The Jakarta Post
A report by Energy and Mineral Resources Minister Sudirman Said to the House of Representatives' ethics council that accuses House Speaker Setya Novanto of trying to broker a deal with an executive of Freeport Indonesia has implicated Coordinating Political, Legal and Security Affairs Minister Luhut Panjaitan. According to the report, Setya and fuel-import magnate Muhammad Reza Chalid, the financier of losing presidential candidate Prabowo Subianto during last year's election, repeatedly mention Luhut as having a role in making the Freeport deal successful. The Jakarta Post's Rendi A. Witular met with Luhut at his private residence in South Jakarta late on Wednesday to gain insight into the matter. Here are excerpts of the interview:
Question: You were immediately summoned by the President upon your arrival from Australia on Wednesday evening. Did you discuss Sudirman's report to the ethics council?
Answer: The President asked me on whose order did Sudirman dare to report the case. The move was not sanctioned by the President and he never instructed Sudirman to do so. The President called Sudirman to explain the case but the latter was on an overseas trip. But the President eventually became aware of the people behind Sudirman who orchestrated the event. The President also told me that the recorded conversation was nothing more than a petty talk that has turned into a national fuss. The recorded talk also has no legal consequences. He also emphasized his stance regarding Freeport, in which the government will demand bigger royalties, share divestment, local content and the construction of a smelter.
Did you anticipate the report being fielded to the council?
I heard of the plan on Saturday. But I guess it was just speculation. I was going to initially refrain from responding to the case but since my name has been mentioned [in the media], I have to clarify things.
How will the case impact your relations with Vice President Jusuf Kalla [among the few officials who strongly support of Sudirman] and other fellow ministers?
Relations between the President and Vice President are extremely good, and I have played a role in strengthening their relationship. My position is to ensure that such relations are maintained, although both have their own pluses and minuses. If I don't maintain relations, the impact will be harmful. The President knows how to play his cards well. He has become a master of it. He knows what he is doing.
What is the strategic gain in reporting Setya to the council?
That will be a long story. But Setya is among the President's staunch supporters. It is because of Setya and other House leaders that the President can forge better ties with the House. The passing of the 2016 state budget cannot be disassociated from Setya's role.
Have you personally befriended Setya and Reza?
I've known them for a long time but we are not close. I am fortunate not to have any business relations with them. If I did then I would be in big trouble now. They have also never treated me to a meal. But I once treated them to bakso [meatball soup] at my place.
So why did they mention your name in the Freeport deal?
They used my name because they thought that I was close to the President.
As a senior Golkar Party politician, why is there no united stance in Golkar to defend Setya?
There are many factions within Golkar. If Setya becomes stronger, others will risk being cast out. The President has no intention of intervening because the risk is just too great.
Are you interested in taking Freeport's shares?
The results of thorough analysis by my staff suggest not to immediately extend Freeport's contract, and there is no way I would betray them by trying to profit from the company. I could have profited back in 2011 when I met Jim Bob [Freeport's chairman and founder James R. Moffett] in Santiago and he offered me shares of Freeport Indonesia. Then president Susilo Bambang Yudhoyono rejected the proposal and I did not force myself to accept it. I would have had to pay for the shares and there is no way that I could have afforded them. If I did take them, then I would have profoundly regretted the decision [because of the recent steep decline in global commodity prices and Freeport's declining share prices and mounting debt]. In my last four years of service I just would like to leave a good legacy.
You have stiffly opposed Freeport's contract extension. Why?
I never agreed to any proposals to immediately extend the contract. Indonesia will not benefit from it. We should treat Freeport the same way we impose our policy in taking over the [oil and gas] Mahakam block [from France's Total SA and Japan's Inpex]. Another reason worth noting is that Freeport is in financial trouble, giving us greater bargaining power.
Freeport has overleveraged its debts and it is desperate to immediately extend the contract to maintain credit lines. If it doesn't get a positive signal for the extension then it will be difficult for it to seek more loans given that some of its debts will mature soon. Just wait until 2021 when the government will have a good chance to secure majority shares and can dictate its own terms. We should not bow to pressure from foreigners. Jim Bob has even said that he could buy Indonesians.
But Sudirman has forced himself through various means to immediately grant the extension by trying to revise Government Regulation No. 77/2014 on the operation of coal and mineral resources [the regulation requires that an extension application be lodged two years prior to contract expiry at the earliest.
If Freeport complied with the regulation, it could only apply for the extension in 2019, a time when Indonesia will hold both legislative and presidential elections].
Sudirman included the revision in the economic package [of reform policies] in September. The President at the time was not aware of the risk, but I warned him that revising it just to accommodate Freeport's interests would be politically unfavorable.
Another point worth noting is that if the contract expires in 2021, the mine will automatically be under the auspices of the government. So why bother to have the shares if we will soon automatically control them?
Proponents of the contract extension dislike my stance because they have hidden interests. The President has already taken a clear stance not to grant the extension until the contract is about to expire, or when negotiations start in 2019 at the earliest.