The Palm Scribe

Indonesia Threatens European Union with Retaliation Over Palm Oil

Senior Indonesian officials are voicing strong reactions, including threats of retaliation, to the plan by the European Union to impose its Renewable Energy Directive II (RED II) that will ban palm oil-based biodiesel from its transportation sector arguing that it was responsible for deforestation.

Indonesia’s Coordinating Minister for Maritime Affairs, Luhut B Pandjaitan speaking at a seminar in Jakarta on Wednesday (3/27) warned the European Union to not underestimate Indonesia, adding that the Indonesian government was ready to defend its national interests.

Luhut Pandjaitan also said Indonesia might even consider leaving the Paris treaty agreement on Climate Change, following the steps of the United States.

A day earlier, Vice President Jusuf Kalla also aired his disappointment with the European Union which he said was openly discriminating against Indonesian palm oil products and also warned of possible retaliation.

“This is important because this will affect 15 million Indonesians who work directly or indirectly in this business,” he said at the Vice Presidential Office.

Kalla cited an example, that Indonesia could cancel the purchase of European products, including Airbus aircraft, manufactured in France by the Dutch-registered European aeronautical consortium.

“We don’t need to buy Airbus anymore, that’s our right. If the European Union has the right to make rules, we also have the right to make rules.” Kalla said.

“It’s basically a retaliation. We don’t say trade warfare, it’s retaliation,” Jusuf Kalla said as quoted by several Indonesian national media.

It was not the first time for Pandjaitan to vocally defend the interest of the country, During the World Economic Forum in Davos, last January, Pandjaitan speaking at a workshop on the Acceleration of Partnerships and Action for Forests warned that Indonesia refuses to be dictated.

“We are very open, but don’t dictate us,” he told the forum, which was attended by international participants such as Albert Gore Jr., President of Chile, Ivan Duque Marquez, and Satya Tripathi, the Assistant Secretary General of the United Nations for the Environment program.

Based on data from the Central Statistics Agency (BPS), Indonesia’s exports to the European Union reached $17.09 billion in 2018 or 10.47 percent of Indonesia’s total exports. This is the fourth biggest export market for Indonesia after ASEAN, China, and the United States (US).

However, not all parties agreed to the idea of retaliation.

Shinta W. Kamdani, Deputy Chairperson of the Indonesian Employers’ Association (Apindo), was quoted by as saying that the government needed to consider a lot of factors before deciding a boycott.

First, a boycott may threaten other sectors which export products to the European Union. She cited the textile and footwear industries which exports to the European Union equaled the export value of CPO and its derivative products to the same market.

“We also have to calculate the economic impact in Indonesia,  a reduction in employment in several sectors due to the conflict between Indonesia and the EU,” Kamdani said.

The government of Indonesia has already announced that it was taking the EU REDII for arbitration to the World Trade Organization (WTO) once it becomes effective.

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