The dollar is mightier than the sword sometimes, if waved the right way.
Only days ago Indonesia appeared ready to defy international threats of intervention and diplomatic ostracism over the killings in East Timor. General Wiranto, commander of the armed forces, appeared to have sidelined President B.J. Habibie and blocked any suggestion that his military would let in foreign soldiers to restore peace.
"You would have to fight your way onto the beach," said a grim foreign minister Ali Alatas last Thursday.
Indonesians had dismissed threats of Western sanctions as hollow. Foreign diplomats had supported this impression by saying that they were more concerned about the destabilizing impact that sanctions would have on Indonesia, the world's fourth-largest nation with 210 million people, than about the killings in East Timor, home to 850,000.
"The dilemma is that Indonesia matters, and East Timor doesn't," said one senior diplomat in Jakarta last Tuesday.
But news of continued massacres in East Timor, particularly the slaying of more than a dozen nuns and priests, outraged world opinion and forced world leaders to get more serious this past weekend. President Clinton, whose administration had been ambivalent about sanctions and declined to send in troops, suddenly cut off military assistance and sales and warned of economic sanctions. The Paris Club of creditor nations delayed any discussion on debt relief for Indonesia until next year.
That appears to have done the trick. On Sunday night, Wiranto stood somberly aside while Mr. Habibie announced that international peacekeepers were welcome. As the terms of such an intervention had yet to be discussed, some diplomats suspected that Indonesia might merely be buying time - time to finish implementation of its scorched-earth policy in East Timor.
The military's spokesman, Brig. Gen. Sudrajat, confirmed the worst fears when he announced yesterday that Australian troops were not welcome; they are the only troops ready to move in. Any other peacekeeping force would take weeks if not months to assemble.
All the same, the country's change in stance surprised many Indonesians. "It was the international pressure that did it," says Anton Supit, chairman of the Indonesian Shoe Industry. "Even if they don't cut off aid, just talking about it hurts our business. The question is not who is right or wrong, but who is talking. If it's a big country or the [International Monetary Fund], it's a problem."
"We don't have any choice," Mr. Supit adds. "The only ones who can help us are the World Bank and the IMF."
At risk was $5.9 billion pledged to fund the budget deficit this year, as much as $8 billion in debt rescheduling requested by the government, and several billions in trade credits and other bilateral aid programs.
On the other side of the balance is a large debt load that needs to be paid back, a population ravaged by one of the most dramatic economic crises of the century, and a deadlocked banking system that requires a costly bailout.
But Pande Radja Silalahi, economist with the Center for Strategic and International Studies in Jakarta, argues that the threat of sanctions works beyond the flow of dollars.
"Aid is not so significant," he says, calculating how Indonesia's export revenues have recently been boosted by a sudden rise in the price of its main commodities, oil and gas. "The real deterrent we face is the international investors. The IMF is a symbol of trust. Indonesia's economy badly needs the trust of the international community."
Yet Mr. Silalahi argues that the threat of sanctions worked mainly because it supported one camp in the government in its power struggle against the other. "Most economists in Indonesia realized it was bluff," he says. "But Habibie used the bluff. He used the hand of the outside world to press the armed forces."
One of Habibie's aides, Umar Juoro, indicated as much when he said Habibie stood weak earlier this week but was hoping to use international pressure as a weapon against Wiranto. "The president has not closed the possibility of inviting an international peacekeeping force," Mr. Juoro said at the time. "The military and the foreign ministry are very much against it. Habibie is not strong, so he hopes for international support."
It is an odd twist but not a unique one. Mikhail Gorbachev, former president of the Soviet Union, used international support against hard-liners in the Communist Party. F.W. de Klerk in South Africa pointed to a worldwide campaign against apartheid to silence conservatives in his government who opposed the release of Nelson Mandela.
Both aides and critics say Habibie thinks of himself as another Gorbachev sometimes, a man who brought reforms that transformed his nation into a democracy. Like Mr. Gorbachev, Habibie may have survived another round by inviting foreign pressure against rivals.
Like Gorbachev, however, Habibie has ended up a tad weaker after each round and is expected to lose presidential elections in November, when he faces the popular Megawati Sukarnoputri. Corruption scandals had already left him deeply unpopular, and the referendum on East Timor's independence, his own initiative, has ended in violence.
(c) Copyright 1999. The Christian Science Publishing Society