Humanity again finds itself in an age of war. European political and military leaders speak increasingly of being in a ‘pre-war’ period. Worrying signs abound of an impending major war in the Middle East. From the northern territories of Japan, across to the Korean peninsula, through the western Pacific, and around to the disputed border of China and India in the Himalayas, there simmer flashpoints which could erupt into wars in Asia.  

Our worst nightmare would be for different wars in Europe, the Middle East and Asia to break out and merge into a third global war for supremacy in Eurasia, the geostrategic heartland of the world. Such a war would perhaps be humanity’s last. 

What might this mean for the defence of Australia? Our defence planners are rightly focused on a wide variety of contingencies. With very little notice, the Australian Defence Force could be called upon to undertake rapid deployments in the nearby arc of small states. While necessary and important, such ventures would be only marginally relevant to today’s great issues of war and peace. The same could be said of vital operations in support of distressed communities in the wake of natural disasters. 

Given long-lead times, Defence also has to focus on complex capability and programming issues, especially as related to the planned force of 2035 and beyond. However, just as defence planners of the late 1930s would have found, perhaps when contemplating the optimal force of 1955, more pressing matters can arise suddenly.  

Certainly, our strategic imagination has to be cast forward a decade or more. In doing so, we should contemplate very different possible futures—including where perhaps the United States had isolated itself (as a matter of choice or through military defeat); where China was hegemonically dominant in the Indo-Pacific; and perhaps where a very different Indonesia was able and inclined to directly threaten Australia. In these presently improbable futures, a very different defence force would have to be imagined, based on a large navy and air force, heightened military preparedness, and a defence budget amounting to 5 to 6 percent of GDP, if not more. Without the protection afforded by extended deterrence, we would struggle to deter attacks by nuclear-armed adversaries. 

These different futures are worthy of contemplation. The times, however, demand that we devote the greatest amount of useful effort to more immediate challenges. We face, before 2030, the credible prospect of having to defend Australia during a major war in the Indo-Pacific. Australian defence planning has since the Second World War rarely focused on the idea of mounting such a defence. Planning until the mid-1970s typically contemplated instead ‘forward defence’ —sending Australian military forces forward into Southeast Asia. During the 1970s, the idea of the ‘defence of Australia’ emerged. The concept, as announced in the 1987 Defence White Paper, contemplated low-level attacks, to be handled in a largely self-reliant fashion. This was good policy for the times. 

Today, we need to contemplate Australia, and the airspace, seas and islands that surround us, as potentially constituting a theatre in a larger Indo-Pacific war. How or why such a war might come about would require a lengthier analysis. For the sake of discussion, and planning, it would be prudent to rate the chance of war breaking out in the Indo-Pacific in the 2020s at 10 percent, at a minimum. Such a war could well be drawn out over months as the combatants carefully sought to avoid strategic nuclear escalation, an assumption which needs to be critically examined at another time.  

Unless Australia were to actively decline to take part in such a war, including by way of denying to the United States access to the use of facilities in Australia, then it would be reasonable to assume that an adversary would contemplate actions to degrade our ability to support the US war effort, and to undermine the national will to fight. It is probable that we would face, at a minimum, cyberattacks on critical infrastructure and essential services. Cognitive warfare would be employed, using technology-enabled propaganda and disinformation, which would be aimed at degrading Australia’s national will. We could not rule out the possibility of more direct action also being taken. 

From the perspective of the United States, Australia would be viewed as the vital southern bastion in any such war, in relation to a number of publicly declared intelligence, surveillance, communications and space activities; in support of potential US operations in the South China Sea, the South Pacific, and the Indian Ocean; as a haven for the dispersal of at-risk US forces; and as a logistics, maintenance and sustainment support base. There would probably be an expectation that Australia would lead in its home theatre, without unduly calling on US assistance, especially were stretched US forces to be engaged simultaneously in combat operations in Europe and the Middle East, as well as in the Indo-Pacific. Were it come to pass, we should indeed insist on Australian primacy in our theatre (in contrast to our subordination in 1942–45), with any available allied forces being integrated into Australian-led theatre-level forces. 

Defence of the Australian theatre would be a higher priority than sending our forces forward, except for perhaps some on a limited scale, and would represent our principal contribution to the war effort. This would also be central to the adversary’s calculations about whether, when and where to strike us, and how heavily. This would have implications for the ADF’s force structure and how we might employ it operationally—with the priority being to develop an integrated and focused force which was optimised for a campaign on and around our territory and in the broader airspace, seas and islands of a theatre-wide area of operations. 

