chosen to take a softer line towards China.[2]

More likely, though, Indonesia’s weakening economy drove both decisions, rather than any easing of its concerns over the South China Sea.  Joko’s government has argued that it needed to shift resources away from military spending to fund a series of stimulus packages to revive the Indonesian economy, which has suffered as the country’s raw material exports have fallen, a problem deepened by the government’s ill-timed reforms of Indonesia’s mining industry.  With respect to the contract award, the Chinese bid was sweetened at the last minute with a financial package for the proposed railway’s construction that did not require any loan guarantees from the Indonesian government, freeing it from any liabilities if the expensive project failed to meet expectations.  That was something Japan’s competing offer could not match.[3]

Whatever the reason for the lower defense allocation, it will hinder the modernization of Indonesia’s naval and air forces.  During budgetary testimony in October, General Gatot Nurmantyo, the commander of Indonesian armed forces, told the DPR’s defense commission that the lower defense allocation would force him to delay or scrap a number of procurement programs.  That prompted some on the DPR defense commission to worry whether the Indonesian military would have enough resources to achieve its “Minimum Essential Force,” the minimum requirements needed to defend Indonesia’s maritime interests.  Hence, the commission adopted a new proposal to add Rp 37.1 trillion ($2.5 billion) to the defense budget.  Ultimately, the DPR’s budget commission pared back that proposal, but still boosted the defense budget to Rp 99.5 trillion ($6.7 billion).[4]

While the new budget still represents a decrease from a year earlier, the small increase over the government’s proposal will help to keep some procurement programs on track and offset the falling value of the Indonesian rupiah against the U.S. dollar, which has made purchases of foreign military equipment more expensive.  In any case, Indonesia has also pursued other financing means to support its military procurement.  In early September, the Indonesian Ministry of Finance arranged for PT Bank Negara Indonesia to provide credit worth Rp 980 billion ($666 million) to the military for a variety of acquisitions.  Soon thereafter, the DPR’s defense commission revealed that Jakarta was seeking to secure a $3 billion loan from Moscow to fund major acquisitions.[5]  If the loan is finalized, Indonesia’s Ministry of Defense will most likely use it to acquire Russian Su-35 fighters and Kilo-class submarines, both of which the DPR’s defense commission has already endorsed.  As the one commission member said of Indonesia: “[we are] a maritime country… so sea security must be prioritized.”[6]

Yet, even with such support for new kit, the Indonesian military will have to stretch its resources to set up adequate defenses in the South China Sea.  The military has already listed a number of infrastructure improvements on and around the Natuna Islands that need to be completed before it can station more forces there.  The improvements include the construction of facilities for 2,000 additional troops; expansion of a naval base at Pontianak; and upgrade of Ranai air base with new hangars, radar, and a longer runway.  In September, Minister of Defense Ryamizard Ryacudu visited Natuna Island to draw attention to Indonesia’s efforts to beef up defenses in the area.  He noted plans to deploy three ships and four fighter aircraft on the island.[7]

In the near future, Indonesia is expected to publish a new defense white paper.  It will likely detail the growing maritime threats to Indonesian security.  Along with Jakarta’s ongoing attempts to strengthen its navy and air force, it reflects the intent of Indonesian leaders to better protect their country’s interests in the South China Sea.  But how quickly those leaders can do so is an open question.  They have a long way to go before they can bring to fruition the robust force structure envisioned in the 2010 Strategic Defense Plan.  Despite the progress made over the last five years, the defenses on the Natuna Islands are only just beginning to improve.  For now, Ranai air base still has the air of a remote outpost, operating a single 1980s-era radar set.  Perhaps in the coming years more military hardware will finally reach it.

[1] “Jokowi wants RI to be respected maritime force by 2020,” Jakarta Post, Oct. 5, 2015; Moeldoko, “China’s Dismaying New Claims in the South China Sea,” Wall Street Journal, Apr. 24, 2014.

[2] Kanupriya Kapoor and Cindy Silviana, “UPDATE 2-Indonesia rewards China’s ‘courage’ with high-profile rail contract,” Reuters, Sep. 30, 2015; Nani Afrida, “The TNI to cut back on weapons procurement,” Jakarta Post, Sep. 9, 2015.

