Sometimes a country has to antagonize good friends for reasons of sound policy. This I learned, to my personal discomfort, when serving as a U.S. ambassador to the United Nations. Yet no country should antagonize good friends for reasons of misguided policy. But that seems to be the case in a recent decision by the Obama administration.

The Environmental Protection Agency earlier this year announced that palm oil does not qualify as a feedstock to produce biodiesel and renewable diesel under its standards for renewable fuel. This decision combines bad diplomacy, bad national security and bad policy and should be quickly revoked.

The EPA ruling is bad diplomacy as it antagonizes two good friends who happen to be the largest producers of palm oil — Indonesia and Malaysia. At a time of high concern over Islamic radicalism, it also makes little sense for America to offend the state with the largest Islamic community in the world, Indonesia, and Malaysia, which also has a large Islamic population.

These two important nations are not only friendly to America, but they are functioning democracies and demonstrate to others how democracies can enable diverse communities to live and function together. They should be treated better than this.

Second, the EPA ruling is bad for U.S. strategic economic interests. As a Republican, I’m not often admiring of the Obama administration’s foreign and trade policy. However, one element of it has impressed me: how the United States is promoting an open regional market in the Asian Pacific region through the Trans-Pacific Partnership Agreement.

This regional free-trade agreement will provide reference points by which countries in the region can continue to build free-market economies and expand trade, investment and prosperity and thereby enhance security. Economic security is critical to national security, for the U.S. and for nations in the Asian Pacific region.

This regional leadership from the U.S. comes at a vital time. While China’s trade and investment in the Asian Pacific region have expanded rapidly, its promotion of the free-market economic underpinnings that guarantee continuing economic growth has not. China’s leadership has lost the momentum to liberalize trade to which it committed when it joined the World Trade Organization more than a decade ago.

The administration’s decision to deny palm oil biofuels equal treatment with U.S. biofuels unfairly restricts those imports and directly undermines the laudable intent of the grand strategy to foster open markets in the Asian Pacific region. It is little different from the hypocrisy that so characterizes the European Union’s “green” protectionism, to which America took great exception when the EU imposed emission limits on U.S. air carriers entering its airspace.

While extending a friendly hand to China, the Obama administration is wisely casting a wary eye whenever the Chinese make unreasonable claims over international waterways, currency manipulation, etc., or take critical actions that antagonize other Asian nations.

Tightening national security and intelligence cooperation with key countries in the Association of Southeast Asian Nations, as well as Australia, New Zealand and Japan, fits nicely into overall U.S. national security interests. Offending critical ASEAN countries — Indonesia and Malaysia, which together constitute almost half of ASEAN’s 600 million people, produce palm oil and rely heavily upon its export — surely does not.

Yes, upsetting a friend and ally for sound diplomatic or national security reason happens, and must happen, whenever a policy is critical enough and the decision made on it is sound enough. But neither is true in the case of the EPA’s recent decision.

Another critical goal for the U.S. is to broaden its energy mix. At a time of rapidly rising global energy demand, the United States must embrace an all-of-the-above energy strategy. That means using all available low-cost fuels, from traditional fossil fuels to renewable sources such as wind, solar, geothermal and biomass. The EPA’s decision undermines this important goal by removing options from the nation’s energy mix, thus making American energy markets more prone to shocks and volatile price swings.

In fact, it hurts the American economy overall. Consumers now face $4 per gallon gasoline and saw highly fluctuating prices at the pump during the past year. Diversifying our energy supply by incorporating unconventional fuels such as palm oil would lower prices overall and steady the price line over time. In essence, diversifying the supply of renewable transport fuel to include palm oil would provide refiners and blenders greater flexibility in sourcing, helping to create more price stability.

It makes little sense for the Obama administration’s EPA to rule against palm oil in this manner. Given our strategic and economic interests in Asia, sound policy would be to reverse this decision.

Kenneth Adelman served as a U.S. ambassador to the United Nations and director of the Arms Control and Disarmament Agency under President Ronald Reagan, and as a member of the Defense Policy Board and the advisory board to the director of the National Counter-Terrorism Center under President George W. Bush.