Energy and Extractive Corruption in Indonesia

1. Introduction: The High Stakes of a Green Dream

In late August 2025, the facade of Indonesia’s “green future” shattered on the pavement of Jakarta. While President Prabowo Subianto stood on the world stage pledging a monumental 100% renewable energy target within a decade, the reality at home was a blood-stained protest. Nationwide unrest, ignited by an obscene ten-fold increase in parliamentary housing allowances, reached a fever pitch after the death of Affan Kurniawan, a 21-year-old ojol (motorcycle taxi driver) crushed by a security vehicle. To the millions of Indonesians struggling under the weight of inflation, the elite’s “green” promises are not a lifeline they are a distraction.

This skepticism is fueled by staggering systemic rot. As the government courts $20 billion in international climate funding via the Just Energy Transition Partnership (JETP), the state is hemorrhaging far more to “pervasive” corruption. Two catastrophic scandals the $18.58 billion environmental and financial devastation linked to PT Timah Tbk and the $11.85 billion sabotage of Pertamina reveal a parasitic political economy. For every dollar promised by the West to cool the planet, nearly two dollars are being siphoned off by a carbon-entrenched cartel that has no intention of letting go.

2. Takeaway 1: Politics is a Pay-to-Play Game Funded by Coal

In Indonesia, political power is an extractive industry of its own. By 2025, the “open secret” of Indonesian democracy has become a math problem: it now costs a candidate up to 200 billion rupiah ($12.5 million) to secure a seat. Since few individuals possess such liquid wealth, they turn to “sponsors” in the coal and nickel sectors.

This creates a “social obligation” that effectively mortgages the Indonesian state before an official even takes the oath of office. Policy is not written in the halls of parliament; it is dictated by the debts owed to the energy titans who funded the campaign. The systemic nature of this debt has transformed political parties into corporate assets.

“They even mentioned the acquisition of political parties, likening it to a company merger. This is possible because there is no ideological foundation.”

3. Takeaway 2: The “Gasoline Godfather” and the $12 Billion Sabotage

The most visceral example of state capture arrived on February 24, 2025, when authorities arrested seven high-ranking executives in a sprawling $11.85 billion corruption case. Among those detained were Riva Siahaan, CEO of Pertamina, and Yoki Firnandi, CEO of Pertamina International Shipping. At the heart of the probe is the elusive “Gasoline Godfather,” Mohammad Riza Chalid, a man whose influence over Indonesia’s fuel trade has spanned decades and who is now the subject of an Interpol Red Notice.

The conspiracy was an intentional act of economic sabotage designed to justify expensive, low-quality fuel imports:

• Sabotaging Refineries: Executives intentionally reduced domestic refinery capacity and rejected domestic crude oil under false quality claims, ensuring the state-owned firm remained dependent on foreign supply.
• The “Double Play”: Domestic oil was labeled “substandard” and exported, while the state simultaneously imported lower-quality fuel to fill the artificial gap.
• Markup Schemes: The conspirators blended inferior fuel in storage tanks and charged the state illegal shipping mark-ups of 13% to 15%, funneling billions into private accounts.

This is the irony of the Indonesian energy landscape: a state-owned company actively crippling its own production to line the pockets of a shadow cartel.

4. Takeaway 3: “Frankenstein Plants” and the Coal Trap

While the government publicly pivots toward the JETP, a legislative backdoor Presidential Decree 112/2022 has ensured that coal remains king. The decree prohibits new coal plants but carves out massive exemptions for “public service” or plants that mix coal with biomass. These “Frankenstein plants” are the ultimate exercise in greenwashing, allowing fossil fuel incumbents to claim “green” credentials while burning the same dirty fuel.

Nowhere is this more evident than in the “green” nickel industry. Indonesia is currently building 12.8GW of “captive” coal power specifically to fuel the nickel smelters required for EV batteries. This creates a recursive loop of corruption: coal powers the “green” nickel, which is then used for batteries subsidized by companies often owned by the families of military generals. As one analyst pointed out, the transition is stalled because the state utility (PLN) remains the primary customer for the political elite’s coal mines: “Who will buy the coal if not the PLN?”

5. Takeaway 4: Solar Energy’s Dark Side and the “Blok Medan” Connection

The corruption isn’t limited to fossil fuels; the green frontier is already being pillaged. In Kutai Timur, solar projects intended for remote villages were systematically gutted by contractors like M. Zohan Wahyudi and the politically connected Neneng Sri Wahyuni. By fragmenting projects to bypass open tenders, they “marked up” costs for non-functional units, buying luxury Range Rovers while villages remained in the dark.

However, the rot reaches higher. The bribery case of Abdul Gani Kasuba, the former Governor of North Maluku, revealed the existence of the “Blok Medan” code a specific allocation of mining blocks allegedly linked to Bobby Nasution, the son-in-law of former President Widodo. This connection suggests that the previous first family’s interests are deeply embedded in the very minerals required for the green transition. If the transition is merely a change of commodities from coal to nickel managed by the same dynastic actors, it is not a reform; it is a rebrand.

6. Takeaway 5: The Fragility of the $20 Billion JETP Debt Trap

The much-vaunted $20 billion Just Energy Transition Partnership (JETP) is remarkably fragile when held against the light. While Indonesia needs $97.3 billion to meet its climate goals, only $153.8 million of the JETP pledge is in the form of grants. The rest is a “debt trap” of concessional loans that could force $8.4 billion in sovereign guarantees, potentially shrinking national welfare spending to pay for the energy sector’s debts.

Furthermore, Law No. 16/2025 has structurally shifted the governance of State-Owned Enterprises (SOEs), concentrating power and making the PLN monopoly even harder to penetrate. For international investors, the “make-or-break” factor is beneficial ownership transparency. Without knowing who truly owns the companies receiving these billions, the JETP risks becoming a slush fund for the very oligarchs it is supposed to displace.

7. Conclusion: Scepticism vs. Optimism

Indonesia is currently at a crossroads between technical reform and systemic capture. While the 2024 Conflict-of-Interest regulations and the Stranas PK offer a roadmap for resilience, they are being implemented in a vacuum of political will. The Supreme Court continues to prioritize “actual state losses” (cash) over “ecological losses” (the destruction of the land and the health of its people), allowing the PT Timah-style devastation to continue largely unchecked.

The fundamental question remains: Can Indonesia truly transition its energy system without first transitioning its political economy? Institutional efforts like beneficial ownership registries are necessary, but they are insufficient to address “state capture” when the very politicians formulating green policies are the beneficial owners of the companies they are regulating. Until Indonesia addresses the systemic reliance on extractive industry financing for political survival, the green transition will remain a new frontier for old-school graft.