The Australia-Indonesia relationship has seen a number of incredible developments over the past five months. The Edward Snowden leaks shattered a delicate cooperative arrangement at a time when the Abbott government needed it most. But while Australia’s media landscape has been saturated with news of spying allegations against Canberra, a far more significant series of events have been unfolding.

On 2 October 2013, Chinese President Xi Jinping and his Indonesian counterpart, Susilo Bambang Yudhuyono, officially upgraded the Jakarta-Beijing strategic relationship. Both leaders vowed to intensify military and naval cooperation, laying out their plans in a joint communiqué. The countries met again the following month, agreeing to deepen combined army personnel training and increase high level military exchanges. Reports emerged during this period of Jakarta and Beijing conducting combined surveillance operations against Australian officials. Last month, Indonesia allowed a fleet of Chinese military vessels to pass through waters along its southern approaches near Christmas Island.

The Jakarta-Beijing strategic relationship is maturing rapidly. China established diplomatic relations with Indonesia following its independence in 1949. Indonesia’s President Sukarno courted Marxist-inspired governments in Beijing, Moscow and Pyongyang, while bolstering the Indonesian Communist Party’s influence over national affairs. Sukarno reasoned that tilting Indonesia towards the Communist Bloc would win Jakarta support for its claim against the Netherlands to the western half of New Guinea.

But the later history of fraught ties between the countries makes recent developments in their strategic partnership fascinating. Indonesia severed relations with China in 1967, when Jakarta accused Beijing of backing a coup against its government. Suharto’s vehemently anti-communist New Order movement swept to power, carrying out an anti-communist purge that killed an alleged 500,000 Chinese and leftist elements. Suharto’s regime was committed to promoting capitalism, stability, and strong ties with the West. Between 1967 and 1990, Indonesia-China relations were practically non-existent, and once ties were re-established, government-to-government exchanges remained minimal.

This all changed in 2005 when Beijing and Jakarta signed a strategic pact aimed at increasing trade, investment and defence cooperation. Within eight years, annual two-way trade quadrupled to $US66.2 billion and investment ballooned. Military ties have also grown; this is especially significant for Australia. Washington has ensured Australia’s security in the region for 63 years and a pro-US government in Jakarta, under no influence from other major powers, has greatly assisted America in this endeavour.

This state of affairs has contributed enormously to Australia’s prosperity and security. Guaranteed safe passage through Indonesian sea-lanes has helped Australia create an export-driven economy, where trade now comprises over 40 per cent of our GDP. Law enforcement cooperation between Canberra, Jakarta and Washington has been vital in eliminating terrorist cells that have killed and injured Australian citizens. A pro-Western administration governing Australia’s northern neighbour has kept Canberra’s defence spending down, allowing for greater expenditure in areas such as health and education.

All of this could be under threat. Obama’s ‘Asian Pivot’ has left much to be desired, and Beijing’s push to shift the status quo in East Asia has grown more pronounced. Most states in this region are keen for Washington to hang around. Tensions are rising in the East China Sea, and Tokyo wants American firepower to keep China in check over the Senkaku islands. Beijing is deploying more naval units to the Scarborough Shoal and the Spratly Islands; the Philippines will need a strong US maritime presence to give Manilla’s claims to these territories some teeth. The same goes for Taiwan. With Pyongyang regularly threatening to rain fire down upon Seoul, South Korea will not want any of America’s 28,500 troops leaving its territory anytime soon. In stark contrast, Jakarta’s posturing towards Washington has grown more ambiguous, and it is necessary to question how far Western influence over Indonesian foreign policy will diminish as China’s power increases.

The truth is that many potential catalysts for tensions between Indonesia and the West remain unaddressed. Many Indonesian politicians bitterly resent Australia’s alleged role in East Timor’s independence. They now worry that politicians in Canberra will come under domestic pressure to do the same for West Papua. Such a scenario is highly unlikely; but, as the revolutions in communication and transportation help West Papua’s independence movement internationalise its cause, this contingency cannot be ruled out so Jakarta’s suspicions will linger. Unilateral naval operations from Australia geared towards countering unauthorised maritime arrivals will also continue to produce tensions. With respect to sovereignty and human rights, China can promise Indonesia policies that the US and Australia simply cannot match. Canberra can wax lyrical about its ‘unabashed’ support for Indonesian sovereignty over West Papua but, as a democracy, Australia’s citizens could always potentially sway Canberra’s foreign posturing. As a one party state, China is unlikely to face this dilemma.

Indonesia and China have many overlapping interests. Both are highly sensitive that separatists and border disputes will bring their sovereignty into disrepute. Neither state wants to set a precedent that could allow foreign nations to intervene in their internal affairs. Jakarta and Beijing have no significant territorial disputes. Indeed, the disputes between Indonesia and Malaysia over the Ambalat Sea Bloc and wrangles between Beijing and Kuala Lumpur over the James Shoal oil reserves indicate that both countries share a common enemy who could unite them as time goes by.

The notion of bebas aktif – free and active – is presented as central to Indonesia’s foreign policy ambitions. This is especially noticeable when it comes to ASEAN, where Jakarta is determined to lead and not be led. Unchecked Chinese power threatens this goal and it is here that Washington’s presence, which can prevent Beijing from altering the status quo, is most valuable to Indonesia. This suggests that Jakarta’s recent military partnership with China is more indicative of a hedging strategy than a simple realignment away from the West. But as power in the international system becomes increasingly diffuse, Australia can expect its northern neighbour to become more of a wildcard.

Matthew O’Neil is an intern with AIIA NSW and the Lowy Institute for International Policy. He graduated from the University of Sydney in 2013 with a Bachelor of International & Global Studies and received first-class honours for his thesis on Australia-Indonesia relations.