Furthermore, China has secured stable supplies of critical raw materials such as lithium, nickel, and cobalt. It produces the bulk of midstream products such as the chemicals, cathodes, and anodes needed to assemble battery cells. In contrast, the US is almost entirely dependent on imports and has been slow to develop a raw material supply chain.

This will include mining and refining, producing battery-grade nickel chemicals, battery parts, battery cells, and EVs. By 2030, Indonesia aims to build 140 gigawatt hours (GWh) of battery production capacity, equivalent to five of Tesla’s battery gigafactories in Nevada, with plans to export about 50 GWh.

Unfortunately, these plans also mean that Indonesia is likely to be embroiled in the intensifying technological rivalry between the US and China. For one, the Southeast Asian nation is an important part of the Chinese EV supply chain, and China has become one of Indonesia’s most important economic and development partners.

Two of the most important production centres for nickel processing, the Indonesia Morowali Industrial Park and the Indonesia Weda Bay Industrial Park, are majority owned by Tsingshan Group, a Chinese nickel and steel giant. Chinese plants producing nickel chemicals are slated to come online in the next few years, while CATL, China’s largest lithium-ion battery manufacturer, will open a factory for the component in Indonesia that is to begin production in 2024.

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Economic overdependence on China has become a hot-button political issue in Indonesia. While Indonesia benefits from pragmatic economic cooperation, it has also sought to diversify its economic exposure to China.

Planned joint ventures between a consortium of four state-owned companies with South Korea’s LG Chem, Tesla, and Japan’s Panasonic will help dilute the Chinese presence and provide an alternative source of expertise in battery and EV technologies. To ensure that Indonesia captures economic value from value-added activities, 60 per cent of the nickel supplied to foreign partners must be processed into batteries locally.

While pursuing economic cooperation with multiple partners is an old trick in the great-power playbook, hedging could be harder in an era of growing techno-nationalism. Indonesia’s position as a supplier of lithium-ion batteries for Chinese EV production can be interpreted as potentially hostile to American national and economic interests.

On the other hand, the US has responded in its recent supply chain review by calling upon partners such as Canada, Australia, and Brazil to supply the critical raw materials needed for its lithium-ion battery production, the so-called friend-shoring.

For Indonesia, this is a complicated and awkward situation to be in. It is on track to add 450,000 tonnes of nickel and 50,000 tonnes of cobalt production over the next few years, much of it for battery production. While it has repeatedly signalled its interest to work with American companies, it is not interested in becoming an exclusive trading partner of either the US or China.

If the world moves towards forming rival trading blocs, especially over key technologies, this will make it hard for Indonesia to find a middle way and pursue its domestic development goals. For instance, the US could pressure allies to stop lithium exports to Indonesia, just as South Korea and Israel are pressured to reduce technology exports to China.

How Indonesia and China can learn to get along

Lithium is a significant vulnerability for Indonesia’s EV ambitions as it does not have domestic supplies. It plans to import used batteries for lithium recycling and import the element from Australia.

Indonesia has traditionally upheld a fiercely independent foreign policy premised on pragmatic equidistance between great powers. As national security narratives regarding clean energy transitions or energy independence grow more strident, its diplomatic manoeuvring space could shrink.

Indonesia needs to prepare for the possibility that great powers can utilise outright diplomatic pressure, blacklists, and sanctions as tools of economic statecraft to shape its behaviour. One strategy can be to pre-emptively review Indonesia’s position in global supply chains to evaluate potential geopolitical risks by establishing a multi-ministerial task force on foreign investments. Jakarta can ensure that it has domestic regulations on lithium-ion battery exports that adhere to the practice of free and fair trade.

The bottom line is that Indonesia and other Southeast Asian countries interested in preserving strategic autonomy must move beyond expressing a refusal to pick sides or becoming someone’s follower. In an era of increasing great power competition, an active and anticipatory foreign policy is increasingly needed.

Jefferson Ng and Dedi Dinarto are Senior Analysts at the Indonesia Programme, S. Rajaratnam School of International Studies, Nanyang Technological University (NTU), Singapore.