In recent years, critical minerals have emerged as strategic commodities in global economic and geopolitical spheres. Minerals such as nickel, cobalt, copper, bauxite, and rare earth elements (REEs) are essential inputs for high-tech industries, including electric vehicle batteries, renewable energy, semiconductors, and defense industries. Global demand for these minerals has surged alongside the energy transition and digital industrial transformation. In this context, Indonesia occupies a highly strategic position in the global supply chain due to its vast reserves of critical minerals.
Indonesia sits at the epicenter of the global nickel supply chain, holding approximately 21 million tons of reserves—around 22% of global reserves—making it the country with the largest nickel reserves. Its nickel production reached approximately 1.8 million tons in 2023, positioning Indonesia as the world’s largest nickel producer. In addition, Indonesia possesses around 927–972 million tons of bauxite reserves and approximately 640 million tons of copper reserves, as well as other strategic minerals such as cobalt, chromium, xenotime, and monazite, which are part of the rare earth element group. These resources are distributed across regions such as Sulawesi, Papua, West Kalimantan, and the Bangka Belitung Islands.
Beyond its reserves, Indonesia also plays a significant role in global production. In 2024, Indonesia accounted for around 60% of global nickel production and approximately 11% of global cobalt production, making it a key actor in the supply chain for minerals essential to the global energy transition. At the regional level, ASEAN as a whole holds approximately 46% of global nickel reserves, 22.7% of bauxite reserves, 20% of rare earth element reserves, and about 6.9% of cobalt reserves. These figures highlight Southeast Asia—particularly Indonesia—as a new center of global mineral geopolitics.
The Trade Agreement Trap: Tariff Incentives vs. Sovereignty
Given Indonesia’s vast critical mineral potential, the United States has increasingly sought to strengthen cooperation with Indonesia to secure supplies of strategic minerals for electric vehicles, clean energy, semiconductors, and defense industries. One recent development is the proposed reciprocal trade agreement between Indonesia and the United States, which is framed as offering export tariff reductions for Indonesian goods entering the U.S. market while opening greater investment opportunities for American companies in Indonesia’s critical mineral sector.
However, behind the narrative of a “strategic partnership,” a fundamental question arises: do these trade incentives truly strengthen Indonesia’s position, or do they deepen dependency and weaken natural resource sovereignty?
A closer look at several provisions of the Agreement on Reciprocal Trade (ART) reveals structural imbalances that warrant critical scrutiny. For instance, Article 6.1 encourages Indonesia to allow, facilitate, and remove barriers to U.S. investment across the entire value chain—from exploration, mining, processing, and refining to transportation, distribution, and export of critical minerals. This provision shows that the agreement goes beyond trade, opening broad avenues for foreign control over Indonesia’s strategic mineral supply chain.
Meanwhile, Article 2.2—which exempts U.S. products and companies from local content requirements (Tingkat Komponen Dalam Negeri/TKDN)—risks undermining Indonesia’s industrialization agenda. In this scenario, Indonesia may be confined to extraction and early-stage processing, while higher-value technological and manufacturing activities remain concentrated in developed countries. In other words, the agreement does not fully establish an equal trade relationship but rather demonstrates how market access and investment are used as tools to reshape control over Indonesia’s strategic resources.
Global Political Economy and the Risk of Extractivism
From a global political economy perspective, this pattern reflects the persistent asymmetry between developed and developing countries. Indonesia is positioned primarily as a supplier of raw or semi-processed materials, while developed countries capture greater value through technological control, manufacturing, finance, and end markets.
In the context of critical minerals, this risk is even more pronounced, as advanced processing technologies—such as rare earth refining, battery precursor production, and electric vehicle component manufacturing—remain dominated by industrialized nations. As a result, Indonesia’s vast mineral reserves do not automatically translate into economic sovereignty if cooperation frameworks continue to place the country at the lower end of the global value chain.