[3] Robin Harding, Avantika Chilkoti, and Tom Mitchell, “Tokyo furious after Jakarta awards rail contract to Beijing,” Financial Times, Oct. 2, 2015, p. 6; Avantika Chilkoti and Taufan Hidayat, “Indonesia rolls out next stimulus phase in effort to lift economy,” Financial Times, Sep. 29, 2015.

[4] Lili Sunardi Senin, Kementerian, “PU Dapat Anggaran Terbanyak Dari APBN 2016,”, Nov. 2, 2015; Jon Grevatt, “Indonesian parliamentary commission approves defence spending increase,” Jane’s Defence Weekly, Sep. 28, 2015.

[5] Ibid.

[6] “National scene: House support plans to buy Russian submarine,” Jakarta Post, Sep. 30, 2015.

[7] “Indonesia: Islanders on Alert,” NHK World, Nov. 11, 2015; “Indonesia’s Defense Ministry to focus on improving infrastructure in Natuna,”, Sep. 21, 2015; “Indonesian military adds two thousand personnel to guard Natuna waters,”, Sep. 16, 2015; Ridzwan Rahmat, “Indonesia to upgrade naval base near disputed South China Sea waters,” Jane’s Defence Weekly, May 9, 2014.

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The Almost-Normal Country: Japan and the Use of Force

The enactment of Japan’s new national security bills was a long time in the making.  The bills, already passed by the lower house of the Japanese Diet in July, were approved by its upper house last week.  But ever since Shinzō Abe became Japan’s prime minister in 2012, he had sought legislation that would enable Japan to engage in “collective self-defense,” the ability to aid friendly countries under attack.  While that may seem routine in most countries, it has been anything but in Japan.  Many were unhappy with the legislation’s passage.  Those who opposed it feared that it would lead the country into war; and even some of those who supported it grumbled that it did not go far enough to make Japan a truly “normal” country, one where the use of force is considered as a legitimate tool of international politics.

Japan Collective Self-Defense

Unsurprisingly, China was quick to condemn the legislation’s passage.  China’s Ministry of National Defense declared that Japan’s new security laws ran “counter to the trend of the times that upholds peace, development and cooperation.”  The ministry chastised “Japan’s war mentality, its reinforcement of military alliances and attempts to send more troops abroad.”  Chinese media was less charitable.  Xinhua carried the headlines: “China Voice: Is Japan bound up to battle chariot?” and “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine.”  One commentator at The People’s Daily blamed the “unyielding spirit of militarism” of Japanese leaders who were “breaking [Japan’s] pacifist promise and getting ready to send its troops to battles again.”[1]

Of course, China rarely passes up an opportunity to remind Japan of its imperial aggression.  Thirty-six years of Japanese economic aid to China—now nearly $1.2 billion per year—has yet to restrain its reflex.  In part, that is because the Chinese Communist Party (CCP) has often used anti-Japanese sentiment to buttress its own political legitimacy.  (Only recently did the CCP even credit its longtime Chinese rival, the Kuomintang on Taiwan, for its contribution—arguably larger than the CCP’s—to resisting Japan in World War II.)

That it took so long for Japan to pass this sort of legislation is a testament to the strength of Japan’s postwar pacifist sentiment.  While militarist elements may still lurk in Japan, most Japanese are decidedly uncomfortable with the use of force in international politics.  That was clear during Japan’s negotiations with Russia over the Northern Territories (or southern Kuril Islands in Russia) in the 1990s.  Though Japan had already begun its long economic stagnation, its military and political might was still near its peak.  In contrast, Russia, following the fall of the Soviet Union, was at its nadir.  Things were so bad in the Russian Far East that it was questionable whether Moscow could provide enough food or heat for its population on Sakhalin Island, let alone defend it.