Civil preparedness would also be required. Civil defence and national mobilisation would be intrinsic to any war effort. If the possibility of war in the Indo-Pacific is to be taken seriously, relevant preparations should be made urgently, but also proportionately and soberly. In war, the most important question is whether the nation at large has the structures, capabilities and, above all, the mindset and national will that are required to fight and keep fighting; and to absorb, recover, endure, and prevail. These cannot be put in place or engendered on the eve of the storm. 

With the exception of brief periods during the Cold War, civil defence and national mobilisation have not been priorities for Australia since the Second World War, because wars, such as were being fought, were remote from Australia and not directly threatening to our population or territory. Today, war could come to our home, and potentially for an extended period. 

As a practical suggestion to focus effort, we should modernise the practice from the 1930s and the 1950s of the preparation of a war book. 

War books were guides on what would need to be done, and by whom, in the event of war. Preparing a modern war book would help to focus the national mind, break down the abstraction of ‘war’ into its particulars, enhance preparedness and contribute to resilience. 

A war book would be prepared by the Commonwealth, with contributions from the states and territories. As our society is today more dependent on private companies to operate critical infrastructure and deliver essential services, business would have to be deeply involved from the outset. Unlike earlier iterations, which were controlled by the Department of Defence, a modern war book would be best prepared jointly by Defence and the Department of Home Affairs, the latter as a consequence of the crucial role that would be played by critical infrastructure providers, cybersecurity firms and emergency management bodies in any war effort. Other departments and agencies would be brought into the process, which Home Affairs could coordinate, as it did during the pandemic. 

A war book would deal with the entire span of civil defence and national mobilisation which would be required to move to a war footing, consisting of a range of coordinated plans. Some would deal with critical infrastructure protection and national cyber defence. Others with the mobilisation of labour and industry (covering supply chains, industrial materials, chemicals, minerals and so on). Sectoral plans would address the allocation, rationing, and/or stockpiling of fuel, energy, water, food, transport, shipping, aviation, communications, health services and pharmaceuticals, building and construction resources, and so on. There would be plans for the protection of the civilian population (covering evacuation, fortification and/or shelter construction); for augmenting police, fire, rescue and ambulance capacities; and dealing with social cohesion, domestic security and public safety. 

Lessons could be adapted from international experience (especially Ukraine and Israel), as well as domestic experiences, such as natural disasters and the COVID pandemic, noting however that war is different insofar as in war a conscious adversary calibrates and adjusts their actions as the situation unfolds. War is not simply another hazard in the all-hazards universe of emergency management. It has its own character and logic. We need to think about war as a national crisis unlike any other. 

A war book would deal with legal authorities, which past experience would suggest would have to be urgently expanded in a war. The defence power in the Constitution has been successfully used in the past to ground otherwise impermissible authorities (for example to do with rationing and prices). The relevant constitutional cases were decided in the 1940s. Fresh thinking would be required to test those earlier concepts and to inform the drafting of contingency legislation, which could be prepared in readiness.  

A complex area which would need careful thought would be cognitive warfare. A war book could usefully set out roles and responsibilities for dealing with disinformation and propaganda, and especially the vexed questions of censorship (to protect the war effort) and government information processes to thwart an adversary’s efforts to deceive and demoralise the population. Technologies and procedures would need to be developed, as required, to disseminate alerts, notifications and public information regarding developments in the war, in trusted and secure ways. 

The whole point of this exercise would not be the production of a competently produced technocratic document, as useful as that might be. A war book would of itself simply consist of building blocks (the plans) that could be quickly activated should the need ever arise, tailored to circumstances as they emerged.  

More importantly, the very act of undertaking such planning would of itself enhance preparedness and resilience, as relevant experts were brought together to develop solutions through a structured process—for instance, to deal with the likelihood that Australia’s international shipping and aviation links would be impaired severely, or cut completely, in such a war. Developing civil defence and mobilisation plans would force us to think expansively and intensively, concretely and innovatively, and above all collectively.  

If done well, it could be used to sensibly bring the nation along, with purpose, focus and structure, and without undue alarm. Secrets would still have to be preserved, and sensitive details would need to be protected. Through such an effort, those with ears to hear would come to understand what needs to be done in the face of what might come. 

