By Remy Majangkim, Majangkim Office
SANDAKAN: The federal government is reviewing diesel subsidies in Sabah and Sarawak. Communications Minister Fahmi Fadzil confirmed the review on March 17, citing smuggling concerns. Prime Minister Anwar Ibrahim has framed the existing subsidy as something provided “although it is not within MA63.”
At the same time, the Strait of Hormuz—through which 27 per cent of global maritime oil trade passes—has been effectively closed since March 4 following U.S.-Israeli military operations against Iran. Global oil prices have jumped from $71 to over $100 per barrel.
Raising diesel prices in Borneo under these circumstances would be a strategic error. Here is why.
The global crisis is not Sabah’s fault.
Iran has closed the Strait of Hormuz. The United States and Israel are at war. Supply chains are disrupted. These are geopolitical forces beyond Sabah’s control.
When the Strait closed, Brent crude jumped from $71.32 on February 27 to $77.24 on March 2 and has since surpassed $100 per barrel. Goldman Sachs now projects Brent will average $85 in 2026.
Global oil prices do not exist in a vacuum. When crude rises, the cost of refined products like diesel follows. The government’s current subsidy mechanism—maintaining diesel at RM2.15 per litre in Borneo while the Peninsular price floats—becomes exponentially more expensive when global prices spike.
Sabahans should not be made to bear the cost of a crisis they did not create.
Smuggling is an enforcement problem.
The government’s concern about smuggling is real. The price gap between RM2.15 in Borneo and RM3.12 in Peninsular Malaysia creates a lucrative incentive for illegal diversion.
But the solution is not to raise prices on Sabahans. The solution is enforcement.
The government has already assigned the Domestic Trade Ministry to handle land enforcement, the Maritime Enforcement Agency to cover coastal areas, and the Border Control Agency to manage borders. Let these agencies do their work before punishing consumers.
History tells a different story.
Let us go back to a time before the current debate about subsidies.
In the late 1980s, global crude prices fluctuated dramatically—from a high of $27.71 per barrel in 1985 to a low of $14.44 in 1986. The 1986 collapse was particularly brutal. Prices fell nearly in half within months.
During those years, Sabah’s oil was extracted and sold at global prices. The revenue flowed to Putrajaya. The federal government set diesel prices across Malaysia, including in Sabah. Sabahans paid roughly the same as everyone else—between 70 sen and RM1.20 per litre—despite being the ones who pumped the oil.
When prices collapsed in 1986, the federal government’s revenue from Sabah’s oil dropped, but the subsidy structure remained. Sabahans did not see lower prices at the pump.
They did not see a share of the revenue that was rightfully theirs.
Today, global crude has surpassed $100 per barrel. The federal government is now reviewing diesel subsidies in Sabah and Sarawak. And Prime Minister Anwar Ibrahim has framed the current subsidy as something done “although it is not within MA63.”
Let us be clear: subsidies are not gifts. Subsidies are the return of what was taken.
The absurdity: Sabah produces the crude that makes diesel.
Here is the question the federal government does not want answered:
Sabah produces sour crude oil. Sour crude is specifically refined into diesel. So why is Malaysia importing diesel from Iran?
Sour crude oil—with high sulphur content—is ideal for diesel production. Sabah’s offshore fields produce predominantly sour crude. This is not a secret. It is the geological reality of the region.
Yet Malaysia imports diesel to meet domestic demand. Iran is a major source of crude oil and a significant supplier of refined products. With the Strait of Hormuz closure, these imports are now at risk and more expensive.
Consider the value chain:
Sabah’s sour crude is exported and sold at the global market price.
It is refined elsewhere—likely in a refinery designed to process sour crude.
Diesel is produced and sold back to Malaysia at the global market price.
The federal government subsidises that diesel to RM2.15 in Sabah.
We are exporting crude and importing diesel. This is not commerce. This is economic insanity.
Sabah loses three times: once when crude is sold at a discount, twice when the state does not receive its 40 per cent revenue entitlement, and three times when the federal government claims the subsidy as a “gift”.
If Sabah’s sour crude were refined in Sabah or for Sabah’s needs, diesel could be produced locally. Transportation costs would be eliminated. Global supply chain risk would be irrelevant. Sabah could control its own energy security.
But this requires control over resources—which is precisely what the Territorial Sea Act 2012 took away.
If prices rise, here is what happens.
