Indonesia has the most nickel reserves, important for electric vehicle (EV) batteries, of any nation. In 2023, more than half of the world’s processed nickel exports came from Indonesia. Many people now look to Indonesia’s nickel industry and some say that China has already taken control of everything.
China has invested a lot of money into Indonesia’s nickel, especially in smelters and other industrial plants, but that did not just happen because China forced its way in. The US had a chance to be involved, but it did not take that opportunity seriously.
Indonesia tried to build closer cooperation with the US. The Indonesian government even proposed a special trade deal, so that refined nickel from Indonesia could help US companies get subsidies under the Inflation Reduction Act (IRA). That plan did not move forward, mainly due to political problems in Washington and criticism about the environment.
Some US politicians say they are worried about the pollution from Indonesian nickel production, especially because many smelters still use coal. This is a real issue, but if the US rejects Indonesia just because of this, it misses the bigger picture. Developing nations such as Indonesia need economic growth first before they can move to greener technology. If the US really cares about the environment, then it should help Indonesia improve — not walk away.
While the US was prevaricating, China moved. Chinese companies helped build refineries throughout Indonesia. Now, more than 80 percent of nickel processing in Indonesia is connected to Chinese investors. Indonesia made this decision because there was no better offer.
Neither is Indonesia choosing China over the US: It wants to be open to many partners. Indonesia stopped exporting raw nickel ore so it can focus on building factories and creating jobs at home. The nation is now working with South Korea to build EV battery factories. Indonesia would work with anyone who respects its plans and supports local development.
Meanwhile, the US is sending mixed signals. The IRA is supposed to support clean energy and green jobs, but only gives benefits to minerals from free-trade partners and Indonesia is not one of them. That makes it hard for US companies to buy nickel from Indonesia and still get IRA support. While the US government says it wants to fix this, nothing has happened yet.
US President Donald Trump has removed some support for EVs, which made investors unsure about US policy. This kind of policy flip-flop makes it harder for nations to trust the US to be a long-term partner.
If this situation continues, Indonesia would keep working with whoever is ready to invest. The more the US worries about Chinese influence, the more its own inaction is helping China grow stronger in Indonesia.
There are some positive examples, such as Ford working with companies in Indonesia and China to make EV battery materials. Nevertheless, the US needs a bigger and more serious strategy, starting with a critical minerals deal that includes Indonesia.
The price of doing nothing is high. By 2035, about 90 percent of nickel might come from nations that do not have trade deals with the US, according to S&P Global. The US would fall behind in the global green economy.
Indonesia does not want to be just a raw materials nation; it wants to go higher in the supply chain, create more jobs and become more advanced. What it needs is not charity, but real engagement, investment, cooperation and respect.
Indonesia will not wait forever. If the US keeps delaying, it might find that the future of nickel — and maybe even the future of clean energy — would move forward without it.
Muhammad Zulfikar Rakhmat is director of the China-Indonesia desk at the Center of Economic and Law Studies in Jakarta.
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