Jakarta. President Joko “Jokowi” Widodo’s recent meeting with his American counterpart Joe Biden has brought the nickel-rich Indonesia a step closer to a trade deal on critical minerals with the US.

Washington’s Inflation Reduction Act (IRA) has set an obstacle in Indonesia’s dream of becoming a leading player in electric vehicle (EV) batteries. The law grants EV buyers in the US tax credits of up to $7,500. For an EV to qualify for half of the tax credit, a portion of the critical minerals in its batteries must be extracted or processed in the US or countries with whom it has a free trade agreement (FTA). 

Indonesia does not have an FTA with the US. This prompted Jakarta to pursue a critical minerals deal with Washington -- all in hopes its processed nickels, among others, get covered by the IRA. Jokowi is currently in the US and has already met Biden at the White House for bilateral talks. The meeting saw the two leaders committing to developing an action plan that can lay the foundation to launch negotiations on a critical minerals agreement.

“In principle, [the two leaders] agreed that it is important to strengthen cooperation on critical minerals. For that reason, a work plan will be developed towards the establishment of the critical mineral agreement,” Foreign Minister Retno Marsudi said in a press statement following the Jokowi-Biden talks.

She did not give a set timeframe for the work plan completion. “If there is a critical minerals agreement in place, Indonesia can supply EV batteries to the US in a sustainable manner, and for the long term,” Retno said.

Indonesia holds the world’s largest nickel reserves. According to the US Geological Survey,  Indonesia’s reserves of nickel -- a mainstay in battery production -- stand at 21 million tons. The Southeast Asian country already stopped exporting unprocessed nickel ores in favor of shipping them in the form of higher value-added goods.

Japan earlier this year struck a critical minerals agreement with the US, enabling Tokyo to enjoy the benefits of IRA’s tax credits. 

Jokowi’s visit to the White House also saw the upgrade of Indonesia-US diplomatic ties into a comprehensive strategic partnership. According to Retno, the freshly announced status is set to bolster bilateral cooperation, particularly on the economic front.

Read More:Biden Hails 'New Era' of Ties between US and Indonesia