271 Department of External Affairs to Ballard

1. American Consul-General's interpretation of Indonesian reaction to their offer [1] is in our view correct. It asked that good offices be used to secure arbitration.

2. Last night Indonesian Prime Minister accepted our proposal for joint American-Australian arbitration.

3. It should be clear to American Consul that our proposal is only one likely to be acceptable to both parties and give prospect of speedy settlement. He should know too our fundamental interests in the matter and entertain no fears as to our co-operation with America.

4. An immediate message from him to his Government recommending acceptance of Australian proposal as only possible way out would be most helpful.