Indonesia’s Delicate Dance: Navigating the Fallout of the Khamenei Assassination
When the United States and Israel struck Tehran in late February 2026, Jakarta’s response was conspicuously muted, reflecting the restrained atmosphere within Indonesian diplomacy. As “Operation Epic Fury” unfolded on February 28, 2026, reportedly eliminating Iran’s Supreme Leader, Ayatollah Ali Khamenei, a forceful reaction from Indonesia, the world’s largest Muslim-majority nation, was anticipated. Instead, the initial response was a tepid expression of “deep regret,” lacking direct condemnation of Washington or Tel Aviv and omitting immediate official condolences from the presidential palace.
This restraint contrasted sharply with the vocal stance taken by former president Megawati Soekarnoputri, who issued condolences for Khamenei’s death and subsequently congratulated Mojtaba Khamenei upon his succession through the Assembly of Experts on March 10, 2026. This action, perceived as a form of “shadow diplomacy,” evoked the legacy of the 1955 Bandung Conference at a time when the central government appeared strategically hesitant.
Geo-economic Shackles
Indonesia’s constrained response to the Iran crisis stems from the evolving geo-economic and geopolitical landscape shaped by the United States. On February 19, 2026, Jakarta signed the Agreement on Reciprocal Trade (ART) in Washington, a pact that, while marketed as a “Golden Era,” functions as a constraint on Indonesia’s foreign policy autonomy.
Economic pragmatism has seemingly pushed Indonesia’s long-standing “free and active” foreign policy doctrine to a precarious point. By aligning with the Board of Peace (BoP), a U.S.-backed alternative to the United Nations launched in Davos in January 2026, Indonesia has entered a system prioritizing market stability and energy security, even at the cost of shielding key allies from accountability. Jakarta is no longer a bystander but a participant in an order where geopolitical alignment carries economic consequences. This results in a delicate balancing act between dollar dependence and the potential erosion of Indonesia’s ideological identity.
Mounting economic pressure since early 2025 underscores this dynamic. The U.S. Threatened unilateral tariffs of up to 32 percent on Indonesian exports to reduce a $23.7 billion trade deficit. To avert economic disruption, Indonesia agreed to the ART deal, eliminating tariffs on over 99 percent of U.S. Goods. A key clause requires Indonesia to import $15 billion worth of U.S. Energy annually – a twelvefold increase – shifting energy dependence from the Middle East to the Gulf of Mexico amidst conflict in the Strait of Hormuz.
This structural dependence creates a deterrent effect: criticism of U.S. Military actions risks triggering Section 232 of the Trade Expansion Act, potentially revoking Indonesia’s preferential trade status on national security grounds. Indonesia’s moral voice on the global stage now carries a measurable economic cost, with each potential condemnation jeopardizing the trade surplus needed to stabilize the rupiah.
Further compounding this is the role of strategic investment. The expansion of Freeport-McMoRan’s Grasberg mine, in partnership with Indonesia’s Ministry of Investment, is projected to generate $10 billion annually. Indonesia’s ambition to dominate the global nickel downstream industry and the electric vehicle battery supply chain as well remains contingent on Western technology and market access. Foreign policy, increasingly resembles a balance sheet calculation.
The Board of Peace and the “Free and Active” Dilemma
Indonesia’s accession to the Board of Peace represents a shift from UN-based multilateralism toward a more transactional order. The BoP is a body where the U.S. Wields unilateral veto power, and permanent members contribute $1 billion in membership fees. By joining, Indonesia has implicitly acknowledged Washington’s primacy in shaping narratives of peace and stability.
The timing is significant, occurring just one week after the BoP’s inaugural meeting in Washington on February 19, 2026. This has drawn criticism from the Indonesian Ulema Council (MUI), which argues the BoP has lost legitimacy, serving as a mechanism for granting impunity to U.S. And Israeli military actions. Indonesia’s commitment to deploying troops to the International Stabilization Force (ISF) in post-conflict Gaza further complicates matters.
This places Indonesia’s military in an ethical bind, fulfilling a peacekeeping mandate while enforcing an order shaped by actors involved in the Iran strikes. President Prabowo Subianto’s administration has adopted a “rational, calm, and non-emotional” approach, delaying further discussions on BoP commitments without outright withdrawal.
Domestically, tensions have intensified, with civil society organizations like Nahdlatul Ulama condemning the strikes as a violation of international norms and warning that global silence could fuel radical movements. This internal pressure prompted Indonesia’s Ministry of Foreign Affairs to issue a stronger statement on March 9, 2026, calling for a halt to the attacks, albeit in cautious diplomatic language.
Dual-Track Diplomacy
Megawati Soekarnoputri’s stance on Iran can be interpreted as a deliberate dual-track diplomacy. While President Prabowo maintains economic ties with Washington, Megawati, through the Indonesian Democratic Party of Struggle (PDI-P), preserves Indonesia’s historical and ideological links with Tehran. Her correspondence, invoking the principles of “Trisakti” and Iran’s self-reliance, serves as a pressure valve to prevent a lasting rupture in bilateral relations.
However, this strategy carries financial risks. Indonesia’s banking sector faces increasing scrutiny from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) regarding entities linked to Iran. The collapse of the Iranian rial and the reimposition of UN sanctions have severed Tehran’s shadow banking networks, requiring Indonesia’s Financial Services Authority (OJK) and Bank Indonesia to prevent entanglement with blacklisted entities.
Looking ahead, Indonesia must convert its geo-economic strengths—particularly in critical minerals—into political leverage. The shift away from Boeing’s F-15EX fighter jets toward Dassault Rafale aircraft and the KF-21 program signals an effort to diversify defense partnerships and reduce overreliance on a single supplier. Strategic silence may offer short-term stability, but risks eroding Indonesia’s credibility as a regional leader.