Freeport and the Suharto Regime, 1965-1998 - Author(s): Denise Leith

In functioning democratic economies a structural balance must be found between state and capital. In Suharto's autocratic state, however, a third variable upset this equation: patronage. By using access to resources and business as the major lubricant of his patronage style of leadership Suharto actively encouraged the involvement of all powerful groups within the economy. Eventually, the military, politicians, and the bureaucracy became intimately involved in the most lucrative business ventures to the point that to be successful in Indonesian business one required an influential partner in at least one of these institutional groups, preferably with direct access to Suharto. When Freeport began negotiations with the new military regime in Jakarta in 1967 to mine the copper in West Papua, the American transna tional with the valuable political connections was the more powerful of the negotiating parties, enabling it to dictate the terms of its contract. As Suharto's political confidence grew and as the American company's finan cial investment in the province increased—and by association its vulner ability—the balance of power shifted in Jakarta's favor. Eventually Free port became another lucrative source of patronage for the president.

Early History of Freeport in West Papua
In 1936, while on an expedition to the center of the island of West New Guinea, a Dutch geologist working for Shell Oil, Jean-Jacques Dozy, was struck by the sheer magnificence of a 180-meter barren black rock wall covered in green splotches standing above an alpine meadow.1 Realizing he had discovered a huge copper outcrop Dozy knew that its inaccessibil ity meant "It was just like a mountain of gold on the moon" (Mealey 1996, 71). The advent of the Second World War and the physical impos sibility of accessing the site in the rugged and inhospitable Carstensz Range meant that Dozy's report of the discovery of Ertsberg, or ore moun tain, lay forgotten for years.2 Freeport Sulphur Company (now Freeport-McMoRan Copper and Gold Incorporated of the United States), became interested in Ertsberg in 1959 when a company geologist, Forbes Wilson, first heard of Dozy's report from a friend who, through his company Oost Borneo Maatschap pij (obm), had taken out a concession for the area from the Dutch gov ernment. Persuading the company to send him to West New Guinea in i960, Wilson was so excited by what he saw and sampled that he pre dicted correctly that Ertsberg would prove to be the largest above-ground copper deposit discovered at that time. Having recently had its nickel mining projects in Cuba expropriated by Castro, Freeport was nervous about making a substantial investment in the unstable region. Moreover, the only way for a mining concern to access the site was via helicopter, and even with the most powerful helicopter available at the time it would take months to move just one small drill rig and crew to the remote site. Thus, technical problems and political concerns saw Freeport shelving the Erts berg project in the early sixties.

Freeport's Entry into West Papua
In the boom times of the sixties, mining was the magnet for speculative international capital, and the company did not forget the possibilities it glimpsed in West New Guinea. In early November 1965, just a couple of weeks after a military coup sidelined Indonesian President Sukarno, two Texaco executives from Indonesia with close associations to the new mil itary regime approached Freeport. They informed the company that the time was right to open negotiations with the generals in Jakarta over Erts berg (Wilson 1981, 155). Freeport's subsequent decision to commit well over a hundred million dollars to the risky project seemed extraordinary given the political instability in Indonesia at the time. Freeport's confi dence, however, may be understood in the context of its connections to the highest echelons of power in Washington, the United States' expanding military power in the region, and its interest and influence in the events unfolding in Indonesia. DOWNLOAD