The Tesla CEO soon found a supplier that could fulfill at least part of his request. In 2022, the EV maker struck a $5 billion deal to source nickel from Indonesia. The Muslim-majority archipelago of 280 million people has a landmass three times the size of Texas, scattered across an island chain spanning a distance comparable to that between San Francisco and Bermuda in the mid-Atlantic. Buried beneath its mangroves, ancient rainforests, and active volcanoes is the world’s largest reserve of nickel: 42% of the global supply. The metallic element is a component crucial to rechargeable batteries—including those in EVs—and to the world’s overall green transition. 

As the EV sector has boomed, Indonesia’s government has sought to leverage this stockpile to jump-start its high-value manufacturing sector and stoke its economy. The strategy has already proved lucrative, but cashing in on the sought-after resource comes with challenges: Extracting it from the earth is a dirty, dangerous business. And sagging sales of EVs worldwide suggest that nickel, the resource one of the world’s richest men begged for a few years ago, may not be an easy pathway to prosperity.

Ever since Dutch colonists first discovered nickel in Indonesia in the early 1900s, it’s been at the center of battles over who gets to mine and sell it. In the past decade, the Indonesian government has set out an ambitious development plan that would give it definitive control over nickel and other commodities. 

The government’s first step in capturing more of the nickel value chain was banning exports of the raw metal, which Indonesia first did in 2014. That means nickel isn’t just mined in Indonesia; it’s now refined in the country before it’s sent elsewhere. The result is clear: The value of Indonesia’s nickel exports has exploded from $1.06 billion in 2014 to almost $6 billion in 2022, according to United Nations data. Nickel prices have steadily appreciated in recent years, more than doubling to $21,690 per tonne from a historic low in 2016.

The government of President-elect Prabowo Subianto, who takes office in October, is likely to follow up with a second step in the development plan: a ban on the export of refined nickel, which would encourage manufacturers to set up factories in Indonesia. Companies including LG and Hyundai have already built battery and EV production facilities in the country. 

By supplying a key component to EVs, Indonesia has landed squarely in the middle of an intensifying rivalry between China and the U.S. So far the government in Jakarta has struck a delicate balance between the two superpowers. China has invested $17.2 billion in Indonesia’s metals sector since 2006, recently pouring money into local refining capacity, according to the American Enterprise Institute. An additional $10 billion is in the pipeline. “Indonesia has grabbed Chinese attention because it appears to be the best metals choice at scale,” says Derek Scissors, senior fellow at the institute. At the same time, as a neutral country in the U.S.-China rift, Indonesia hopes it will be able to funnel vast quantities of commodities to both nations—even if its refiners are funded by Chinese money.

Indonesia has attempted to replicate its nickel strategy with export bans on other minerals like bauxite, copper, and tin. Udith Sikand of Gavekal Research is skeptical Jakarta can repeat its nickel success. Indonesia has a “near stranglehold” on nickel production, he says, but “faces a much more competitive landscape” for the other metals. There are plenty of alternative countries where companies can source their supplies. 

Indonesia’s cornering of commodities is intended to boost the fortunes of homegrown firms like Amman Mineral Internasional, Harita Nickel, Merdeka Copper Gold, and Merdeka Battery Materials, all of which appear on the inaugural Fortune Southeast Asia 500 list this year. Prabowo has vowed to deliver annual economic growth of 8%. In the first quarter of 2024, Indonesia GDP grew 5.11%, surpassing estimates.

Still, continued growth is not guaranteed. Indonesia’s nickel push is under threat for the risks it poses to the environment and the people mining and refining the resource. 

Indonesia has largely failed, critics say, to uphold the latter part of Musk’s plea—to “mine nickel efficiently and in an environmentally sensitive way.” Incumbent president Joko Widodo had pledged to improve environmental standards in the industry, which is associated with deforestation and air and water pollution. But Didit Wicaksono, climate and energy manager at Greenpeace Indonesia, says that global demand for EVs has been “misinterpreted” by the government and “used to justify exploiting nickel as a critical mineral commodity supporting the electric-car industry, causing extraordinary environmental impacts and damage.” The government is fueling the development with coal, he adds, which will leave the country short of its emissions targets.

And on occasion, nickel mining has proved deadly. In December, an explosion at a refinery owned by Tesla supplier Tsingshan, a Chinese commodities giant, killed 21 workers and injured dozens more. (The two firms did not respond to requests for comment.) Indonesian police have since brought charges of criminal negligence against two Chinese nationals.

The strongest headwind, however, may be the struggling EV industry. Price cuts across the sector “are signaling that the market is saturated,” says Jesse Kuri of BCA Research. 

For now, though, Indonesia is charging ahead. When Musk visited Jakarta in late May to launch Starlink services, the government proposed that Tesla construct an electric-vehicle battery plant in the country. An official in charge of investment told reporters the Tesla boss said he would consider the offer, but Musk himself has given no comment. 

This article appears in the June/July 2024 Asia issue of Fortune with the headline, “Has Indonesia hit the nickel jackpot?”