Welcome to Foreign Policy’s Southeast Asia Brief.
The highlights this week: Countries around the region brace for higher fuel prices, a Thai ship is struck by Iranian missiles as it transits the Strait of Hormuz, and Chinese influence reshapes a border in Myanmar.
How High Fuel Prices Are Rattling Governments
This handout photo released by the Royal Thai Navy shows smoke rising from the Thai bulk carrier Mayuree Naree near the Strait of Hormuz after an attack on March 11.
Handout/Royal Thai Navy/AFP via Getty Images
Oil is up to more than $100 dollars a barrel and will likely rise further. Southeast Asian governments are already feeling the pinch politically as petrol stations reportedly run dry in many countries.
Measures by governments across the region include trying to conserve fuel; legislating cuts to fuel taxes; and, in some cases, limiting energy exports.
The immediate problem is that every country in the area, barring Singapore, either provides fuels subsidies in some form or is proposing to roll them out. The subsidies cushion the pocket of the consumer but threaten government finances.
In Indonesia, such subsidies were already set to absorb nearly 10 percent of the government’s 2026 budget. But that hinged on the assumption of oil averaging roughly $70 a barrel and a relatively steady rupiah. Neither of these holds.
Even with the government signaling that there will be price increases, the subsidy bill is set to become much bigger. The government is preparing to roll out implementation of an emergency COVID-19-era regulation to let it ignore its 3 percent deficit limit. But with investors already nervous about Indonesian debt, markets could rebel.
The 1998 revolution was in part sparked by petrol prices rising by an eyewatering 71 percent. Between 2005 and 2018, Indonesia saw five riots over fuel prices, and memories of last year’s unrest, fueled partly by cost of living issues, are fresh.
The day after the first U.S. strikes on Iran, Indonesia’s military was conspicuously deployed around the capital, Jakarta. The government has downplayed the apparent connection.
Other governments have reacted less precipitously but have also rolled out expensive measures to protect consumers at the pump.
While Thailand has yet to finalize its post-election government, the presumptive (and incumbent) Prime Minister Anutin Charnvirakul won office with promises to boost growth, roll out crowd-pleasing consumer support schemes, and trim the national debt.
It was always going to be tricky to square this circle, but now it looks to be for the birds. A fuel price cap introduced on March 10 is costing about 1.2 billion baht (about $37 million) a day and has wiped out a previous surplus for the government’s oil fuel fund.
Price hikes may be coming, but this will eat into growth.
Malaysia’s petrol and diesel subsidy bill has quadrupled over the past month, as the government has promised to keep fuel prices steady.
In Vietnam, prices have continued to rise even as the government draws on its fuel price stabilization fund.
Meanwhile, the Philippines’ government—having long ago liberalized the fuel market—is scrambling to impose regulations to let it control prices.
These countries lack the same bloody history of fuel-related riots that Indonesia has. But all doubtless appreciate the fact that price hikes can be potent political destabilizers.
Transport unions in the Philippines are planning national strikes. One such strike in 2017, held over a different set off issues, cost an estimated 1.28 percent of daily GDP. And in Vietnam in 2008, fuel price rises helped spark a rare flurry of strikes and protests.
Myanmar’s government was already facing civil war. That government has the unique challenge of not just managing civilian anger but also shortages of fuel for its military jets, which had played a vital role in its pushback against resistance groups. Iran had previously been an important supplier.
What We’re Watching
Thai ship struck in Hormuz Strait. On Feb. 11, Thai container ship Mayuree Naree was struck by Iranian missiles while trying to cross the Strait of Hormuz.
At time of writing, 20 of the 23-strong crew had been evacuated by the Royal Navy of Oman.
However, three others remained stranded on board, with the Royal Thai Navy saying that intermittent weapons fire in the area made their evacuation complicated.
Iran’s Islamic Revolutionary Guard Corps (IRGC) has claimed responsibility for the attacks, saying the ship “ignored the warnings” of the IRGC naval forces. So far, some 20 ships have been hit while trying to cross the strait.
Thailand has lodged a formal diplomatic protest with Iran over the incident, and it has also requested an apology.
Anutin, Thailand’s aforementioned incumbent prime minister, said the government is mobilizing all available resources to evacuate the three remaining sailors. He added that the attack was “not appropriate.”
Anutin also emphasized that the facts of the incident were still unclear, though, and that the circumstances of the attack should be carefully examined before its impact on Thailand-Iran relations could be decided.
Thailand and Iran have enjoyed a cordial relationship despite the former being a treaty U.S. ally. Iran played a central role in helping Thailand negotiate the release of Thai workers taken hostage by Hamas during the Palestinian group’s attack on Israel on Oct. 7 2023.
Meanwhile, three Indonesian sailors remaining missing after a United Arab Emirates flagged tugboat was hit in the straits on March 6.
New U.S. tariff probes as trade pact convenes in Hanoi. Seven Southeast Asian countries—Cambodia, Indonesia, Malaysia, Singapore, Thailand, the Philippines, and Vietnam—have been subjected to U.S. probes based on allegations of unfair trade practices.
The investigations, launched under Section 301 of the U.S. Trade Act of 1974, which empowers the president to levy tariffs on countries found to be pursuing unfair trade practices, could lead to further tariffs.
Two investigations are in progress: one into “excess capacity” in manufacturing, which covers all of the aforementioned countries bar the Philippines, and one into forced labor, which covers all seven countries.
Public hearings into the investigations are scheduled for April 28 and May 5. Most of the accused countries are pushing back.
Malaysia’s trade minister said that the country is ready to give answer to both charges and confirmed that Malaysia’s previous trade deal with the United States has been nullified.
Singapore has also politely but firmly disputed the claims—having previously avoided being bounced into a hasty tariff deal.
Thailand is also pushing back, arguing that a portion of its surplus with the United States comes down to U.S. companies producing in Thailand. It is also looking to secure exemptions on a product-by-product basis.
The Philippines has similarly said that it will engage with the United States to explain why it should not be subject to investigations.
Meanwhile, Indonesia is taking a softer line, saying it still plans to ratify the tariff deal that it hammered out with Washington despite the probes.
Cambodia appears to be keeping quiet thus far, as is Vietnam.
Meanwhile, though, on March 11, Hanoi saw the opening of this year’s first senior officials’ meeting of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—a massive trade pact spanning 12 nations, but not including the United States.
Indonesian activist maimed with acid. Andrie Yunus, the deputy coordinator of the KontraS rights group, was attacked in Jakarta on March 12.
The attack was carried out by two men on a motorbike who threw acid at him, leaving him with burns on 24 percent of his body.
Andrie is an outspoken critic of the growing political influence of the military in Indonesia.
“We view this acid attack as an attempt to silence critical voices in society,” Dimas Bagus Arya, another KontraS coordinator, told media.
Jakarta police say they have opened an investigation into the matter. And the national police chief has said the case is receiving special attention on orders from the president.
President Prabowo Subianto has been widely accused of overseeing the creeping return of the military in Indonesian politics.
Threats against activists and government critics are common in Indonesia. However, the extreme violence of this incident stands out.
Photo of the Week
Ethnic minority citizens line up to cast their votes inside a polling station in the northern province of Tuyen Quang, Vietnam, on March 15.STR/AFP via Getty Images