In an era of labels, reductive discourse, and short attention spans, these remarks will be dismissed as ‘predictably hawkish utterances’. Surely, we can be more nuanced and layered. Preparing our society and economy for the contingency of major war would be complementary to, and supportive of, a strategy of working to defuse tensions and ensure peace. Engaging in diplomacy, seeking to stabilise international relationships, and reducing the margin for miscalculation are not idealistic follies. They are the realist’s approach, if only to buy time, while preparing simultaneously for the possibility that such efforts might yet fail. If this is indeed a pre-war period, we should redouble all efforts to ensure peace while at the same time preparing resolutely, without reducing every suggestion to the binary opposition of ‘hawk’ or ‘dove’.

The Chinese Communist Party (CCP) is increasingly taking a stand against corruption in the Belt and Road Initiative (BRI). Bribing foreign officials in securing projects has always been an unspoken BRI mechanism, but what’s become intolerable to the party is growing embezzlement of Chinese funds by Chinese officials. 

It’s an extension of a domestic campaign to catch official self-enrichment that began more than a decade ago. Still, holding down that side of corruption in the BRI is helpful in promoting the idea that the international infrastructure initiative is transparent and efficient. 

A review of Chinese documents reveals that the change began around 2021. Notably, officials of the party’s anticorruption agency, the Central Commission for Discipline and Inspection (CCDI), have been posted abroad with state-owned enterprises (SOEs) to monitor officials. 

China projects the BRI as a global public good. However, it also facilitates China’s economic influence through economic integration and resource extraction. And by creating dependence on China abroad, it lifts the country’s geopolitical influence. 

China floated the idea of a ‘clean’ BRI in the first Belt and Road Forum for International Cooperation in 2017. Since then, it has stepped up the narrative of its anticorruption measures being a fight against global corruption. That narrative downplays corrupt practices by Chinese companies in BRI projects. 

Official discourse has framed corruption in the BRI as a human problem that’s pervasive in all societies, thereby presenting Chinese concerns about corruption as reflecting the efficiency of the Chinese political system. Officials also present anticorruption concerns in terms of guarding against possible wrongdoing amid massive investments, rather than pointing to existing corrupt practices. 

However, it isn’t corruption in itself that has prompted Chinese authorities to step up monitoring and investigations. 

China has criminal law provisions for prosecuting officials for bribing foreign officials. However, there’s a qualification to those provisions: only cases involving ‘improper commercial benefit’ can be tried, and that’s difficult to define in legal cases. As a result, despite numerous allegations and reports of bribes by Chinese companies to foreign officials, only a few such cases have been prosecuted. In 2023, a local court in Guangzhou sentenced two former officials of the state-owned China Railway Tunnel Group Co Ltd for bribing Singaporean officials and embezzling. 

A few trials indicate that the CCDI’s efforts to tame corruption in BRI projects are aimed at those who embezzle Chinese money and resources, rather than those who bribe foreign officials. 

China launched an anticorruption drive to hunt down bribe-taking officials at home in 2013. Xi Jinping’s call for a ‘clean’ BRI in 2017 was an extension of that: a response to corruption cases involving domestic officials and SOEs with links to BRI projects. 

The government officials often acknowledge that the large sums of money spent on BRI projects naturally breed corruption. Several officials from companies and financial institutions engaged in BRI projects have been investigated, and the number of those investigations has dramatically increased since 2021. 

Compared with earlier years of Xi Jinping’s rule, the number of corruption cases involving officials from SOEs and financial institutions has risen sharply. For example, the CCDI started investigating nearly 300 officials from such institutions in the 18 months after the 20th CCP National Party Congress in 2022, compared with around 400 during the first five years of the anticorruption campaign. 

Several of those officials are senior executives of SOEs and financial institutions that have also invested in BRI projects. However, due to a lack of transparency in anticorruption trials, assessing corruption’s true extent and nature in the BRI is challenging. The high number of investigations of officials from SOEs operating domestically, which also have large stakes in the BRI, is an indication that policymakers are worried. 

For example, in the past two years, the CCDI has investigated around two dozen senior officials of the Export and Import Bank of China and the China Development Bank, which are among the top lenders for BRI projects. Similarly, several officials from the COSCO group and its associated companies have been investigated since 2014. COSCO is the largest state-owned conglomerate involved in shipping and logistics. 

