Indonesia's military development will escalate tensions with China in disputed waters north of the Natuna Islands, forcing Jakarta to accept the potential economic cost of Chinese retaliation. Both Indonesia and China claim control over the territory in the South China Sea that borders Indonesia's Natuna Islands, which have an estimated 1.9 trillion cubic feet of natural gas reserves, crucial fishing stocks, and access to key shipping lanes that go from the Strait of Malacca to East Asia. Indonesia is attempting to balance its military modernization and territorial defense against Beijing's competing claims just north of the islands, as well as Indonesia's economic reliance on China (with 26% of Indonesian exports going to China). In recent months, Jakarta has been in talks with major arms-dealing countries to upgrade and modernize its navy and airforce, shoring up holes in its defense....
