Oceania | Economy | Oceania

The Deepening of Australia-Indonesia Ties Yields Dividends With Fertilizer Shipment

Tonnes of fertilizer are being unloaded in Brisbane for Australian farmers. It’s not a one-off deal but the product of consistent fertilizing of the relationship between Canberra and Jakarta.

The war in Iran did more than just disrupt the flow of oil and liquified natural gas (LNG) out of the Middle East, impacting the critical fuel supplies of many countries. It also disrupted another essential commodity: fertilizer. Around 30 percent of global nitrogen-based urea fertilizer, as well as large shares of ammonia and sulfur, normally move through the Persian Gulf region. When fighting escalated in late February, shipping insurers raised premiums, some vessels were delayed or stranded, and producers in Iran and Qatar temporarily cut output.

Australian agriculture is heavily dependent on imported fertilizer. Depending on the year, up to 80 percent of its fertilizer requirements are foreign sourced. This creates a food security vulnerability that the war exposed. 

Yet just as Australia productively used its regional relationships to secure its fuel supply – with now greater fuel reserves than when the war began – it has done likewise with fertilizer. This week a ship carrying 47,250 tonnes of urea fertilizer from Indonesia docked in Brisbane, part of a 250,000-tonne agreement between the two countries. 

Given that Australia is a significant agricultural exporter to Indonesia, it is in Jakarta’s interests for Australia’s agricultural industry to be productive. As Indonesia is the second largest importer of wheat in the world, Australia has been able to provide it with supplies that had been affected by the war in Ukraine. 

Food security has become a serious geopolitical concern since the disruptions of the COVID-19 pandemic, as well as the wars in Ukraine and Iran. Fertilizer markets have been among the most severely affected, with price surges as sanctions, energy shocks, and shipping bottlenecks combined into supply chain constraints. It’s clear to governments how dependent food production is on events that may be far beyond their borders. 

While Australia is a major agricultural exporter, Indonesia possesses substantial fertilizer production capacity through its state-owned industrial companies. This means that there is a genuine economic complementarity between the two countries – a previous lack of which had hindered the trading relationship.

Yet the fertilizer agreement is more than simply a commercial transaction. The two governments have framed the deal as part of a broader Indo-Pacific food security and supply chain resilience........

© The Diplomat