On Wednesday, March 10th the Lieutenant Governor General set up by decree 'The Provisional Federal Government for Indonesia'. It consists of seven Indonesians and nine Dutch, together with Van Mook as President and Abdulkadir as Deputy. The composition is:
(a) Eleven state secretaries in charge who will be assisted in some cases by Dutch 'advisers general'.
(b) Three state secretaries, one of whom is already in charge of a department, who will be given special tasks in connection with Internal Security, self-governing affairs and Foreign affairs, with the suggestion that these tasks may lead to the formation of new departments.
(c) The heads of the three departments of the old Netherlands East Indies Government, Army, Navy and Attorney General's, all of which will remain as they were.
2. Examination of the structure shows that no new Government has been estab-lished. De Jure all powers will continue with Van Mook.
The Old Netherlands East Indies Government remains but a number of Indonesians have been put in charge of reorganised departments as a means of gaining experience.
3. On Sunday, the Netherlands East Indies Government Information Officer issued hand-outs in which the new structure was referred to as an 'interim' government with the implication that it was an entirely new Government in which the Republic would be invited to join. These hand-outs were NOT to be published before six p.m. on Tuesday March 9th. However, on Tuesday morning the press were informed that the statements could be released at mid-day. Then at twelve-fifteen on Tuesday, the decree was released which made No reference to the word 'interim'.
4. From these developments it may be surmised, (1) that the new provisional Government was originally devised as an interim Government which would present the Republic with a fait accompli, (2) thence, as a result of instructions from The Hague possibly stimulated by American pressure, there was a last minute change of plan based on the realisation that a new structure would be quite incompatible with the conception of an interim Government contained in the Renville agreement, (3) that the Netherlands East Indies authorities, despite instructions from The Hague, are not prepared to give up wholly their original conceptions and are endeavouring to confuse the situation.
The last of these surmises is borne out by the fact that the first task of the new provisional Government is to consider the establishment as a public forum of a Senate on which all States would be represented.
5. My fear is that the Dutch, unless kept on the rails and forced to reach a satisfactory political agreement with the Republic in the next few months, will twist the new Government structure as a basis for a United States of Indonesia. If the Senate is established, the new structure could easily be transformed into a Government on the American model. Such a Government without the checks and balances of the United States Constitution and with a President appointed by the Dutch is an antithesis to democracy.
6. The main pressures available to the Republic to bring the Netherlands to a satisfactory political agreement are, (1) World opinion.
(2) Ability to live alone.
(3) Threat of dislocation and disorder.
The first of these depends upon reports of the Committee and parties in terms of recent Security Council resolution.  The second depends upon trading opportunities open to the Republic.
Apart from the opening up of commerce and communications in terms of the truce agreement the most important objective here is to ensure that Malaya and Singapore do not enter a trade agreement with the Netherlands East Indies which will tie up all Indonesian trade. The British Consul-General assures me that the reason for delay in the proposed agreement has been the reluctance of the United Kingdom to take action which will assist the Dutch to regulate Republican trade for their own political ends. I believe, however, that representations should be made to London requesting the United Kingdom Government to delay such a trade agreement until it has the approval of the Republic, or perhaps our own Government. The third pressure might be used at a later stage to swing American support behind reasonable Republican objectives.