Indonesia’s ‘Gasoline Godfather’ targeted in $23 billion graft probe

LONDON – A reclusive oil merchant dominated Indonesia’s fuel trade for decades. Now he is embroiled in an US$18 billion (S$23 billion) probe into the country’s state-owned oil producer that has become a litmus test for President Prabowo Subianto’s anti-corruption drive.

Mr 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 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 the authorities say have cost the state 285 trillion rupiah (S$22.6 billion).

The probe involves multiple companies, including at least one controlled by Mr 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 Dr Siwage Negara, a research fellow at the ISEAS – Yusof Ishak Institute in Singapore. “This is one thing the Prabowo administration needs to fix if it wants 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 antigraft investigations in decades in Indonesia – has already resulted in the detention of more than a dozen executives, including Mr Chalid’s son, and the questioning of more than 250 witnesses.

Mr Chalid himself is alleged by the attorney-general’s office to be the beneficial owner of Orbit Terminal Merak (OTM), which the 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 Mr 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.

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”.

Still, the authorities have publicly named Mr Chalid several times as a suspect in the sprawling case, and earlier in August said 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 transit, according to the attorney-general’s office.

Investigators have also seized assets they say are linked to Mr Chalid, including a Toyota Alphard, a Mini Cooper, three Mercedes sedans and cash in multiple currencies.

Corruption probes are not new to Indonesia, and Mr Prabowo’s 10-month-old government has already pursued several – but this is the first attempt to tackle a major state-owned entity and a businessman of Mr Chalid’s stature.

Mr Chalid’s political links date back at least three decades to the era of authoritarian leader Suharto, when he was 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. Mr Chalid has not commented on the report.

But it was through his oil trading business that Mr 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 its peak, companies affiliated with Mr Chalid accounted for as much as 70 per cent of the unit’s contracts, according to comments in July by Mr Sudirman Said, a former energy minister who commissioned a 2015 government audit into Petral.

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 chief executive Dwi Soetjipto.

The conclusions were reported to Indonesia’s antigraft agency, but no case was ever launched against those involved. Petral, though, was shut down.

Mr Chaild’s 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 the demand of more than 280 million people for petrol, diesel and other products. 

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

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

Some of those imports have been replaced with purchases from other countries including the United States, with whom Indonesia struck a trade deal in July.

Ultimately, the renewed push for energy self-reliance left Mr 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. BLOOMBERG