Deceit And Deception - US Dealings in Indonesia

24 September 1999, John Howard

Deception, Deceit and Betrayal - More revelations today from official declassifed US Commerce Department documents on United States government dealings in Indonesia. John Howard reports, "Follow the Money."

In 1998, the US Commerce Department returned a "blacked-out" version of a document titled "Indonesia Advocacy Projects" that it had previously sent in full to my US sources. It was a mistake which perhaps goes some way now towards explaining why the US is reluctant to become involved in the East Timor crisis.

On November 16, 1994, President Bill Clinton and the late Secretary of Commerce, Ron Brown, travelled to Jakarta for the Asia Pacific Economic Conference (APEC), at which Clinton signed deals to supply Indonesia with electric power using US taxpayer loans. The deals were worth billions of dollars to US corporations such as Cal Energy, Mission Energy (now named Edison Mission Energy) and General Electric.

"As markets expand, as information flows, the roots of society will grow and strengthen and contribute to stability," Clinton said during the 1994 signing.

But in September 1994, long before Clinton signed the power deal, the Commerce Department documented that Indonesia's Suharto had cut his family in for a bribe.

According to a 1994 declassified Commerce document, 0.75 percent ownership of a $2 billion US-backed power project was given - at no cost - to Suharto's daughter, Siti Hediati Prabowo. Her 0.75 percent ownership was equal to a free gift of $15 million from US taxpayers.

The $15 million was part of a $50 million bribe split between Prabowo and other Suharto relatives. In return, Suharto selected companies, including those owned by major Clinton donors, to build the Paiton power plant in East Java.

The Paiton power project consisted of two 600-million watt, coal-fired plants to provide electricity to east Java. The partners in the US-led consortium included Mission Energy, Mitsui & Co of Japan, General Electric Capital Corporation of the US and P.T. Batu Hitam Perkasa, an Indonesian firm formed in 1989 to participate in the development of the country's private power industry.

The leader of the US project in the Paiton power plant, Mission Energy, is also a partner of Indonesia's Lippo Group, a consortium partly owned by Indonesian billionaire Mochtar Riady and the Chinese Army's bank, CITIC (China International Trust and Investment Corporation.)

According to US Federal Electoral Commission records, Mission Energy CEO, John Bryson, donated money to Clinton's campaigns and also donated money to Clinton's legal defence fund. Riady is also accused of illegally donating money to Clinton's political campaigns.

The September 1994 Commerce document states that the Indonesian Paiton project encountered difficulties with financing, because the Asian Development Bank (ADB) knew it also contained the Suharto kickback. Suharto's son-in-law is also documented as known to be a shareholder in P.T. Batu.

On September 30 1994, the Commerce Department, State Department, Mission Energy and several consultants met to review the Paiton project. According to hand written notes, "ADB is still considering this, b/c of very minimal involvement of Indo ruling family in the Mission project. ......ADB's delay revolves around concern for projects in Indonesia involving the first family. 0.75 percent ownership of the Mission project by daughter of Indo pres."

In another document dated November 1, 1994, only days before the Jakarta signing by Clinton, the Commerce Department noted "Ambassador Barry stated that the project is facing two problems."

Those two were - "(i) the ADB financing may cave in and (ii) EXIM financing (Export/Import Bank) Regarding ADB, technical questions have been satisfied, but ADB is skittish about involvement of Indonesia's first family (a minority shareholder is married to Pres. Suharto's daughter)."

The US Commerce Department documents reveal that Commerce was not only aware of Suharto's corrupt activities but quietly cooperated by seeking US-backed financial aid for the project.

The documents also show that US Ambassador Barry worked directly with Linda Yang, executive director of ADB, to obtain financial support despite the concerns over kickbacks to Suharto. One document states Yang was "doing all she can" to help Indonesia obtain the financing for Paiton.

However, after the signing by Clinton, the ADB pulled out of the deal due to their concerns. According to notes taken by Commerce Department officials at a Paiton meeting "Mission Energy expecting default by March (1995) .... first project to go on bond market $180M and will default also."

In April 1995, Commerce Secretary, Ron Brown, came to the rescue and provided for the US Export-Import bank and the Overseas Private Investment Corporation to substitute for the ADB. Over $1.8 billion in limited recourse project debt was provided to Paiton by The Export-Import Bank of Japan, the Export-Import Bank of the United States, the Overseas Private Investment Corporation of the United States and eight commercial banks.

Commerce documents show that Lippo business partner Mission Energy received strong Clinton administration support for the Paiton project. In March 1995, Mission Energy CEO, John Bryson, wrote to Secretary of Commerce Brown: " Dear Ron -- Thank you once again for being so ready to support a successful completion of the Paiton Power Project ..... The U.S. Government, from the President on down, has put a high priority on the Paiton Project."

The Paiton power plant was designed to burn "low-sulfur coal." But in 1996, President Clinton created the 1.7 millon-acre Grand Staircase-Escalante National Monument in Utah, placing off-limits the world's largest deposit of low-sulfur coal.

In the process, Clinton also greatly enriched his supporters and the Suharto family. The coal for the Paiton plant is provided under a no-bid contract from the only other supply of "soft" environmental coal - located in Indonesia - and primarily owned by Lippo Group.

By locking-up the US coal reserves into a national park, Clinton vastly increased the value of Riady's low-sulfur coal reserves in a single stroke of his pen. Prabowo's brother-in-law, Hashim Djojohadikusumo, is also a shareholder of the Indonesian reserves of soft coal and is also another partner in the Mission Energy-General Electric partner at Paiton. Hashim's brother is Suharto's son-in-law and a general in the Indonesian Army.

Today, the Indonesian power companies are bankrupt. Some US companies such as Cal Energy, have taken their Indonesian partners to court for non-payment. Indonesia cannot pay for the power plants nor can its people afford the inflated interest rates driven by the Suharto corruption.

US taxpayer-funded deals have also been cut by EXIM and OPIC in Russia and China in one case, $4 billion worth of natural gas deals.

Meanwhile, US taxpayers are left carrying the burden.

In the context of US reluctance to become involved in the East Timor crisis, current Indonesian President, B.J. Habibie, is also tainted by the Suharto corruption. He was picked by Suharto and has been involved in Indonesian politics since the 1970's. Habibie did not get to the point of becoming Suharto's number two - and eventual successor - just by chance. General Wiranto is aligned with Habibie but he is also aligned with those who don't want Suharto put on trial.

We live in interesting times.

ENDS

Link to main East Timor page

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