Indonesia is restricting exports of used cooking oil as part of an ambitious strategy to dominate the global sustainable aviation fuel market, echoing past resource nationalism that has created trade tensions with international partners.
The export restrictions, reported by the Jakarta Globe, represent Jakarta's latest effort to move up the industrial value chain by processing raw materials domestically rather than exporting them for refinement elsewhere.
Resource Leverage for Industrial Policy
The strategy mirrors Indonesia's controversial 2020 palm oil export ban, which aimed to ensure domestic cooking oil supplies while pressuring international markets. That policy created significant friction with trading partners and highlighted the tension between resource sovereignty and free trade commitments.
By restricting used cooking oil exports, Indonesia seeks to position itself as a leading producer of sustainable aviation fuel (SAF), a rapidly growing market as airlines worldwide face pressure to reduce carbon emissions. The Southeast Asian nation's massive food service industry generates substantial quantities of used cooking oil that can be converted into biodiesel and aviation fuel.
"In Indonesia, as across archipelagic democracies, unity in diversity requires constant negotiation across islands, ethnicities, and beliefs," the saying goes. The same negotiation applies to balancing domestic industrial development against international trade obligations and diplomatic relationships.
Global SAF Market Implications
The move comes as aviation fuel markets undergo dramatic transformation. Airlines face mounting regulatory pressure in Europe and North America to incorporate sustainable fuels, creating lucrative opportunities for producers who can supply certified renewable aviation fuel at scale.
Indonesia's strategy assumes that controlling feedstock supplies will force international aviation fuel producers to either source processed SAF from Indonesian refineries or lose access to critical raw materials. However, this approach risks accelerating the development of alternative feedstocks and production methods that bypass Indonesian supplies entirely.
Trade economists warn that export restrictions, while potentially effective in the short term, can undermine long-term competitiveness by encouraging buyers to diversify supply chains. Singapore and Malaysia are also developing SAF production capacity, potentially competing with Indonesia for the same markets.
ASEAN Economic Integration Questions
The policy raises questions about Indonesia's commitment to ASEAN economic integration principles. As the largest economy in Southeast Asia, Indonesia has traditionally championed regional cooperation and reduced trade barriers. Export restrictions on key commodities, however, suggest a more nationalist economic approach.
For President Prabowo Subianto's administration, the aviation fuel strategy represents an attempt to demonstrate economic leadership while creating high-value manufacturing jobs. Whether this resource nationalism strengthens or weakens Indonesia's regional economic position will depend on international market responses and the success of domestic SAF production development.
The policy reflects broader debates within ASEAN about balancing national industrial policy with regional integration commitments—a challenge that will shape Southeast Asian economic development for years to come.