The federal government has signalled that any restructuring would likely follow the Peninsular model.
If Sabah and Sarawak are harmonised with the Peninsular system:
The price would rise from RM2.15 to approximately RM3.12 per litre—a 97 sen increase.
Thereafter, the price would float weekly based on global crude prices through the Automatic Pricing Mechanism (APM).
Targeted subsidies would remain for transport operators through fleet cards.
The government would save approximately RM1 billion annually in subsidy costs. Smuggling incentives would be reduced. The system would be “uniform” across Malaysia.
But the cost of raising prices would far exceed the savings.
The red line: why 20 cents is the point of no return
Let us speak plainly.
There is a threshold beyond which this ceases to be a policy debate and becomes something far more dangerous for Putrajaya. That threshold is 20 cents.
A 20-cent increase is:
A psychological barrier. Once the price moves, trust is broken. The act itself is the rupture.
A test of tolerance. If the government raises prices and the response is muted, they will raise them again.
A declaration. Raising diesel prices sends a clear message: Sabah’s interests are negotiable. Sabah’s welfare is expendable.
For Sabah, the dead man switch is the price of diesel. For decades, Sabahans have accepted federal control over fuel pricing. But there is a limit to acceptance.
When the federal government raises diesel prices—even by 20 cents—the failsafe activates. Sabahans will suddenly understand what they have always suspected: the federal government does not protect them. The federal government extracts from them.
Once this happens:
The narrative collapses. The claim that the government “subsidises” Sabah becomes impossible to maintain.
Solidarity hardens. Sabahans across all lines find common ground. The issue becomes about dignity.
Civil society mobilises. Organisations fighting for Sabah’s rights will see support multiply overnight.
Political consequences become permanent. No federal government that raises prices in Borneo will ever recover trust.
The constitutional fight becomes existential. Legal claims become demands of a people pushed too far.
This is not a threat. It is a prediction based on decades of political behaviour in Sabah. Borneo rising does not mean violence. Sabahans are not a violent people. But it means economic resistance, political realignment, legal mobilisation, cultural reclamation, and perpetual distrust.
The federal government might save RM1 billion in subsidy costs. But it will lose:
Political capital is worth far more.
Electoral support that will take generations to rebuild
Legal standing in ongoing constitutional cases
Economic stability in a resource-producing region
The benefit of the doubt—the quiet trust that has kept the federation intact
The principle at stake
There is a Latin maxim that applies here: nemo dat quod non habet. No one gives what they do not have.
The federal government cannot claim to be generous with subsidies when it has spent decades extracting wealth from Sabah without fulfilling its constitutional obligations. You cannot give what you do not own. And you cannot claim generosity while holding what is rightfully someone else’s.
What should happen next?
For the federal government:
Pause any decision on diesel subsidy restructuring until the Strait of Hormuz crisis stabilises.
Invest in enforcement mechanisms to address smuggling without punishing consumers.
Recognise that the current subsidy is not a gift but a partial return of Sabah’s resource wealth.
Separate this issue from ongoing legal matters—do not create the perception of retaliation.
Address the structural absurdity: why export Sabah’s sour crude while importing diesel?
For Sabahans:
Understand the connection between global events and local prices—what happens in the Strait of Hormuz affects the price at the pump in Papar.
Support resource sovereignty—resource control is the only long-term solution.
Remember your history—Sabah’s resources have been flowing outward for decades.
Speak up—the federal government must hear that Sabahans will not be punished.
Conclusion
Raising diesel prices in Sabah and Sarawak during a global energy crisis, while constitutional challenges are ongoing, would be:
Dimension Assessment
Politically Unwise — it will unite Sabahans against Putrajaya.
Legally Precarious — it undermines the government’s position.
Historically Ignorant — it ignores decades of resource extraction.
Economically Harmful — it raises costs for Sabahans already facing global price pressures.
Structurally Absurd — Sabah produces the crude that makes diesel, yet imports from Iran
Strategically Suicidal — it triggers a reaction no amount of subsidy savings can compensate for.
The federal government has a choice.
It can treat Sabahans as partners in the federation—respecting MA63, absorbing the cost of global price shocks, acknowledging historical context, and addressing the structural absurdity of exporting crude while importing diesel.
Or it can treat Sabahans as supplicants—raising prices, claiming generosity, and proving precisely why so many Sabahans feel the federation has failed them.
The Majangkim Office recommends the former.
