Indonesia’s Nickel Downstreaming in the Geopolitics of the Global EV Battery Industry: A Political Economy and Scenario Modeling Analysis

Indonesia, which holds around 30% of global nickel reserves, has pursued a downstreaming strategy since the 2014 ban on raw ore exports, aiming to increase domestic value added and strengthen its role in the global electric vehicle (EV) battery supply chain. This study evaluates the causal impact of the policy on economic growth, foreign direct investment (FDI), export transformation, and geopolitical positioning over the period 2005–2025. A mixed-method longitudinal design is employed, combining intervention analysis with a policy dummy (2005–2013 = 0; 2014–2025 = 1) and robustness checks, including placebo tests, alongside qualitative scenario modeling of geopolitical dynamics. The results show that downstreaming increased the mining sector’s annual GDP contribution by IDR 12.86 trillion (β₁ = 12.857; p < 0.001), raised export value-added per ton nearly twenty-four-fold, and positioned Indonesia as the leading supplier of processed nickel with 47% of global exports by 2025. These gains, however, are offset by growing strategic dependence on China, which accounts for 68% of FDI inflows and 58% of export markets. Scenario modeling further suggests that a potential adverse WTO ruling could diminish the policy’s impact by 60–70%. Overall, while nickel downstreaming has successfully driven domestic upgrading within global value chains, the increasing geopolitical exposure highlights the urgency of diversification strategies, stronger ESG standards, and the institutionalization of a sovereign wealth fund to safeguard long-term resilience. JEL Classification : F13, F21, O13, Q32, L72