Yet, Japan did not try to use its military or political capital to pressure Russia into a settlement.  Rather, Japan solely relied on the persuasive power of its economic assistance.  That tactic ultimately came to nothing.  After Russia’s economy recovered, Japan’s window of opportunity to settle the dispute on favorable terms closed.  Today, Russian leaders act without concern over Japanese reaction.  They cavalierly flout Japanese interests.  This year, a series of senior Russian officials visited the four disputed islands, despite repeated protests from Tokyo.  Russian Prime Minister Dmitry even toured one of them in August.  While there, he underlined that the Kuril Islands “are part of Russia… That is how it is and how it will be.”[2]

Japan’s self-imposed limitation on its use of force has also impacted its ability to secure its place in a changing East Asian geopolitical environment.  China’s economic rise has drawn other Asian countries closer to its orbit, while its seemingly relentless military rise has upset the regional balance of power.  Without the ability to form true security partnerships, Japan has risked becoming isolated.  Hence, Abe has eagerly cultivated new political and economic ties across the Asia-Pacific, from Australia and India to the countries of Southeast Asia.  Japan has certainly become more sensitive to changes in Asia’s geopolitical balance.  Last year, after Thailand’s relations with the United States soured, offering China an opening, Tokyo leapt into the breach with pledges of economic engagement with Bangkok.

Surely, the most immediate beneficiary of Japan’s new security laws is the United States.  For the past half century, the United States has borne the entire security burden of the alliance between the two countries—if Japan is attacked, the United States is obligated to defend Japan; but if the United States is attacked, Japan has no such reciprocal obligation.  Even during the Cold War, that uneven arrangement rankled some Americans.  To make it more equitable, Japan accepted the lion’s share of the financial burden to host American forces in Japan.  But with the end of the Cold War and the withdrawal of a substantial portion of American forces from Japan (to Guam and elsewhere), the relationship was about to tilt again.  Thus, it was hardly surprising that Washington welcomed the legislation’s passage.

But beyond the United States, the legislation also enables Japan to more effectively cooperate with other countries on security matters.  If Japan’s relationships with Australia, India, the Philippines, and recently Vietnam mature into security partnerships, those countries can now count on Japan as a full partner.  In fact, in the days before the upper house vote on the national security bills, Abe met with Vietnam’s communist party secretary to discuss stronger security ties, in light of Vietnam’s dispute with China in the South China Sea.  Abe pledged more patrol boats for Vietnam.  Such promises is partly what worries Japanese opponents of the bills.  Getting Japan entangled in the disputes of other countries could pull it into a conflict, perhaps with China.  On the other hand, the possibility of facing a regional network of security partners might restrain China’s aggressiveness.  After all, China’s own economic prosperity (tenuous as it has become this year) requires peace and stability.

Even with the enactment of its new national security bills, Japan seems unlikely to seek the active use of military force far from home.  After all, Japan’s debt-laden government is in no position to rapidly expand its self-defense forces without hurting its still-weak economy.  Moreover, the conditions under which Japan can use force to support American expeditionary efforts abroad are still narrowly circumscribed.  The new legislation may be a step toward a Japan that is more comfortable with the idea of the use of force.  But the road to an actual use of force remains a long one.  Ironically, China may be the one country that could propel Japan faster down that road.

[1] “China Voice: Is Japan bound up to battle chariot?” Xinhua, Sep. 19, 2015; “News Analysis: Japan’s pacifist ideals stripped as Abe steps closer to resurrecting old war machine,” Xinhua, Sep. 19, 2015; “Japan’s new security bills against trend of the times: defense ministry,” Xinhua, Sep. 19, 2015; Wen Zongduo, “Abe’s win is Japan’s loss,”, Sep. 19, 2015.

[2] “Moscow officials ‘have always and will continue to’ visit Russian Kuril Islands – PM,”, Aug. 23, 2015.

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What the Unit Costs: U.S. Federal Reserve Policy, International Currencies, and Military Procurement

At first glance, the movement of currencies seems to have little to do with the trajectory of military capabilities.  But look closer and what emerges is a clear connection between international finance and international security, particularly for countries whose militaries rely on foreign arms.  Since a country must buy armaments, like other goods, with local currency that must be converted into a foreign one, the exchange rate at which that conversion occurs is very important.  A stronger local currency means a country can buy more from abroad; a weaker one means it can buy less.

Soon after the global credit crisis hit in 2008, the U.S. Federal Reserve quickly loosened monetary policy to support the American economy.  But its trio of quantitative easings—purchases of bonds with newly created money—has had far-reaching consequences.  They not only lifted the U.S. economy, but also weakened the U.S. dollar relative to other currencies.  Fearful that a suddenly weak U.S. dollar would trigger disruptive money flows and undermine their export industries, many countries tried to stabilize their currencies’ exchange rates against the U.S. dollar.  To do so, their central banks slashed interest rates and expanded their monetary bases.  Happily (for the moment), that had the attendant benefit of spurring economic growth.  And so, countries as diverse as Brazil, Indonesia, and South Africa boomed.

