Jokowi takes on Indonesia's Oil Mafia

Romeo Gacad/File/AFP

JAKARTA, Indonesia – Indonesian President Joko Widodo’s midnight move on Monday, November 17, to cut subsidies for the country’s most widely used gasoline and diesel, raising pump prices by Rp2,000 ($0.165) per liter each and other actions put him squarely up against what has been called the Oil Mafia, a shadowy cabal close to some of the country’s most powerful political figures.

It is the first major domestic move by the new president and is expected to provide more than IDR100 trillion ($8.28 billion) to be reallocated into other sectors including infrastructure construction and social welfare programs. It is daring to say the least. The Oil Mafia is said to include members of some of the country’s most powerful families and political parties, making it questionable whether Jokowi can pull it off.

Indeed, lawmakers from losing presidential candidate Prabowo Subianto’s Red-White coalition lashed out in Parliament on Tuesday at the decision to raise fuel prices, although there is no obligation to inform the lawmakers.

According to the 2015 budget approved by the House of Representatives, fuel subsidy spending is set at IDR276 trillion, up by nearly 12% from Rp246.5 trillion in the revised 2014 national budget. Jokowi has benefited by the fact that in 6 months the price of benchmark crude has fallen from a 52-week high of $114.77 to $77.50 – a fall of 32.47% – and may well fall further.

The “Oil Mafia” is said to include even members of the Indonesian Democratic Party of Struggle (PDI-P), Jokowi’s political party, as well as officials of Golkar and former President Susilo Bambang Yudhoyono’s Democratic Party. Political sources describe the system as a funding mechanism for powerful political parties and a route to vast wealth.

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