The Russian government has agreed to provide Indonesia a US$1 billion export credit to procure several Sukhoi fighter jets, warships and other military equipment from the country.
A memorandum of understanding on the deal was signed in Jakarta on Thursday. It follows an agreement in April 2003 to enhance technical military cooperation between the two countries.
Under this latest deal, the export credit also will be used to buy spare parts from Russia, for troop training programs and to develop Indonesia's defense industry. The agreement is effective for five years.
""As a first step, we will buy six Sukhoi fighter jets for around US$300 million to meet the needs of the Air Force,"" said the secretary-general of the Defense Ministry, Lt. Gen. Syafrie Syamsudin.
He said the ministry hoped two of the Sukhoi jets would be delivered by mid-2007. The Indonesian Military currently owns four Sukhoi jets.
Syafrie said Indonesia also planned to buy several Russian vessels for the Navy, including submarines.
According to the secretary-general, the government agreed to accept the export credit because of the beneficial terms offered. ""The interest rate is only for five years and there is no insurance fee. The credit can save us up to 12.25 percent if compared to a commercial credit.""
""There is the possibility that the value of the credit will be expanded. Russian banks are still studying this cooperation,"" Syafrie said.
President Susilo Bambang Yudhoyono plans to visit Russia to discuss defense cooperation with his counterpart Vladimir Putin.
Alexander V. Denisov, a senior Russian defense official, said his office was preparing for the planned visit by Yudhoyono. However, he could not specify a date.
""We can fulfill all the Indonesian government's military needs since our government has a good relationship with Indonesia,"" Denisov said during Thursday's signing ceremony.
He said Russia had also agreed to find other sources of funds to provide Indonesia more credits for its defense needs.
""We are still talking about the payment system for the Indonesian government,"" he said.