Indonesia Orders Rafale to Drive Fighter Modernization

On 10 February 2022, Indonesia signed an $8.1 billion USD contract with France’s Dassault Aviation for 42 Rafale multi-role fighters. Dassault will start implementing the first phase of the contract for six aircraft in the coming months. It will start the second phase for the remaining 36 aircraft in late 2022 or in 2023.

However, as it stands today, Indonesia has committed to six Rafale fighters. The remaining 36 aircraft are still subject to further approval by the Indonesian government.

This deal marks the conclusion of Indonesia’s several-year-long pursuit for a new multirole fighter. It had originally sought 11 Sukhoi Su-35 fighters from Russia’s United Aircraft Corporation (UAC) in 2017. But the United States put pressure on many of Moscow’s arms customers through CAATSA (Countering America’s Adversaries Through Sanctions Act) to stop buying Russian equipment. Ultimately, Indonesia was unable to finalize the Su-35 deal and, instead, explored alternative options.

As the winning option, the Rafale deal is expected to include a comprehensive package consisting of the fighters as well as munitions, training, and support equipment. However, a critical part of Indonesia’s new fighter requirement was the inclusion of offsets and, potentially, some transfer-of-technology (ToT).

Offsets Are Key

Regarding offsets and ToT, France and Indonesia’s respective defence industry vendors signed a series of agreements in support of the Rafale fighter program.

First, Dassault Aviation signed a memorandum-of-understanding (MoU) with Indonesia’s state-owned PT Dirgantara Indonesia (PTDI) to carry out the Rafale’s maintenance, repair, and overhaul (MRO) work.

Second, France’s Naval Group (formerly DCNS) signed a MoU with Indonesia’s PT PAL to jointly undertake R&D work on submarines. Indonesia is seeking two Scorpene submarines from Naval Group.

Third, Dassault Aviation and PTDI signed an MoU to implement the offset component of the Rafale deal.

Neither Indonesia or France revealed the terms of the offset obligation. However, during the days of the Su-35 deal, Russia had reportedly agreed to an offset worth $970 million consisting of both investment and counter-trade deals. This was equivalent to nearly 50% of the Su-35 deal.

Fourth, Thales Group signed a MoU with PT Len to cooperate in the telecommunications sector. This may be a vehicle to drive French investment in Indonesia’s wireless and/or fiber-based internet efforts.

Fifth, Nexter Munition signed a MoU to jointly manufacture large-caliber munitions with PT Pindad.

The offset component of the Indonesian Rafale deal could be significant. One of Indonesia’s core defence goals for the coming decades is to advance its advanced technology base. Its current commitment to the South Korea KF-21 multirole fighter is a marque example of this ambition.

France may engage with Indonesia’s defence industry when fulfilling their offset obligations. This result in a wellspring of capacity, skill, and technology intellectual property (IP) growth for Indonesia.

Alternatively, Dassault Aviation, Thales, MBDA and Safran Group may invest in Indonesia to build their own servicing or production centers. This would enable these vendors to compete for future Indonesian defence bids from within the country and, potentially, leverage localization as a competitive edge.

For example, if Indonesia requires new helicopters, Airbus Helicopters could propose the H225M Caracal by marketing the fact that PTDI is involved in the production process. Airbus Helicopters can also point to the expansion of local support through Safran and Thales (from the Rafale contract) as a case for how the Caracal involves more local participation.

Modernization Roadmap

In general, the majority of Rafale customers order the MBDA Meteor long-range air-to-air missile (LRAAM) and MBDA Storm Shadow/SCALP air-launched cruise missile (ALCM). Indonesia likely sought both of these munitions alongside others, such as the MBDA MICA LRAAM and MBDA AASM precision-guided bomb kit.

Indonesia’s commitment to procure 42 aircraft suggests that the Indonesian Air Force (TNI-AU) is opting to rely on only the Rafale for its fighter needs, at least until the availability of the KF-21.

This is a relatively large scope given the TNI-AU’s history of buying in incremental batches and maintaining a variety of different fighter types. It seems that the TNI-AU is moving towards type consolidation where it leans on the Rafale and F-16 for its combat aircraft needs, and the T-50 as its advanced trainer. The KF-21 could factor in as the long-term option to replace current fighters, like the F-16, in the 2030s or 2040s.

However, consolidation may only be a vision for now. Currently, the TNI-AU only has six Rafale fighters on order; so, it is still following its tradition of small batch orders. It could, potentially, add another fighter type into the mix through another small unit order. Basically, the six-unit Rafale deal is similar in scope – a small unit order – as the ill-fated Su-35 contract, which was for 11 aircraft.

Interestingly, the U.S. Defense Department authorized the sale of 36 Boeing F-15ID fighters via a potential $13.9 billion USD contract. The approval came through on the same day Indonesia inked the Rafale deal. It is possible that Dassault will compete against the F-15ID so as to secure the follow-on 36-unit order, in which case, there is a chance that the pricing and offset terms are not entirely set in stone (for the follow-on deal). Ultimately, this could be a ploy by the Indonesian government to secure a better deal.

In any case, the common factor between the fighters the TNI-AU has been exploring for its future fleet is that they involve medium-to-heavyweight twin-engine designs. In fact, of the fighter types on Indonesia’s roadmap, it seems that the KF-21 is the lightest one in terms of weight and payload capacity. Thus, it may be a distinct requirement (e.g., the lightweight side of the TNI-AU’s plans) and, thus, unaffected by either the Rafale or the potential F-15ID purchases.

The TNI-AU is likely focusing on these larger designs to leverage a heavy payload at long range. This would make sense seeing that a significant portion of the TNI-AU’s operating theater covers Indonesia’s exclusive economic zone (EEZ) at sea. In fact, Indonesia has the world’s six largest EEZ at 200 nautical miles. Both the F-15ID and Rafale would be able to carry a sizable stand-off weapon (SOW) capability (e.g., anti-ship cruising missiles, air-launched cruise missiles, gliding munitions, etc) at long-range.

Geo-Strategic Implications

It is worth noting that tensions between Indonesia and China are a potential reality. Indonesia has a dispute with China regarding the control of an area in the South China Sea. In December 2021, China told Indonesia to stop drilling for oil and natural gas in the disputed territory (Reuters).

It is possible that the Indonesian government is putting the need to control this disputed territory at the top of its long-term geo-strategic priorities. This can, in part, explain the TNI-AU’s focus on procuring large numbers of Rafale, F-15ID, and/or KF-21 fighters.