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Bilateral relations between Singapore and Indonesia have taken a turn for the worse, after Jakarta decided to reduce gas deliveries to the city-state on Saturday, cutting them by about 9%, claiming it needed extra supplies for domestic use, following a blackout in Batam earlier this month.
But this move came suspiciously close after another warning issued by the Indonesian Minister of Energy, Bahlil Lahadalia who threatened a review of energy exports to countries that ‘disrespect it’, just 5 days ago.
This was a response to international criticism directed at the country amid the worst haze season in over a decade.
It is quite bizarre that a country which is struggling to contain mostly man-induced forest fires, which are poisoning millions of people in Southeast Asia, would try to aggressively respond against its neighbours and their valid concerns.
But what is even stranger is that it decided to target Singapore first, because it depends on it much more than the other way around — despite being the largest and most populous country in the region.
While Indonesian government claims that the cuts to Singapore are within contractual limits, it’s hard not to interpret them as a hostile gesture. Fortunately, they amount only to 2% of Singapore’s daily natural gas consumption. A drop in the bucket.
This is thanks to past efforts to diversify Singapore’s energy sources away from its neighbours.
The most important milestone was a 2006 decision to build the first LNG (liquified natural gas) terminal in the city. Construction on it started in 2010 and was completed in 2013.
This reduced reliance on Malaysia and Indonesia from 100% to under 50% today, with piped gas at around 45%.
After subsequent expansions in 2014 and 2018, the terminal could meet just about the entire year’s worth of gas demand in Singapore, meaning that the country could ship virtually all of it from outside the region if needed.
This is an important distinction, because Indonesia is still responsible for 30% of gas imports today and it would be a huge vulnerability if Singapore is still dependent on piped gas — which is location dependent — rather than LNG, which can be transported globally.
As if that wasn’t enough, a second terminal is in the works, with the planned completion date of 2030, increasing total capacity by around 50%.
Even though there’s no risk of that happening now, but if for some reason Indonesian gas exports collapsed, Singapore is well-prepared to replace them. At the same time, local power plants are prepared to work on diesel fuel if necessary, ensuring uninterrupted electricity production, regardless of disruptions.
It is interesting how such a large country as Indonesia continues to be so dependent on a small city-state, which makes the current spat even harder to explain.
And yet, 63% of gasoline imports, amounting to nearly 40% of the total petrol consumed by the nation of over 290 million people, comes from Singapore.
This is because Jurong Island is one of the world’s largest oil refining centres. And if you remember, when war with Iran broke out earlier this year, several countries in the Asia Pacific region faced acute shortages of petrol – including Indonesia.
Not Singapore, though.
And the problems aren’t over, as fresh shortages hit several regions of the country just this month, including the tourist hotspot, Bali.
Indonesia vowed to reduce this reliance on Singapore last year already, but its plans to replace it with supplies from the Middle East quickly got a reality check when the Strait of Hormuz was blocked and oil pipelines in Gulf countries bombed.
This is why Singapore remains indispensable to Jakarta, regardless of its desires.
The city is also the leading source of Foreign Direct Investment in Indonesia, responsible for 31%, or US$17.4 billion (S$22.3 billion) in 2025, as many investors prefer using Singapore as their base of operations in the region.
This is unlikely to change anytime soon, given that Indonesian stock market is under international pressure and is facing a ratings downgrade over alleged coordinated trading activity.
Jakarta’s Stock Exchange is currently the worst performing market of 2026, having lost nearly 40%, or around US$400 billion in capitalisation, if we factor in the drop in value of the rupiah.
This massive wipeout is going to keep Indonesia on capital coming through Singapore for many years to come.
There is also one other, interesting dependency — the internet, where the city-state has a near monopoly on international connectivity. A whopping 90% of international internet traffic to and from Indonesia passes through Singapore, which is the terminus of most subsea fibre cables.
Should there be any serious conflict between the two countries in the future, Indonesia could suffer a near total disconnect from international web.
Most importantly, Indonesia’s pressure campaign on Singapore is going to cost it what it needs the most, and what Singapore has an abudance of — international trust.
This is the reason why foreign capital flows into Southeast Asia through the city state, why foreign companies build their HQs and pay taxes here.
Indonesia’s abrupt cuts to Singapore’s gas deliveries undermine the trust in Jakarta, even if, as the minister claims, they are within contractual limits.
The entire campaign preceding them, the accusations against unnamed neighbours and then a sudden decision to make the cuts, suggest that it was a deliberate decision, made for political reasons, rather than genuine economic need.
This is where Indonesia has the most to lose. The inconvenience to Singapore is minimal, but the loss of reputation is going to be deep and lasting for Jakarta. Even before we consider how much it still relies on a neighbour so small.
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