In the past few years, China has signed a series of extradition treaties with BRI countries, to help investigate and bring corrupt Chinese officials to book. The CCDI has placed its officers within companies in BRI projects and organised regular joint inspections of projects with local authorities. The agency has been running corporate compliance courses for enterprises in the BRI since 2018 and introductory courses on the anticorruption system for officials from BRI countries. 

The negligible number of people in BRI projects who have been tried for bribing foreign officials indicates that Chinese authorities are more worried about Chinese resources and money being embezzled rather than corruption generally. The anticorruption effort in the BRI is really just a case of taking the domestic campaign abroad. 

 

Solomon Islanders are set to vote on 17 April in an election that has significance within and beyond the country’s borders. It is the first chance for them to vote on policy directions that the coalition led by Prime Minister Manasseh Sogavare has taken and may change or consolidate his power.

Since Sogavare was elected by his parliamentary peers in April 2019, Solomon Islanders have lived through several shocks. First there were riots in April 2019, precursors to a much larger riot in November 2021. Both incidents related to grievances about the ruling political coalition and perceived foreign control of government decisions and the economy.

There was a switch in bilateral relations from Taiwan to China in September 2019, a decision announced before a parliamentary inquiry concluded or provincial governments had their say. The omission contributed to tensions between the prime minister’s office and the Malaitan provincial government, especially its former premier, Daniel Suidani. Those tensions resulted in Suidani’s removal from office in a vote of confidence in February, allegedly after money was offered to members of the provincial assembly to take him down.

Then there was Covid-19, which prompted a 28-month state of emergency. Sogavare’s emergency powers included rights to decide who could enter the country. He could also ban events, restrict inter-island travel and suspend access to media outlets. A decision to ban Facebook was ultimately not implemented but pointed to an anti-democratic trend. With even much-needed doctors and nurses sacked over strike plans or a critical social media post, rising centralisation of power and restrictions on free speech became clear. Criticism of the coalition has become more muted or is kept private.

Governance has become less transparent. No auditor general’s annual report on the state of government finances has been published in the past five years. The Royal Solomon Islands Police Force has released no annual report since 2018. Allegations of corruption, including alleged bribery of High Court officials, are unresolved.

Foreign money, meanwhile, has helped consolidate the ruling coalition’s power. Constituency development funds—discretionary money given to members of parliament— have a long history in Solomon Islands, but in 2021 the money, now coming from China, was for the first time allocated not to all MPs but only to members of the coalition. Aid funds from other countries tended to be directed into preparations for the South Pacific Games of late 2023.

So Sogavare and his coalition have enjoyed unprecedented powers and discretionary funds over the past five years; they have also benefited from hosting the games. So it may seem to outsiders that these advantages should result in easy re-election. However these are not usual times, with many grievances against the current coalition and increasingly visible and organised opposition groups making election outcomes unpredictable.

Opposition parties include the Solomon Islands Democratic Party, headed by Matthew Wale and offering candidates in 36 of the 50 electorates. There are also the Democratic Alliance Party (led by former prime minister Rick Houenipwela, with 12 candidates) and the United Party (of Peter Kenilorea, with 18 candidates). New parties have emerged, raising the chances of electoral upsets. They notably include the People’s Liberal Democratic Party (headed by preacher Benedict Maesua, with 44 candidates) and the Iumi for Change Party (led by a former advisor to Suidani, with eight candidates).

Meanwhile, Sogavare’s Ownership Unity Responsibility Party is fielding candidates in 41 electorates. Its previous allies include the Kadere Party, Democratic Alliance Party and Peoples First Party. Any of them and indeed some of the other parties could help form a government.

Voters’ choices will depend on issues including their self-interest (whether in the form of personal cash payments or progress in their communities), loyalty (influenced by relatives and church networks) and ideology (for example, inclinations towards either democracy or strongman rule). Voters also consider specific local issues and the characters of candidates. Many candidates will win with small percentages, edging out rivals in a first-past-the-post system. Intense political localism makes even constituency-level results hard to predict.

After an election, a new ruling coalition is typically formed at a hotel in Honiara, a major challenge for the gathered MPs being agreement on who should be prime minister (and be confirmed as such in a later parliamentary vote). MPs are supplied with food, accommodation and sometimes bribes and promises of ministerial appointments. Foreign companies sometimes pay the bills and thereby exert great influence on the outcome, securing later government access and privileges along the way.