But that virtuous cycle is ending.  Before long the U.S. Federal Reserve will start to taper its bond purchases—a first step toward tightening American monetary supply.  As a result, the U.S. dollar has generally strengthened against other national currencies.  For those countries whose currencies have become relatively weaker, that has meant that everything they import is now more expensive, from grain to oil to military equipment.  Countries whose governments subsidize imported food and energy have seen their subsidy expenditures balloon.  In response to such inflation, some central banks have sought to temper the weakening of the currencies by raising interest rates to drain the excess liquidity from their economies.  Unfortunately, that also slows economic growth and strains their capital markets (sometimes in countries whose unemployment is already relatively high).  In any case, both these factors further weaken local currencies, which in turn reduce the foreign purchasing power of their governments’ arms procurement budgets.

The Indian military knows that all too well.  India’s high inflation and a balance-of-payments crisis in the early 1990s caused the value of the Indian rupee to precipitously fall.  Given the concurrent demise of the Soviet Union and its generous arms export terms to India, its hoped-for military modernization plans never transpired.  Costs, in Indian rupees, for new military kit from abroad soared.  Even the prices for spare parts to maintain its legacy Soviet hardware climbed.  Indian warships designed with Russian combat systems in mind went unfinished and those in service became expensive to maintain.  A Godavari-class frigate built in the early 1990s was estimated to cost four times as much as comparable one in the 1980s.

To Indian military leaders old enough to remember that era today must seem uncomfortably familiar.  Reacting to the U.S. Federal Reserve’s increasing monetary restraint and high inflation, the Reserve Bank of India raised interest rates to defend the rupee.  That has slowed the country’s economic growth and, in turn, pressured its currency.  In fact, the rupee slid 14 percent against the dollar between May and August 2013.  With such a currency backdrop, India’s military is finding its new modernization program difficult to achieve, even apart from its internal bureaucratic challenges (perhaps a topic for a future blog).  In one recent example, the Indian navy must decide how to replace the Sindhurakshak, which was lost in an August 2013 explosion.  Early speculation is that the navy will lease another Russian Kilo-class submarine.  But that would entail annual payments which could rise if the rupee falls further.  And if the navy decides to buy a replacement, that submarine would be 14 percent more expensive than it was only four months ago.  Such considerations hinder not only India’ military, but also multinationals selling everything from artillery pieces to attack helicopters, all of which India needs.  Indeed, if New Delhi proceeds with the formation of a new two-division mountain strike corps, it may find its new divisions under-equipped for battle.

A weak currency can also affect developed countries, like Japan.  There, the Bank of Japan has exacerbated its currency’s relative weakness by starting its own aggressive monetary expansion program, just as the U.S. Federal Reserve is ending its.  Consequently, the Japanese yen has plunged 22 percent against the U.S. dollar since last year.  That will impact potential Japanese purchases of OV-22 and long-range unmanned aerial vehicles from the United States.  And that is particularly bad news for Japan’s Air Self-Defense Force, whose technological future rests on the already-expensive American F-35 Joint Strike Fighter.  A weaker yen means that each new fighter will cost more yen.  Under a June 2013 foreign military sales agreement with the United States, Japan agreed to acquire its first four F-35 fighters for $124 million apiece or about ¥10.2 billion each, at the then-prevailing exchange rate of 82 yen to the dollar.  Had they been acquired at today’s exchange rate of 98 yen to the dollar, each new fighter would have cost ¥12.7 billion, almost 25 percent more.

Though Japan’s Ministry of Defense still considers the F-35 fighter as vital to keep a rising China and resurgent Russia at bay, it has already begun to rethink the timing of its purchases.  Originally, Japan planned to complete the acquisition of 42 fighters by 2021.  But given the rising costs, Tokyo might decide to stretch out aircraft deliveries until 2023.   For many of today’s defense planners, it seems wise to include not only include smart weaponry, but also smart currency hedges in one’s arsenal.  The costs of war remain variable.

