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Why did Indonesia drop the Kilo submarine choice?

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Several countries operate Kilos - main users being India (pictured), China, Iran and of course Russia.
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This website has looked at many Asia-Pacific submarine forces, including those of:
- Australia - http://gentleseas.blogspot.com.au/2013/05/a-new-australian-submarine-with-aip.html
- Singapore - http://gentleseas.blogspot.com.au/2009/09/singapore-submarine-development.html, and
- Malaysia - http://gentleseas.blogspot.com.au/2009/09/malaysias-first-ever-submarine-scorpene.html
and http://gentleseas.blogspot.com.au/2009/06/indonesia-gets-apology-from-malaysian.html

Indonesia currently has two HDW 209 (Type 1300) of the Cakra Class. These are KRICakra and KRINanggala, both were launched around 1977 and entered Indonesian service in 1981. Both boats have been non-operational for long periods since 1981. Both are recorded as being refurbished in South Korea by early 2012. The refurbishment included strengthening structures and steel sheets, modernization underwater weapons and sonar systems.
 
Submarines have a limited service life of usually 30 years or less. This is due to salt water induced corrosion, expansion/contraction causing metal fatigue, other technical problems and obsolescence compared to other submarines. The latter is particularly regarding stealthy characteristics (eg. acoustic noise). So Indonesia has been casting around for replacements for her 36 year old subs.

Indonesia's non-aligned status, experience receiving Russian arms in the 1960s and a low price offer in 2007 from Russia originally suggested Indonesia might acquire Russian Kilo submarine . Presumably Russia would recoup the low selling price by padding out the deep service, upgrade and spare part costs during the Kilo's service lives.
 
In 2007 Russia agreedat that time to extend a $1.2 Billion line of credit to Indonesia to buy Russian weapons including two Kilos. However this offer lapsed because Russia probably cannot afford to extend the credit. The GFC-subprime crisis and consequent drop in the price of oil (Russia's main export) has moved Russia from being a cashed-up oil boom economy in 2007 to being cash-strapped from 2009.

Note that in late 2011 Indonesia announced it would buy three South Korean "Improved Chang Bogo Class" variants of Germany's HDW 209 design: see http://gentleseas.blogspot.com.au/2011/12/indonesia-decides-to-buy-korean-made.html 

Also see Indonesian Navy Submarine details here: http://en.wikipedia.org/wiki/Current_Indonesian_Navy_ships#Submarines 
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Submarines provide a relatively inexpensive (asymmetric) way to undertake blue water tasks. Their stealth makes up for the raw combat power of more numerous blue water surface ships (which are greater in tonnage and cost). Indonesia's submarines would represent the major means to wage medium intensity (conventional) war at sea - as well as peacetime intelligence gathering/counter-piracy/counter-terrorism.
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Background on Indonesia's Navy

Information drawn from this site dated 1992 is useful:

The Indonesian Navy became a separate service in 1946, after the Indonesian National Revolution (ejecting the Dutch) began. It was initially stocked primarily with craft once operated by European or the Australian navies. Beginning in 1959, the navy began to acquire a large number of craft from the Soviet Union and East European nations.

In the aftermath of the abortive 1965 coup, however, the navy suffered a decline in influence within the armed forces and the nation because of suspected involvement in the coup attempt (particularly by the marine corps) and because of the navy's small size in comparison with the army.

A large portion of its vessels of Soviet or East European origin were quickly rendered non-operational owing to a lack of spare parts and lack of maintenance expertise. Until the late 1970s, the only major replacements were four frigates acquired from the United States Navy in 1974.

Since that time, the navy has embarked on an upgrading program designed to develop a balanced fleet suited to operations in archipelagic waters. The navy's mission was to act as a territorial force responsible for the patrol of Indonesia's immense coastline. The vast majority of operational ships are stationed at the main naval base at Surabaya, East Java. Whereas the 1970s saw an increase in the fleet's ship inventory, the 1980s witnessed a major effort to improve the navy's armament posture through the purchase of the Harpoon weapons system and the MK-46 torpedo.

Structurally, the navy comprises the headquarters staff at Jakarta under the overall command of the navy chief of staff, two fleet commands (the Eastern Fleet in Surabaya, the Western Fleet in Jakarta), the marine corps, a small air arm, and a military sealift command.

In the early 1990s, naval warships generally were not deployed to a particular region but were grouped in mobile flotillas, to be dispatched where needed. One mission concerned patrolling the strategic straits through which foreign ships enter and exit the Indian Ocean, particularly the Strait of Malacca. The other mission centered on halting smuggling and illegal fishing, considered to be problems particularly in the areas near the Natuna Islands and in the seas between Kalimantan and IrianJaya. In support of the second mission, the navy announced plans to construct a number of limited-role bases in isolated areas in the eastern and western sections of the national territory. Patrol activity also increased in connection with the flow of refugees from Southeast Asia, particularly in the area near the Natuna Islands.

Some of Indonesia's admirals have visions of the Indonesian Navy consisting of "10 submarines and 260 surface ships in the longer term." Ten submarines are clearly unrealistic given the difficulty in buying three.
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Indonesia's main naval priorities are probably anti-smuggling, anti-piracy, refugee boat interception, and protecting territorial boundaries and undersea oil claims (eg. Ambalat) against neighbours like Malaysia. This suggests low intensity conflict patrol boats of 100 to 500 tons should represent the vast bulk of surface ships.
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This list of Indonesia Navy vesselsis useful. It indicates that its frigates are 40 to 50 years old and many corvettes around 30 years.
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The most recent major acquisitions appear to be:

- the four modern, Dutch built (Sigma) corvettes of the Diponegoro Class commissioned between July 2007 and March 2009 and consisting of KRIDiponegoro, KRIHasanuddin, KRISultan IskandarMuda and KRIFrans Kaisiepo.

- four KRIMakassar Classlanding platform dock ships each displacing around 11,000 tons full load and able to take 5 helicopters.

- Dated but also significant was the Indonesian purchase in 1992 of 16 ex East German Parchims anti-submarine corvettes now given the Indonesia classification KapitanPatimura Class.

- three KRI Nakhoda Ragam class corvettesare on order from the UK by 2014.
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Pete

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