At the beginning of last week it appeared that the row with Indonesia over intelligence issues had quietened down. Prime Minister Abbott had sent what was doubtless a carefully drafted letter to President Susilo Bambang Yudhoyono. The welcome indications, after a day or so, were that SBY felt the letter offered a useful way forward.

Foreign Minister Julie Bishop had also visited Jakarta for talks with Indonesian foreign minister Marty Natalegawa. She took along an impressive team of advisors that included Secretary Dennis Richardson from the Department of Defence and Secretary Peter Varghese from the Department of Foreign Affairs. Both are experienced diplomats with extensive knowledge of Asian affairs so the chance that there would be useful talks at the ministerial and official level looked good.

But no sooner had the talks concluded than the harmony began to fray.

First, there were puzzling signals that suggested differences between Bishop and Abbott. According to news reports, during her visit to Jakarta Bishop said the Australian government would not use intelligence assets to harm Indonesia. Marty Natalegawa said that his understanding of the situation was that Bishop had promised Australia would not collect intelligence on Indonesia. But the following day there were reports in Australia that Abbott had categorically said that Australia had made no such promise! (Marty Natalegawa helpfully tried to play down the significance of the apparent difference on the Australian side.)

This apparent confusion led SBY's spokesman for foreign affairs, Teuku Faizasyah, to say that Australia needed to demonstrate a 'sincere intention' to rebuild trust and confidence with Indonesia. He went on, rather pointedly, to say that Indonesia was 'not in a hurry to normalize Indonesia’s relationship with Australia. The pace of the process will pretty much depend on whether we are able to be convinced that Canberra is really sincere in rebuilding trust and confidence in order to normalize the relationship for the future.'

What is still more worrying is that there are now signs Jakarta's irritation is beginning to affect other aspects of the relationship.

Until now, the spillovers into trade relations between Australia and Indonesia have been contained. And in various statements, representatives from the Indonesian business community have said that they hope commercial relations between Australia and Indonesia will not be affected.

However, there are now reports suggesting that trade relations are under some scrutiny in Jakarta. The state-owned firm PT Rajawali Nusantara Indonesia says it has halted talks on a cattle ranch operation in Australia and has started talks with a New Zealand firm as an alternative. Perhaps not too much should be read into this news because doubtless commercial negotiations of this kind ebb and flow all the time.

But a report that the Indonesian government plans to suspend bilateral talks with Australia on a Comprehensive Economic Partnership Agreement (CEPA) is rather more serious. Australia has already invested considerable effort into negotiating a CEPA with Indonesia. A draft document already exists which sets out a useful framework for economic relations between Indonesia and Australia. The Australia-Indonesia Business Council has said that it 'wholeheartedly supports the concept and vision for the Indonesia-Australia Comprehensive Economic Partnership Agreement.' 

Let's hope news reports from Jakarta suggesting CEPA negotiations have been put on hold are wrong. But if they are correct, it would seem clear that, as Teuku Faizasyah said, Jakarta is indeed in no hurry to normalise relations with Australia.

Photo courtesy of the Australian Foreign Minister.