Even after parliament votes for a prime minister, a coalition may not be stable. Opposition MPs frequently challenge governments to survive votes of confidence. Also, government members may be removed by High Court challenges to electoral results, which puts power in the hands of judges and investigating police.

Throughout the post-election process there is heightened risk of social unrest, such as rioting and looting. Research across the Pacific indicates that the probability of such conflict rises amid political transition when crowds gather amid grievances about governance and foreign control and interference.

Australia and its Western allies play important roles, in part by funding the election, backing the assistance given by the UN Development Program. They also transport ballots and help with security of polling stations. The UN agency and the Solomon Islands Electoral Commission will be under intense pressure to respond to misinformation or allegations that they are biased or subject to undue interference. So far they have weathered criticism, but the independence and credibility of commission will be tested and will be key to holding an election that is popularly viewed as legitimate.

Under various agreements, Australia New Zealand, Fiji, Papua New Guinea and China will deploy armed personnel to provide security in support of the local police. This will be controversial. Will these forces allow parades and protests? What will they do if ballot boxes are stolen or if electoral officials refuse to allow outside scrutiny of their work? Will they react if gangs attempt intimidation of voters or candidates? And what happens if candidates question the right of these armed foreigners to be in the country? These situations have all arisen before.

Also, the response of the Solomon police and justice system to major transgressions of the law in previous elections has been lacklustre. For example, there are still no prosecutions in a case of MPs being shot at in 2014.

There is also a risk of misinformation fuelling conflict. Local and foreign officials will have to try to quell rumours in social media or face-to-face gossip, heading off unrest.

Ideally, adequate election funding and the presence of foreign security forces will encourage voters to ignore bribes and threats. If that happens, the outcome should better reflect the preferences of the people, will be more widely accepted and will give less cause for rioting.

Power will be in the hands of the people on election day, but the subsequent process of politicians building and retaining political power, and how they abuse or share it, will be just as important in determining the direction of the Solomon Islands.

Journalists, it has been said, write the first rough draft of history. This is particularly true in China, where official sources and local media provide an incomplete picture and unofficial sources are scarce. As a result, international media play a crucial role in digging up and publishing the facts.

In the past 75 years, the position of American journalists in China has come full circle. From the establishment of the People’s Republic in 1949 to US President Richard Nixon’s visit in 1972, American journalists were barred from the mainland and had to report on China mainly from Hong Kong.

Once the US and China established diplomatic relations in 1979, American media were allowed to set up bureaus in China. The opening of the economy by Deng Xiaoping ushered in a period of relative freedom for journalists that lasted until the violent crackdown on demonstrators in Tiananmen square in 1989. However, relations picked up under the reform-driven leadership of Jiang Zemin, who was concerned to convey a Western-friendly image as he sought accession to the World Trade Organization.

The runup to the 2008 Beijing Olympics was also marked by openness, but was followed by a gradual tightening of restrictions. The publication in 2012 of several controversial exposés angered the authorities, and the decline in relations culminated in 2020 with the mass expulsion of journalists from The New York Times, The Wall Street Journal and The Washington Post.

With the mainstream US media currently covering China largely from Hong Kong, Seoul and Taipei, their field presence is back to where it was in the late 1970s.

In Assignment China: An oral history of American journalists in the People’s Republic, Mike Chinoy reviews the entire period from World War II to the present day. Chinoy, one of America’s leading China watchers, first visited China in 1973 and worked for 24 years for CNN, including as the network’s first Beijing bureau chief, Hong Kong bureau chief and senior Asia correspondent. Many will recall him regularly signing off with the old Chinese saying ‘may you live in interesting times’.

Chinoy’s narrative is built around interviews with over a hundred journalists, scholars and diplomats, giving it exceptional granularity. His list of interviewees is a who’s who of ‘old China hands’, including such names as Chris Buckley (an Australian), Nicholas Kristof, Melinda Liu and Orville Schell.

Chinoy discusses historical turning points from a correspondent’s point of view, from the opening of the economy and the ‘golden era’ prior to the Beijing Olympics to Xi Jinping’s rise to power and the Covid crisis. He also provides a fresh take on recent major China stories.

