Indonesia, nickel, and the political economy of polyalignment in the Second Cold War

To many, Indonesia seems the archetypal ‘non-aligned’, ‘neutral’ or ‘hedging’ state, avoiding taking sides in the emerging ‘Second Cold War’. Though this is indeed Indonesia’s formal foreign policy, we argue that the centrepiece of its economic development strategy – efforts to construct a domestic nickel-processing industry and electric vehicle supply chain – are, in practice, deepening dependence on China while undermining Western partnerships. To explain this outcome, in contrast to hedging scholarship, we provide a critical political economy analysis of polyalignment, unpacking the state to identify the state–society complexes – particularly the powerful politico-business oligarchy – shaping the course of Indonesia’s external relations. Oligarchic interests have powerfully shaped Indonesian nickel development, skewing it towards near-exclusive engagement of Chinese investors and export markets, which also exert outsized power in this sector. This draws Indonesia into Chinese-dominated supply chains and undermines Western partnerships, contrary to Indonesia’s formal objective of balancing its external relations.