Indonesian spy row with Australia could threaten trade ties

Indonesia's relations with Australia sank to their lowest point for more than a decade yesterday over reports that Canberra had spied on top Indonesians, including the president's wife.

President Susilo Bambang Yudhoyono went on national television to announce that he was freezing military and intelligence co-operation, including the issue of asylum seekers, that has long been a thorn in relations.

"It's clear that this is a logical step Indonesia must take," Yudhoyono said.

Meanwhile, Indonesian Trade Minister Gita Wirjawan suggested the chill could hit economic ties, with total trade worth more than US$11 billion last year.

The public display of anger was triggered by media reports this week, quoting documents leaked by US National Security Agency whistle-blower Edward Snowden, that Australian spy agencies had tried to tap Yudhoyono's mobile phone and those of his wife Ani and senior officials in 2009.

An Australian Defence Department spokesman said his ministry was seeking clarification on the moves and said it was not clear what the impact would be on bilateral ties.

Speaking earlier in parliament, Australian Prime Minister Tony Abbott expressed regret for the embarrassment the reports had caused Yudhoyono.

"I do understand how personally hurtful these allegations have been for him and his family," he said. His government has declined to comment directly on the spying reports.

An Indonesian military spokesman said the halt in military co-operation would take effect from the start of next year.

Relations between the two countries last deteriorated in 1999, when Australia sent troops into East Timor after Indonesia's military pulled out after embarking on a scorched-earth policy in the one-time Indonesian colony.

Ties with Jakarta have again turned increasingly prickly since Abbott took office in September, because of the spying reports and tension over how to prevent asylum seekers, most of them from South Asia, sailing from Indonesia to Australia.

Indonesia is a major importer of Australian agricultural products while Australia is Indonesia's 10th biggest export market.

Trade Minister Wirjawan said: "It is difficult if two neighbours can't trust each other to think about anything related to economic co-operation.

He added that he strongly backed proposed new laws that would allow importers to bring in farm goods from any country.

Livestock products, for example, currently have to come from Australia or New Zealand.

Ruhut Sitompul, a Yudhoyono confidant and a member of his ruling Democratic Party, said the president's anger over the spy scandal was understandable.

"He has spent years trying to build a relationship with Australia and so he feels it's personal when they spy on him and his wife," Sitompul said.

Yudhoyono's wife Ani is often seen as having influence over decision-making. But Sitompul said: "Why is (his wife) even being tapped? She's the first lady and yes, she has influence on the president, but to a normal extent between husband and wife.

"So the president is not angry specifically because of his wife. He has told all of us … to be rational about the issue."