Competitive Interdependence: The Singapore-Indonesia Energy Dispute and the Future of ASEAN Integration
The recent cut in Indonesian natural gas exports to Singapore is a small one in terms of volume but quite significant in terms of political implications. Indonesia has reduced its pipeline deliveries by some 31 million standard cubic feet per day to redirect the gas to domestic electricity generation. For Singapore, the reduction is less than 2% of its daily gas requirement and could be easily made up via LNG. The dispute though highlights a deeper issue. Decades of economic integration have created a situation of mutual dependence, but that very interdependence has also created political vulnerabilities which both sides now wish to mitigate.
Indonesia is presenting its decision as a perfectly legitimate response to a domestic need. Gas which was previously being exported to Singapore is now being piped to Batam, Bintan and Sumatra. The domestic situation there has been such that there is a very real and pressing need for gas with the recent 16 hour blackout a stark example of the situation. Energy Minister Bahlil Lahadalia says the cut is still within the contractual minimum as Indonesia has only reduced its exports by about 8%. A breach of contract would only occur at 10%. Therefore, Jakarta is firmly of the view that it is still in full compliance with its obligations even in the face of Singapore's public expressions of concern.
The dispute is in fact more than just a matter of contractual ceilings. President Prabowo Subiantohas spoken of Indonesia’s natural resources as the blood of the nation, while Bahil has made the point that exports may well be re-evaluated should other countries fail to treat Indonesia with the respect it deserves. That’s a very clear statement of the link between energy policy and national sovereignty, national dignity and economic survival. Indonesia is currently using around 70% of its gas for domestic consumption, and the Prabowo government would like to see a greater proportion of the country’s energy going into power generation, petrochemicals and industrial downstream processing.
Such resource nationalism has an understandable domestic logic. Indonesia wants to move beyond exporting raw materials and use its resources to generate employment, industrial capacity, and higher-value production. However, the timing and language surrounding the gas reduction have created the perception that commercial energy flows may become instruments of political signalling. Indonesian analysts have linked the confrontational rhetoric toward Singapore and Malaysia to rising living costs, demonstrations, fuel shortages, forest fires, and dissatisfaction with government accountability. Nationalist posturing can temporarily redirect public frustration toward external actors, but it may also damage confidence among regional partners and investors.
Singapore’s response has been deliberately restrained but firm. Prime Minister Lawrence Wong emphasized that commercial contracts must be honored and that Singaporean importers would protect their contractual rights. Energy Minister Tan See Leng similarly argued that honoring agreements is the foundation of reputation and trust. Singapore has avoided directly accusing Indonesia of violating the contract, but its language indicates concern about the predictability of future supplies and the broader credibility of bilateral energy cooperation.
At the same time, Singapore is accelerating a diversification strategy that could gradually reduce Indonesia’s leverage. In 2025, liquefied natural gas already accounted for 57 percent of Singapore’s gas imports, compared with 43 percent supplied through pipelines. Singapore is expanding LNG capacity, maintaining standby facilities, increasing fuel reserves, building new power infrastructure, and examining biomethane, geothermal, solar, and nuclear power. It is also strengthening energy cooperation with Malaysia. These measures make strategic sense for a country that generates approximately 95 percent of its electricity from natural gas, but they could weaken Indonesia’s long-term position as Singapore’s principalpipeline-gas supplier.
This is the central paradox of competitive interdependence. Indonesia wants greater control over its resources, while Singapore wants protection from Indonesia’s domestic political decisions. Each country’s attempt to strengthen its own resilience may reduce the incentives sustaining bilateral interdependence. Jakarta’s increasingly protective position has already raised doubts about planned exports of green electricity to Singapore. If Indonesia delays electricity exports, while Singapore secures alternative suppliers and technologies, both countries may lose opportunities for investment, infrastructure development, and a more efficient regional energy market.
The situation right now is very much in the teeth of the fact that the two governments have just announced a whole host of cooperation on carbon markets and cross border electricity. The July 2026 agreements included a commitment to at least 3.4GW of cross border electricity by 2035 as well as cooperation on transmission, climate finance, forest protection, coastal restoration and clean tech. That is a very clear demonstration that Indonesia and Singapore are still able to work together on common ground. The issue of course is that MoUs in themselves won't result in any real integration if the future supply of electricity is still going to be at the mercy of a domestic policy decision at any given moment.
Energy is of course not the only area in which mutual interdependence gives rise to political friction. Singapore's probe into companies allegedly linked to the Indonesian forest fires has given rise to sovereignty issues, while allegations of Singaporean diplomats having met with various Indonesian public figures has added to the suspicion. These are examples of how environmental damage, corporate linkages, domestic politics and economic security are all increasingly transnational in nature. Neither government can deal with these issues effectively on its own, but co-operation is made more difficult when the other side is portrayed in the public discourse as an agent of interference or of disrespect.
For ASEAN the lesson is a difficult one. Regional energy integration cannot be predicated solely on political goodwill and vague bilateral understandings. It will require enforceable supply agreements, clear domestic market obligations, advance notice of any disruption, a compensation regime, emergency reserves and an impartial mechanism for the resolution of disputes. ASEAN should also work to develop co-ordinated contingency arrangements so that a temporary shortage in one country doesn't instantly become a bilateral political crisis.
The Singapore-Indonesia relationship remains too important for either government to abandon. Singapore needs access to regional energy, markets, and infrastructure, while Indonesia benefits from Singaporean investment, technology, financing, and demand. Former deputy foreign minister Dino Patti Djalal correctly described trust and cooperation as vital to both countries and warned against actions intended to harm either neighbor. Yet trust cannot rest only on personal relationships between leaders. It must be supported by institutions capable of surviving domestic political pressure.
The gas reduction will probably not cause an immediate energy crisis in Singapore. Its lasting significance lies elsewhere. It demonstrates how quickly economic interdependence can become a source of strategic anxiety when contracts, domestic priorities, and nationalist politics collide. If Indonesia and Singapore can transform this dispute into stronger rules for consultation and supply management, they could provide a model for ASEAN integration. If they instead pursue parallel forms of economic self-protection, the region may remain interconnected but not genuinely integrated.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of IIPA and this platform.
Author
Wai Yan Phyo Naing is a visiting scholar at the Institute of Modern History, Academia Sinica in Taipei, Taiwan, and an Associate Research Fellow at the Centre for Peace and Reconciliation (CPR-Myanmar). He has a Ph.D. in History with a focus on International Affairs and International Regional Studies from the National Research University – Higher School of Economics, Moscow and his research areas include Myanmar studies, Asia-Pacific studies, Myanmar foreign policy, Myanmar-China and Myanmar-Russia relations, Taiwan studies, and Myanmar migrant issues in Thailand.