The 1989 Tiananmen square demonstrations coincided with the visit to Beijing of Russian President Mikhail Gorbachev, for which the authorities had lifted restrictions on international media. CNN was even allowed to set up a satellite dish in the square. Unintentionally Beijing gave the media unusually open access to the demonstrations.

Cameramen Jonathan Schaer of CNN and Jeff Widener of the Associated Press were staying at the nearby Beijing Hotel, and describe in detail how they captured the iconic images of ‘tank man’ blocking the advancement of the People’s Liberation Army tanks. Their footage was taken from a hotel balcony, with warning shots fired by the PLA over tank man’s head literally whizzing by.

The 2008-2009 global financial crisis bolstered Chinese authorities’ confidence in their own development model. Their growing assertiveness turned relations with international media into a cat- and-mouse game, forcing reporters to find new ways to bypass ever tightening controls.

Once information was available on the web, journalists had more opportunities to hone their investigative skills. In June 2012, Bloomberg News published a report on the hidden wealth of the relatives of then Vice President Xi Jinping just four months before the Communist Party congress that would endorse him as the new secretary general. This was followed in October by a carefully researched front-page story in The New York Times on the enormous family wealth of outgoing Premier Wen Jiabao.

As the authorities extended their repression of the ethnic Uighur population in the province of Xinjiang, in 2017 BuzzFeed News published a story referring to China as a ‘21^st century police state’. An opinion piece in The Wall Street Journal at the start of the Covid crisis labelling China the ‘sick man of Asia’ was the last straw, and the expulsion of most US journalists followed.

Sources have always been a challenge for China watchers, and Chinoy provides an insider’s perspective. For three decades from 1953, journalists relied heavily on China News Analysis, a weekly review published in Hong Kong by the Jesuit priest Laszlo Ladani, who monitored official Chinese media closely, and on infrequent interviews with refugees and academics returning from China.

Once reporters were let into China, they were closely monitored, travelled with ‘minders’ and had to be careful to protect their sources. Nowadays, even journalists barred from the mainland have access to wide-ranging sources, from the Chinese internet and commercially available satellite imagery to a virtual cottage industry of China-focused online publications.

Assignment China offers a fresh perspective on China’s recent history, and many of the people who wrote it. And it’s a riveting read.

Indonesia’s success in deploying Chinese capital and innovation to become the dominant force in the global nickel industry has been achieved in the face of concerted opposition from the European Union through the World Trade Organisation.

Over a decade, the high value-added share of Indonesia’s nickel exports has gone from 8% to 100%. Its mine output has risen nine-fold, and it is putting rivals, including nickel miners in Australia, out of business because they cannot begin to match the capital and operating costs of the Indonesian operations.

Enabling Indonesia to transform its place in one of the most important new energy industries could be seen as the most significant achievement yet of China’s Belt and Road program. President Xi Jinping underlined the strategic importance of Indonesia to China by launching the ‘maritime’ component of the Belt and Road program in an address to Indonesia’s parliament in 2013.

While Indonesia is expected to retain its non-aligned status under incoming president, Prawobo Subianto, the help China has given Indonesia to achieve a primary economic objective is likely to cement a bilateral relationship bearing some similarity to that between Japan and Australia.

The government of former Indonesian president, Bambang Yudhoyono, resolved in 2009 to raise the country’s returns from its raw materials by restricting exports of unprocessed ores, giving miners a five-year transition period. In the case of nickel, export of the raw ore was banned from 2014, with a grace period provided only if the mining company was investing in processing. By 2020, the ban on nickel ore exports was complete.

While Indonesia had profited from the global resources boom from 2005, its government argued that most of the benefits had been captured by the mining companies and had not contributed to Indonesia’s development.

Before the ban, Indonesia was extracting 71 million tonnes of nickel ore annually, of which 65 million tonnes was exported in its raw form. Most of the exports went to China, where it was smelted and used to manufacture stainless steel.

Chinese companies, led by the privately-owned Tsingshan Steel Group, responded to the proposed export ban with the construction of smelters in Indonesia. The Belt and Road program helped with the funding of an industrial park where the smelters were located, near the nickel mines. While raw nickel ore exports dropped to zero, Indonesia’s sales of nickel pig iron (an intermediate product) and stainless steel soared.