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Turning Point: Japan’s Upper House Election and National Security

On Sunday, July 21, the Japanese electorate propelled Prime Minister Shinzō Abe’s Liberal Democratic Party (LDP) (together with its partner, the New Komeito Party) to the majority in Japan Diet’s House of Councillors (or upper house).  The victory ends the parliamentary impasse, in which the LDP controlled the lower house and its opponents the upper house.  The biggest issues of the election were Abe’s “three arrow” economic policies and how he hopes to restore Japan’s national power grid.  But many also saw the election as a referendum on Abe’s plans to boost Japan’s self-defense forces and possibly even amend Article Nine of the country’s constitution, which renounces the threat or use of force to settle international disputes and prohibits Japan from establishing formal armed forces.

Though the victory was not large enough to immediately pass a constitutional amendment, it has raised concerns among those Japanese who oppose any revision to Article Nine.  They worry that Japan could experience a resurgence of its pre-World War II militarism or, at the very least, could be pulled into foreign conflicts by its main ally, the United States.  Others, however, are open to amending the constitution; they believe the document, largely written by American lawyers in the occupation authority, should better reflect the needs and will of the Japanese people.  And an increasing number wonder whether the real question is not why Japan should consider amending its constitution, but rather why it has not already done so?  Many young Japanese (like many young Germans) wonder how long their country must repent for and be constrained by the sins committed by their forbearers nearly 70 years ago.  They would like Japan to become, in Abe’s words, an “ordinary country.”

Of course, the debate within Japan has not occurred in isolation.  There have been calls from abroad for Japan to better meet its international security obligations as a major developed country.  After the Persian Gulf Conflict in 1991, some (mainly Americans) found fault with Japan’s contribution to the Coalition war effort, which came largely came in the form of dollars (over $10 billion of them), rather than soldiers.  By the early 2000s, Japan had begun to send small military detachments overseas, usually in clearly defensive, humanitarian, or peacekeeping roles.  Its ground forces were deployed to Iraq as part of the reconstruction effort after 2003 and its maritime forces escorted allied shipping through the Indian Ocean.  And since its inception, Japanese warships have participated in the multinational anti-piracy patrol in the Gulf of Aden.

But it has been Japan’s increasingly worrisome security environment over the last several years that has really spurred many Japanese to reexamine the role of their self-defense forces and seriously consider changes to Article Nine for the first time.  North Korea’s unusually prolonged saber rattling this past spring only served to underscore their heightened sense of insecurity.  Despite Japan’s alliance with the United States and much bandied-about American pivot to Asia, other powers in the region seem bent on exploiting Japan’s pacifism.  Since the mid-2000s, Japan has closely monitored a rise in Russian incursions into Japanese airspace as well as a steady increase in the number of Chinese warships that pass near its southern islands and, in some provocative cases, circumnavigate Japan’s home islands.  And, of course, over the last year tensions between China and Japan have risen as a result of their territorial dispute in the East China Sea, which includes the sovereignty over the Senkaku (Diaoyu) Islands.  Indeed, in the week prior to Sunday’s election, China began drilling for oil in a disputed area of the East China Sea, prompting Japan to dispatch a geologic survey ship.

Even so, any overhaul of Japan’s self-defense forces will take time.  It took almost a decade for Japan’s annual defense white paper to even acknowledge that a rising China presented new challenges, presumably because Tokyo wanted to reduce the potential for Chinese backlash against Japanese commercial interests in China.  Following the Cold War, far more Japanese have been concerned about reviving their national economy rather than their national security.  Most believed that the qualitative superiority of Japan’s self-defense forces was sufficient to ensure their safety.  But after years of under investment, together with China’s rapid military modernization and Russia’s revival, Japan has seen its qualitative margin eroded.  And given the recent behavior of its neighbors, a growing number of Japanese feel that more attention must be given to national defense, either with or without an amendment to Article Nine.  The Japanese media frequently reports on the strains that constant patrolling of disputed airspace and waters have put on Japan’s self-defense forces and coast guard.  At a practical level, there is much to do, even apart from new hardware procurement—from making Japan’s self-defense forces work together more jointly to deciding how (and under what circumstances) they would be used.  If tangible progress is made, then the election will have proven itself to be a turning point for Japanese national security.

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