Red Scare Amidst Elections in Australia

Australia has raised diplomatic alarms over a report from Janes that Russia sought permission to base military aircraft at Indonesia’s Biak Island, just ~850 miles from Darwin. Although Indonesia firmly denied the proposal—reaffirming its long-standing ban on foreign military bases—the timing of the report has stirred political controversy in Australia just weeks ahead of the May 3, 2025 federal election. Prime Minister Anthony Albanese labeled the situation "concerning," while Opposition Leader Peter Dutton criticized the government’s alertness, despite later backtracking after a misstep involving Indonesian President Prabowo Subianto.


Strategically, analysts see this move as consistent with President Vladimir Putin’s broader aim to project Russia as a Pacific power, challenging the West’s influence across Asia. Even though the base proposal is unlikely to proceed, it underscores intensifying geopolitical jockeying in the Indo-Pacific.


In Australia, this episode has instantly sharpened election narratives, spotlighting national defense and diplomatic competence. Political leaders are now pressured to present credible Indo-Pacific strategies. The ripple effects may extend beyond election day, prompting policy shifts in defense investment, foreign alliances, and regional engagement priorities.

Political Effects

Financial Effects

Economic Effects

Political Effects

Financial Effects

Economic Effects

Forecast Scenarios


Base Case (70% probability)


Indonesia maintains non-alignment; the Russian base proposal does not advance. Issue fades post-election, but Australia commits to enhanced regional engagement and minor defense spending increases.


Implications: Status quo maintained, with moderate political capital expended by both major parties.


Upside Case (15% probability)


Australia uses the moment to catalyze a broader Indo-Pacific security pact (e.g., enhanced Quad cooperation or ASEAN defense ties).


Implications: Boosted investor confidence in Australian leadership; long-term defense innovation and alliance building gain pace.


Downside Case (15% probability)


Further unverified reports of Russian or Chinese interest in regional basing trigger prolonged regional tension. Australia may escalate military preparedness or diplomatic friction with Indonesia arises.


Implications: Market volatility in defense and trade-exposed sectors; potential shift in regional investment risk calculus.

Thursday, April 17, 2025