While many resource-rich nations, including Australia, aspire to add value to their raw materials, export bans are not permitted under World Trade Organisation rules and, in 2019, the European Union launched an action against Indonesia.

It said Indonesia’s policy was unfairly limiting the access of European steel mills to nickel ore and was effectively subsidising Indonesia’s exports of stainless steel. Some other Western countries, including the United States and the United Kingdom joined the dispute as third parties, backing the EU arguments.

While the WTO considered the EU’s case, Indonesia’s nickel mine production rose exponentially. It jumped from 200,000 tonnes in 2016 to an estimated 1.8 million tonnes last year, which accounted for about half the global total. Indonesia’s production has doubled in the last two years and processed nickel and stainless steel are now Indonesia’s biggest exports.

The surge in Indonesia’s exports of processed nickel and stainless steel has sent nickel prices plummeting from US$50,000 a tonne in March 2022 to US$16,100 now.

In 2021, the world’s biggest mining company, BHP, made nickel the centrepiece of is new energy minerals strategy but now says it cannot foresee any profit from the business before 2030 and it’s considering putting its Australian-based nickel division into mothballs.

The problem is not just the volume of processed nickel metal coming out of Indonesia: it is also the cost. Indonesia’s nickel smelting and processing operations have been built using novel technology for a fraction of the cost of nickel plants elsewhere and can undercut all other producers.

China’s Tsingshan Holdings, a family-owned business led by a husband and wife team, revolutionised the manufacture of stainless steel by using an intermediate product, nickel pig iron, to feed the steel mills rather than higher cost pure nickel metal. They used a rotary electric kiln furnace to provide a continuous flow to the stainless steel mill.

Applying this technology to Indonesia’s nickel slashed the cost to such an extent that its Chinese state-owned competitor Taiyuan Iron & Steel sought and won anti-dumping protection in the Chinese market.

Chinese resource groups have also brought new efficiencies to the manufacture of battery-grade nickel, which demands greater purity than needed for stainless steel.

Three Chinese businesses, including Tsingshan, have built Indonesian plants to manufacture battery-grade nickel for under US$1.5 billion each. The plants took only three years to build and 12 months to reach full capacity.

By comparison, the Ravensthorpe plant in Western Australia, with a similar output, cost US$2.2 billion and took nine years to build and reach production capacity. The Goro plant in New Caledonia cost US$5.9 billion and took 17 years to reach capacity.

The energy and resources consulting firm Wood McKenzie estimates that the capital costs of Indonesia’s new plants are US$35,000 per annual tonne of nickel produced, compared with more than US$100,000 at western plants. In the brutal logic of commodity markets, it is the highest cost producers that go out of business first in an over-supplied market.

In late 2022, the World Trade Organisation found in favour of the European Union and ordered Indonesia to remove its ban on raw nickel exports. Indonesia immediately lodged an appeal, in the knowledge that the WTO’s appeal panel had lost its quorum and ceased to function in 2019 after the US Trump administration vetoed the replacement of retiring judges.

President Jokowi Widodo rejected the WTO finding saying Indonesia had a right to develop its industry, just as had the European Union.

‘Our country wants to be a developed country. We want to create jobs. If we are afraid of being sued and prefer to retreat, well, we will not become a developed country,’ he said.

Indonesia’s nickel boom has raised some domestic issues. There is a long history of tension between native Indonesians and Indonesians of Chinese origin. The use of imported Chinese workers in building the industrial park brought this to the fore. There have also been environmental issues, with criticism of the use of coal-fired power by the nickel smelters, and concerns about the management of tailings.

However, the model of banning exports to force the development of higher value processing is seen as a success, with the outgoing government of Jokowi Widodo planning to extend it to bauxite and possibly copper. It will be looking to Chinese companies to make this happen.

How this translates in geopolitical terms remains to be seen, but a possible direction is Australia’s relationship with Japan, which was the product of Japanese companies facilitating the development of Australia’s iron ore in the 1960s, coal in the 1970s and both LNG and rare earths over the last two decades.

Australia and Japan have their differences—Japan does not feel constrained from openly criticising Australian policy when it feels its interests are jeopardised, while Australia was a leading voice in international forums against Japan’s whaling. But Japan’s role as not just an important customer but the foundation investor for much of Australia’s resource sector means there is an expectation that each government’s doors will be open to the other and there will be consultation on matters of mutual concern. China would expect no less of Indonesia.