Palm Oil For Arms

Yakovlev Yak-130 Mitten performing a display at LIMA 2019. Zaq Sayuti.

SHAH ALAM: Palm oil for arms. It appears that we will have to resort to barter trade to buy new stuff for the military like back in 1993 and 2003 when we bought the Fulcrums and Flankers, respectively.

Defence Minister Mohamad Sabu said this in an interview on April 19.

From NST, from a Bernama report.

Defence Minister Mohamad Sabu said these countries had shown their readiness to accept palm oil in exchange for military equipment.

“We have been working towards a barter system and have received a positive response,” he told a press conference here today.

Mohamad said the acquisition of defence assets through barter could be a way to reduce the country’s financial burden.

The minister said he would be leaving for Russia tomorrow for a bilateral meeting with the Russian Defence Minister and barter trade would be among the issues to be discussed, adding that if successful, the barter trade could potentially raise the price of palm oil.

Commenting on Prime Minister Tun Dr Mahathir Mohamad’s statement last month on the possibility of Malaysia selecting non-European nations to procure military jets, Mohamad said the decision was not set in stone.

From the story, one might assumed that such purchases will be made purely by barter trade, which is not totally correct, of course. For example when we bought the Flankers back in 2003, we paid part of the deal with palm oil and a deal to blast a dentist into space and the rest with cash.

Sukhoi Su-30MKM from the 11th Squadron – M52-09 and M52-18.

There is nothing wrong in this of course but one has to wonder whether it is good to show our hands at this moment especially when the Defence Ministry is putting up a white paper.

Mig-29s over Subang as part of the flypast training on Dec. 19, 2016.

It must be noted that Russia already bought -either cash or barter trade- 90 per cent of its palm oil from Indonesia, which left us not much room to maneuver in this regard. Furthermore, if we buy from Russia, it is likely we will be slapped with sanctions from the US.

Yakovlev Yak-130 Mitten performing a display at LIMA 2019.

I guess we have not yet learnt the lessons we had for the last 30 years or so. And we are likely to repeat it.

— Malaysian Defence

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Shah Alam


  1. You can get creative if you want to avoid buying from “russia”, like routing it through india for example.

    As of now, another country that has officially said to take malaysian palm oil for defence hardwares is china.

    Hoping to hear more countries willing to do the same, like south korea, turkey, japan and india for example.

  2. At least AFAIK we have never borrowed money from banks etc to buy our military hardware, unlike a few of our neighbours.

  3. Agreed..don’t make any loan for defence procurement like our neighbour did.
    That Malaysia style.

  4. “There is nothing wrong in this of course but one has to wonder whether it is good to show our hands at this moment especially when the Defence Ministry is putting up a white paper.”

    The only purpose I can think of for this announcement is as a warning to suppliers who ban palm oil, to reconsider the ban or blame themselves for putting us in the position.

    I also think there is a silver lining there. It implicitly says we are reluctant to buy Russian or Chinese in the first instance and notwithstanding the palm oil issue. If we intended to do so, we wouldn’t be announcing it because doing so would weaken our bargaining position with them. As others have said, the question of what we can or can’t afford is a complex one.

    If you ask me, we shouldn’t be entrenching ourselves with whoever buys our palm oil because they can always reduce imports later on, which China did earlier this year in favour of Indonesia. We ought to be reducing our dependence on the commodity, not increasing the area under cultivation.

  5. Barter trade or cash, it’s the same. There is absolutely no disgrace in that

    As in others, cash king of course, one can dictate terms much better when using cash.
    And ctually it will be both actually as the barter trade usually will not amount more than 30 per cent. The problem is that how much input the military will be getting in the selection of arms. Those who do not learnt from history are doomed to repeat it.

  6. @… And @ Rock
    Actually LMS is a loan too. There is nothing wrong borrowing money for military equipments. At the end of the day, All loans made by the gov will be reflected in national budget as budget deficit and accumulated as public debt.

    At this moment, there are no many options available. Just act like a beggar, build defence strength in small numbers and batches. Trade barter with palm oil is a good opportunity.

    Dont be shy to learn succes from neighbours. After 1998 crisis, Indonesian starts building defence sector step by step and they are start to run fastly. Yes, they will build other 3 subs with the last unit will completely locally built (asean first nation assemble and built sub). They are on initial talk for next batch sub (type 214) to complete 12 subs needed. Not to mention they on progress on getting hundreds medium tanks and iver huitfeldt heavy frigate.

    Btw, indonesian starts making IFV pandur II 8×8 too, I wonder how they can do all of these?

  7. I think the barter trade should be open up to not only on our palm oil products but also others such as oil and LNG gas from Petronas if possible, albeit at a preferential pricing. This is to avoid our over dependency on only the Russian arms market so that we can entice Boeing or Lockheed to explore this alternative financing which priority should be at RMAF’s needs and requirements.

  8. @ romeo

    Do not confuse staggered payments (which is a norm) with loan.

    AFAIK have never taken defence export credits, or have a loan from banks etc written in the contract for our weapons buy.

  9. I agree with Haris. Barter trade should be extended to offering other products inc petroleum and gas. It’s a good start and nothing to be embarrassed about.
    @Romeo. Am unsure if the Indonesian example in ramping up it’s military power is a measure of success. Their military is heavily involved in govt affairs. We have temporary financial constraints but we have been in a similar spot before. I personally don’t see why we should follow the lead of our neighbors especially Indonesia. Their decision seems to be dictated by ‘superlatives’ … bigger, newer, latest, numbers. We can be a ‘follow thy lead’ fella, but defence is not the ‘end- all’ of a country’s development. We’re not in the position of Singapore which is sloshed in funds. Indonesia? Remains to be seen on how and where they funded their defence purchase and reequipment. Manufacturing armament is one thing. How they managed their purchase is another. And they don’t always inform us on where the findings is coming from. As it is in many governments. One striking example is their new Pindad medium tank. They announced they are now tank builders but in aid of what? Military aggression? In which direction? Malaysia or Australia? When logistically, they can’t even island hop quickly sans suitable transport aircraft and ships.
    I prefer we find our own way in defence. Perhaps via the upcoming Defence White Paper.

