What country is most likely to upset American-Australian relations in the near future? One would be inclined to think of China but Michael Wesley, executive director of the Lowy Institute for International Policy, doesn’t think so.

At The Interpreter, Wesley points to “the Jakarta factor” instead. Indonesia was responsible for the most serious rift in relations between Canberra and Washington, he notes, back in the early 1960s, “when the Americans decided that Cold War interests were more important than backing their mates’ opposition to Jakarta’s annexation of West Irian.”

Things may seem to have moved on. Indonesia has no outstanding territorial claims, and it’s a democracy now. And even though President Barack Obama spent part of his childhood there, it’s still a major effort to get the Americans to think seriously about Indonesia.

Although consumer confidence in Indonesia was back up to pre-recession levels in March of this year already, the island nation has yet not entirely recovered from the Asian financial crisis of the previous decade. Susilo Bambang Yudhoyono, president since 2004, has made serious efforts at reforming Indonesia’s obstructive regulatory environment, including measures to fight corruption, but impediments to economic growth remain. Investment, both foreign and domestic, is curtailed by government interference while judicial enforcement can be erratic and nontransparent. Nevertheless, Indonesia is doing better than a few years ago and, according to Wesley, that’s why it’s likely to clash with Australia eventually.

Australia and Indonesia get on because of the long-running balanced disparity between the two countries. Australia is small but wealthy; Indonesia is huge but poor. Indonesia has a huge army but small naval and air forces; Australia has a small army but potent naval and air capabilities. As Hugh White says, the Australian army could get to Indonesia but do nothing once it got there; the Indonesian army could overrun Australia but can’t get here. So we just accept each other and get along.

As Indonesia rises, being admitted into the G20 and recognized by the United States as a potential partner across the Pacific in counterbalancing China’s revisionist maritime claims in the Southeast Sea, Australia risks being sidelined.

Different countries across the region share a concern about China’s rapid growth and assertiveness. That is why the Vietnamese, for instance, have shown an interest in the Quadrilateral Initiative which Australia, India, Japan and the United States launched in May 2007 in Manilla. The country has since participated in naval exercises with the United States and negotiated a nuclear cooperation treaty with the Obama Administration.

Japan, too, has been strengthening ties across East Asia, organizing military exchanges with Vietnam, building subways in New Delhi, and making a stance along with South Korea when the North sunk one of its ships in May. Indeed, “the Japanese and Koreans have their hands full helping India and Vietnam,” according to Wesley. “This leaves the United States as most likely to awake to the strategic sense of helping Indonesia emerge as a great power.”

Wesley, writing from Australia, has reason to be concerned. “Are we sure our friends in Washington, entering a deepening spiral of strategic competition with Beijing, would take account of our strategic interests before investing in Indonesia’s strength?” The answer is probably no, though one shouldn’t worry too much about China’s navy and its posturing.

Plenty in Washington do worry however, whether they should or shouldn’t, and this should worry Australia in turn, especially with the Rio Tinto affair of last year still fresh in mind. One can hardly blame the Australians for dreading China rather more than we do, halfway across the globe. But with Australia, at the same time, invested in international peacekeeping, particularly in Afghanistan; dedicated to the War on Terror; and with the ANZUS Treaty firmly in place, Canberra hasn’t too much to fret about. If worse comes to the worst, America is rather more likely to pick sides for a prosperous, trustworthy ally than a country that just emerged out of semi-dictatorship ten years ago.