Indonesia's Russian oil deal faces criticism over high cost and poor quality

Indonesia's recent acquisition of crude oil from Russia appears to be a financially detrimental and strategically flawed arrangement, despite President Prabowo Subianto's assertions of significant benefits. The deal, secured after a meeting with Russian President Vladimir Putin in April 2026, has reportedly resulted in substantial losses rather than windfalls.

The Research and Development Center for Oil and Gas Technology (Lemigas), tasked with importing the oil, agreed to purchase 740,338 barrels of Eastern Siberia-Pacific Ocean (ESPO) crude. Procurement documents reveal that Russia is demanding an additional $9.50 per barrel above the Brent crude benchmark price, excluding shipping and distribution costs. This pricing is unusual, as Russian oil, often subject to international sanctions, typically sells at a 30 to 50 percent discount compared to global benchmarks like Brent.

Furthermore, the quality of the ESPO oil is a concern. Lemigas' own testing indicated a sulfur content of 0.65 percent, classifying it as poor quality and exceeding the 0.5 percent threshold. High-sulfur oil requires more complex and costly refining processes and can cause corrosion in refinery equipment.

Adding to the deal's peculiarities, payment is to be made in Indonesian rupiah. With the rupiah's recent depreciation against the U.S. dollar, Lemigas faces the prospect of incurring even greater losses. The transaction also involved the MV Sierra, a Cameroon-flagged vessel that has been blacklisted by several European countries, unloading the oil at a Pertamina port in East Kalimantan.