  10. To compare with indonesia.

    They have good grasp of what is important for their defense. Their MEF plan makes it clear to the public and politicians of what they need.

    They have long term plans, like joining the R&D for the KF-X. Their Transfer of Technology is used to make further batches of the product, like their LSD ships, submarines.

    They have good local manufacturing capabilities and importantly support from the government.

    They would happily buy used. Just look at their F-16, C-130H, Leo2, Marders, M113, M109, Nakoda Ragam.

    They have local media that is supportive and always never put any negative news of their military. Do you even hear anything about the EH101 helicopter scandal? Nothing.

    A buy of 20 medium tanks are such a big deal in indonesia. Our buy of 20 lipanbara or even the multi billion dollar 257 Gempitas (note we signed all of those Gempitas at once, unlike the great 20 units harimau order and non binding “intent” to buy 412) is not even a big deal to most malaysians.

    Low volume manufacturing of something like armoured vehicles can be done at any techically apt locations. Its basically cutting flat plate panels and welding them together. Then installing its powertrain, electricals and weapons. If you value sovereign capability over cost. The harimau tank will cost around USD5.6 million each, while can only withstand shots up to 25mm-30mm shells. It is of similar cost to our more heavily armed and armoured Pendekar. Off the shelf T-90 tanks are around USD2.5-5.5 million, and used T-72s can be had for as low as usd140,000 each.

    Another different thing is how they fund their buys. They usually seek loans to fund big part of their buy, while we usually buy from our budget allocations.

    The EH101 was quite a big story but as it apparently did not involve any politicians it did not become so big.

  11. if the barter deal involve trade mig with new SU MKM and the related hardware plus missile, i think its good…

    but if suddenly we get new type of toy such as LIFT,then i dont know what will happen…

    i hope we get good news with this visit…

  12. “I guess we have not yet learnt the lessons we had for the last 30 years or so.”
    What did you expect when the same folks from 30 years ago returns? It only reinforces their point of view that what they did 30 years ago was THE RIGHT WAY.

    Anyways. If we are looking towards barter trade, can we (the Government, I mean) see if Kuwait will be interested in part exchange of palm oil for their used Hornets? Or India for their Sukhoi spare parts? Or perhaps China would be interested to build more LMS in part exchange for Musang King durians? We should be more creative in the barter, though I can’t think of who would be interested in Malaysian bamboo if we went that direction. Overseas lemang lovers perhaps?

  13. @ taib

    They have been steadily building their fleet of LPD and LSTs. They are planning on a total of 12 new LSTs, recently odered their 6th and 7th from a batam shipyard.

    LPD USD48 million
    LST USD12.75 million

    The LST is quite a large ship for the money, 117m long and displacing 2,300 tons. Can carry 10 Leo2 or 15 IFVs.

  14. Well, call me a pragmatic simpleton. The Indonesian crowd is patriotic on a good day, totally jingoistic on other days. They have always had a quantum more assets compared to us, and the rest of SE Asia. And can get away with the public with big purchases. That’s probably something we can’t do. Not by a mile folks.

  15. i remember we going to get a set of Aerostats for Sabah. No more news after change goverment? or the deal is not ON at all

    No deal it was just an LOI between the agent and manufacturer.

  16. Of coz the history will be repeated because a year ago everybody #rinduzamantun , now the old man back into power, so his administration will do the same again…the truth is Malaysian never learn. Sorry my post seems to looks political kinda things, but truth hurt…. Hope our white paper will be meterialized and the procurement based on the WP… And the WP must forecast the future threat and future technology regardless of much money would be spent

  17. Lkick,
    Did you expect to the government to sit idly by and act dumb when it has a responsibility to its citizens who depend on palm oil for a living?

    The policy is not as dumb as it seems. Already Italy and Sweden have come out to make strong statements against the ban. Italy happens to be the largest importer in the EU and Sweden’s imports are not insignificant.

    What this means is that the possibilities are not as limited as it may seem at first. The highly rated yet cheap M-346 which even the RAF would have bought had the Hawk not been a homegrown product, is a distinct possibility.

    Btw, Sweden just produced 14 extra Gripen C/D fuselages which they don’t need. It means if our negotiators are good enough, we can resuscitate the Saab lease proposal at a very good price. It can even be bundled in such a way that if were were to buy GlobalEye which we desperately need, we can get the Gripens on long term lease practically for free.

    Even Japan (think Kawasaki P-1), South Korea (TF-50) and Pakistan (JF-17) are considering increasing their palm oil purchases. So what is so wrong with the policy as it seems everybody has something to gain from it?

  18. Strikemaster, I’m in total agreement there Tuan! Thinking in active and reactive terms don’t bode well for any plan-of-action. Yes, we’re saddled with some well, outdated aircraft and associated assets. We can out-purchase our neighbors, maintain what we own or try and think out of the box. I kinda like your thoughts on the spare Gripen airframes. I’ve always had misgivings about buying Chinese-sourced products (the JF17 is one) and hope we won’t go that way in haste. The M346FA you mentioned is good but then, we need a very firm and able Defence Minister to be able to negotiate the ‘perilous negotiating table’ and also survive the brickbats that come with any proposed purchase.

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