Your telegram No. 939. 
I went this afternoon to State Department accompanied by Minister and had a long interview with Under Secretary Lovett who had with him Freeman Matthews, Assistant Secretary of State, Charles Bohlen, newly appointed Counsellor of State Department, and Rusk (Hiss's successor as Director of Office of Special Political Affairs which includes United Nations questions). I had hoped to see General Marshall also but he is on the point of leaving U.S.
for Rio Conference. 
I began by stressing our appreciation of the action taken by the United States Government-both the offer of good offices  and the positive contribution to the Security Council dispute.
I then brought out at length and with all the emphasis possible Australia's vital interest in this matter, including the following points- (a) Any major development in the Southeast Asia region greatly concerns Australia. Here our very security is at stake.
(b) In particular any disturbed situation in the Indonesian area since this is immediately adjacent to Australia.
(c) Particular responsibility of Australia as the member of the Security Council most closely affected.
(d) World opinion expects Australia to play a positive part, an expectation arising from Australia's record in the work of the United Nations and also from her part in the Pacific War.
I pointed out that while the Security Council's decision opens the way to a settlement it does not provide specific means by which a just and lasting settlement can speedily be achieved. The United States' offer of good office[s] I continued provided a starting point for practical steps towards a speedy settlement if accepted by both parties.
I underlined how important it was to avoid any proposals which might fail to gain the full confidence of the parties in the dispute. I emphasised that the situation was and would be extremely tense. One major difficulty which seemed to have arisen was that the simple 'cease fire' in present positions might encourage the Dutch to believe they can retain what they now hold.
In consequence the Indonesians apparently felt that Security Council's decision was to some extent unfavourable to them. A concrete proposal for mediation should be made as soon as possible before the situation could deteriorate again. If situation deteriorated the matter would again have to be referred to Security Council in circumstances less favourable than before to a settlement. Australia therefore could not be content just to await events. We felt it essential that Council's decision be followed through by positive action until just and permanent settlement secured.
I developed fact that we have been in closest touch with situation in Indonesia from Japanese surrender. An Australian representative had accompanied Killearn to Cheribon at time of Linggardjati agreement. Recently a mission of 4 Australian officials visited Java and conducted negotiations with both parties and reached successful agreement re Dutch shipping. These officials also made intensive study of situation in Indonesia generally. Our recent move at Security Council was based on very full knowledge of position. We felt that we could claim confidence of Indonesian Republican Government and we had also maintained good relations with both Netherlands Government and Government of Netherlands East Indies.
The Australian Government therefore felt it had positive and perhaps indispensable contribution to make towards a settlement.
We recognised the great interest of the United States in a just and lasting settlement and had welcomed their action. We now wished to propose a joint United States-Australian mediation. I ended by quoting terms of para 8 of your telegram urging immediate joint offer to both parties.
Lovett listened carefully and made only one interruption. When I was developing extremely tense nature of situation and referred to Republican Premier's statement that Dutch had delayed transmission of Security Council's message making it difficult to achieve cessation of hostilities on short notice , he remarked 'Do you believe that is so?' When I had ended Lovett said 'Here is our position-we made our offer 5 days ago. The Dutch have accepted, the Netherlands East Indies' Government approves. We have not yet heard from the Indonesian Republic.' He then went on to say that he was troubled as to why Australia feeling so strongly in the matter had waited for 5 days after the United States' offer before taking this step.
I brought out the likely alternative, a demand for India's participation in the mediation and Lovett again interjected 'it seems to me the same thing applies to India too-why did they not make an offer 5 days ago?' Lovett then asked whether we had reason to think that Australian mediation would be acceptable to both sides and when I told him I believed it would and referred to Australia's help to the Netherlands at the time of the Japanese occupation and since he commented 'my experience has been that in international as in business affairs gratitude is a virtue rarely to be found'.
Harking back to Australia's special position in relation to the Indonesian area he asked whether in fact we were more nearly affected than the Philippines.
I corrected him on this aspect.
Before leaving I made another strong appeal for a joint U.S.- Australian mediation.
Lovett's last word was 'You will appreciate I cannot say more now than that we will consider the question carefully and I shall get in touch with you when we have had an opportunity for communication with our people in these areas'.
My definite impression was that he did not welcome our offer.
We learn informally from U.K. Embassy that Charge d'Affaires saw Matthews at State Department yesterday. Minister expressed British concern with affairs in Indonesia and indicated U.K. Government's disappointment that after approach to U.S. Government for joint Anglo-American offer had been discouraged, U.S. Government had then gone ahead to offer good offices on its own behalf.
I understand Matthews replied in similar terms to those used to Forsyth (my tel. 1037 ) namely that they would keep U.K.
Embassy informed and that while U.S. Government understood U.K.
interest in Indonesia they hoped U.K. would be not less interested in other questions now before Security Council.