Dynamics of Energy Policies in Southeast Asia under Trump's Second Term

In the dynamic landscape of Southeast Asia, the energy sector is a focal point of geopolitical challenges. Asean nations are urged to address these issues urgently, with a focus on increasing the number of technical partners in the energy sector, deepening interactions with the European Union, South Korea, and other partners, and implementing the Asean's Mineral Cooperation Action Plan.

China's significant influence in the region's energy sector is undeniable. In 2022 alone, China provided approximately $534 million in aid, accounting for over a quarter of the total share. Moreover, China controls 75% of the nickel processing capacity in Indonesia, a trend that raises national security concerns due to the need for a diverse group of strategic partners to manage energy geopolitics.

The China Southern Power Grid Company and State Grid Corporation of China own and operate significant portions of the national grids in Laos and the Philippines, respectively. This control underscores the importance of diversifying partnerships and reducing reliance on a single power source.

The US, through its initiatives, is also actively engaged in the region. The USAID's Southeast Asia Smart Power Program has assisted in the development of long-term energy plans for Asean, provided technical training to energy leaders, and enhanced capacity for renewable energy trade. The US-Singapore Feasibility Study on Regional Energy Connectivity highlights the benefits of regional sub-sea interconnections, further emphasising the need for cooperation and interdependence.

The Inflation Reduction Act (IRA), initiated by President Biden in 2022, is another significant development. The IRA provides tax credits to producers of EV batteries, with exceptions for countries without Free Trade Agreements with the US and companies in which 25% or more of the equity stake is owned by China. However, the IRA may force Southeast Asia to choose sides, potentially leaving Asean without a choice when it comes to using critical minerals for the region's sustainable development.

The Trump administration's foreign policy intentions regarding critical minerals may impact the regional vision for sustainable mineral development in Southeast Asia. Trump's demand that Ukraine hand over its critical minerals in return for US military assistance to Kyiv is a concern for policymakers in Southeast Asia, as they may face the possibility that their national copper, nickel, and rare earth deposits can be used as bargaining chips.

The organization that manages the ASEAN's Mineral Cooperation Action Plan is the ASEAN Minerals Cooperation Working Group (AMC Working Group). The implementation of this plan is crucial for ensuring a balanced and sustainable approach to mineral development in the region.

As the energy landscape evolves, it is clear that Southeast Asia must navigate geopolitical challenges with a focus on diversification and cooperation. The region must deepen its partnerships, implement strategic plans, and prioritise sustainable development to secure its energy future.

This article was first published in Fulcrum, ISEAS - Yusof Ishak Institute's blogsite. The complexities of the energy sector in Southeast Asia require careful consideration and strategic action, and this article aims to provide insights into these challenges and potential solutions.