Moreover, Indonesia’s participation in trade schemes heavily oriented toward raw or semi-processed mineral exports risks reinforcing an extractivist development model. Extractivism is an economic model that relies on the exploitation of natural resources to serve global markets without building strong domestic value-added industries. In such a model, natural resources are treated primarily as export commodities rather than as a foundation for national industrial transformation.
The consequences include prolonged dependence on global commodity prices, vulnerability to international market fluctuations, and limited policy space for the state to manage resources in a sovereign, long-term manner.
Governance, Environment, and Regulatory Risks
From a governance perspective, the agreement raises serious concerns about the state’s ability to maintain strategic policies in the natural resource sector. A joint press release by ICEL and PWYP Indonesia (March 16, 2026), for example, highlights that provisions on “good regulatory environmental law” in Article 2.10 (Environment) and Article 2.34 (Environmental Law) are overly general and fail to guarantee stronger environmental protections.
Instead, these provisions risk positioning environmental regulation as an instrument that must be adjusted to facilitate trade and secure supply chains. This poses the danger of a “race to the bottom,” in which environmental standards are weakened to attract investment and ensure uninterrupted commodity flows. If left unchecked, environmental and natural resource policies may shift away from protecting the public interest toward serving global trade efficiency.
Local Impacts: Ecological and Social Consequences
The issue extends beyond policy frameworks. The expansion of critical mineral industries in Indonesia has already generated significant ecological and social impacts at the local level. Nickel mining and processing projects have been linked to deforestation, water pollution, coastal sedimentation, and increased reliance on coal-fired captive power plants (PLTU) to support smelter operations.
In Morowali, for instance, the expansion of the nickel industry has led to large-scale forest clearing and environmental degradation in coastal and surrounding areas. Similarly, in Weda Bay, Halmahera, mining and processing activities have reportedly reduced forest cover and intensified pressure on local communities’ living spaces.
These realities demonstrate that the global energy transition—despite its “green” narrative—is not inherently sustainable. Behind the promise of clean energy lies a significant ecological footprint if mineral extraction continues to expand without strict environmental oversight and social safeguards.
Toward Sovereignty and Just Resource Governance
In this context, Indonesia’s engagement in mineral trade cooperation with the United States must be managed far more strategically. The government cannot simply prioritize export growth or tariff reductions; it must ensure that all trade agreements genuinely strengthen natural resource sovereignty.
This includes enforcing meaningful downstreaming policies, ensuring technology transfer, strengthening domestic industries, enhancing national workforce capacity, and protecting strategic policies such as local content requirements (TKDN). Without these measures, Indonesia risks becoming merely a supplier of raw materials and a site of ecological burden for the global energy transition, while strategic economic gains are captured by external actors.
Equally important is transparency and public participation in trade negotiations. Agreements of this magnitude must not be crafted as “closed-door deals” lacking accountability. The public has the right to understand the scope, implications, and risks of agreements that directly shape national resource governance.
Therefore, the government must ensure adequate information disclosure, meaningful public consultation, and the inclusion of civil society, academics, affected communities, and Indigenous peoples in both the formulation and evaluation of strategic trade policies. Without such openness, trade agreements risk locking Indonesia into unequal economic relationships.
With its vast reserves of critical minerals—such as nickel, cobalt, bauxite, copper, and rare earth elements—Indonesia holds a significant strategic opportunity to shape the global supply chain. However, this opportunity will only be realized if managed through governance that is just, transparent, sovereign, and aligned with public interest.
Otherwise, critical mineral wealth may reinforce longstanding patterns of dependency within the global economic system. Beyond strengthening state policies, it is crucial to ensure protections for local and Indigenous communities in mining areas and to guarantee their participation in decision-making processes. They are not merely affected stakeholders but rightful stewards of the lands and resources that underpin development.
If their voices continue to be marginalized, the development of critical minerals will only reproduce new forms of inequality and extractive injustice.
Writer: Roudhoh Hannaaris Sa’id
Editors: Ariyansah NK and Aryanto Nugroho