Indonesia’s ‘Gasoline Godfather’ targeted in US$18 billion graft probe

[LONDON/JAKARTA] A reclusive oil merchant dominated Indonesia’s fuel trade for decades. Now he is embroiled in a US$18 billion probe into the country’s state-owned oil producer that has become a litmus test for President Prabowo Subianto’s anticorruption drive.

Mohammad Riza Chalid, who has long maintained high-level political ties, is known in the industry as the “Gasoline Godfather” for his key role in importing billions of US dollars of oil products, mostly from neighbouring Singapore. His star has been waning, Indonesia wants to rely less on costly overseas purchases of petrol or diesel, but he is the most audacious target to date for the current administration, as it reshuffles its energy procurement and attempts to supercharge growth in South-east Asia’s largest economy.

Though Indonesia was an early member of Opec, oil production has declined sharply in recent decades, falling almost 60 per cent in the last quarter-century as fields age and investment falters, driving up its import bill. State oil-and-gas giant Pertamina has faced repeated criticism, including from Indonesia’s parliament, for its inefficiency. It is now being investigated for irregularities over the import of crude and oil products between 2018 and 2023 that authorities say have cost the state 285 trillion rupiah, or roughly US$18 billion. The probe involves multiple companies, including at least one controlled by Chalid, according to statements made by the attorney general’s office.

“Prabowo wants to be seen as a clean president, the leader that is brave enough to eradicate corruption,” said Siwage Negara, a research fellow at the Iseas-Yusof Ishak Institute in Singapore. “This is one thing that the Prabowo administration needs to fix if they want to really improve the quality of governance within the state-owned enterprises.”

The widening inquiry into Pertamina, its subsidiaries and trading companies, one of the biggest anti-graft investigations in decades in Indonesia, has already resulted in the detention of more than a dozen executives, including Chalid’s son, and the questioning of more than 250 witnesses.

Chalid himself is alleged by the attorney general’s office to be the beneficial owner of PT Orbit Terminal Merak, which authorities believe secured a long-term lease deal with Pertamina that enabled unjust enrichment through opaque fuel-storage contracts. His son, Muhammad Kerry Adrianto Riza, is listed in company filings as a major shareholder in OTM via a series of holding companies.

Indonesia’s attorney general has yet to formally charge Chalid, who has failed to appear after being summoned three times since the investigation into Pertamina and its subsidiaries began. Officials say immigration records show he left Indonesia in February for Malaysia. He has not made any public statement on the case, and has no known legal representative. A lawyer for the son, currently being detained, did not respond to requests from Bloomberg, but had previously told Tempo magazine that his client’s business had “nothing to do with his parents.” Queries delivered in person to the registered office of OTM were not answered.

Still, authorities have publicly named Chalid several times as a suspect in the sprawling case and earlier this month said that they would seek a so-called Red Notice from Interpol. Such a notification is an international alert for a wanted person, not an arrest warrant. The process is currently still in train, according to the attorney general’s office. Investigators have also seized assets they say are linked to Chalid, including a Toyota Alphard, a Mini Cooper, three Mercedes sedans and cash in multiple currencies.

Pertamina chief executive officer Simon Aloysius Mantiri, appointed by Prabowo last year, has apologised for the probe, without specifically addressing the details of the investigation. He said that the firm welcomed the attorney general’s actions and would work with the government to improve transparency.

Corruption probes are not new to Indonesia, and Prabowo’s 10-month-old government has already pursued several, two high-profile political figures, seen as opponents of his coalition and of the previous administration, were convicted of corruption-related offenses last year and granted clemency this month, but this is the first attempt to tackle a major state-owned entity and a businessman of Chalid’s stature.

Chalid’s political links date back at least three decades to the era of authoritarian leader Suharto, when he is reported to have helped acquire a Russian Sukhoi jet. According to state news agency Antara, he was trusted to represent an arms purchasing company in order to secure the deal. He has not commented on the report.

But it was through his oil trading business that Chalid made waves, leveraging his political connections to take an expansive role in Indonesia’s imports of oil products, according to former associates and business partners who asked not to be named, given the sensitivity of the matter.

Pertamina’s Singapore-based trading arm, Pertamina Energy Trading, also known as Petral, was core to the trade – at the peak, companies affiliated with Chalid accounted for as much as 70 per cent of the unit’s contracts, according to comments made by Sudirman Said, a former energy minister who commissioned a 2015 government audit into Petral, on a podcast last month.

That audit, which covered Petral’s operations from January 2012 to May 2015, found that intervention by third parties resulted in Pertamina paying higher prices for fuel and crude imports, according to then-CEO Dwi Soetjipto. The conclusions were reported to Indonesia’s anti-graft agency, but no case was ever launched against those involved. Petral, though, was shut down.

Chalid, who is part of Indonesia’s Arab minority, has never been a public figure, eschewing high-profile outings, but his fortune grew steadily – in 2016, business magazine GlobeAsia estimated his wealth at US$460 million. He invested widely, including in palm oil plantations and real estate. Among other bets, he is a significant shareholder of budget airline AirAsia Indonesia, corporate filings show.

His political links grew accordingly, as he cultivated ties and welcomed politicians to his office in Jakarta’s business district, according to former contacts. He helped finance Prabowo’s first failed presidential bid in 2014, according to his former associates, though during a second campaign five years later, he backed a party supporting Prabowo’s opponent, and the ultimate victor, Joko Widodo.

Still, his rise was predicated on Indonesia’s heavy dependence on imported fuels. While it still produces significant volumes of crude, Indonesia has long lacked the refining capacity to meet more than 280 million people’s demand for petrol, diesel and other products.

But Prabowo in particular had made reducing that vulnerability a priority, seeking to attract investment into onshore processing but more immediately cutting back on heavy reliance on Singapore, where Chalid and his profitable business were based, working out of a modest office.

“We are importing fuel from a country that does not even produce it. That is funny,” Energy Minister Bahlil Lahadalia told a conference in May.

Some of those imports have been replaced with purchases from other countries, including the US, with whom it struck a trade deal last month.

Ultimately, the renewed push for energy self-reliance has left Chalid at odds with the government’s targets. According to political analyst Kevin O’Rourke, it was a change that left “literally the biggest player” looking far less untouchable, just as a new government sought to make its mark.

“The oil business has just been too stable, it’s not been as dynamic as nickel and palm oil,” O’Rourke, principal at Jakarta-based consultancy Reformasi Information Services, said. “He’s not the only game in town anymore.” BLOOMBERG