131 Department of External Affairs to Australian Delegation, United Nations
Cablegram 234 CANBERRA, 14 May 1948, 5.30 p.m.
MOST IMMEDIATE SECRET
Your UN433.  Indonesia.
Both parties have been meeting continuously with Committee of Good Offices in Indonesia to try to reach agreement on outstanding political and economic issues. While agreement has been reached on comparatively minor matters, progress on important issues has been slow. The Dutch have continued to take offence easily over small incidents, e.g. Djokjakarta Station episode  and the recent Tjoa statement in New York , and they are apparently seizing every opportunity to impute bad faith to the Republicans.
At the present time discussions are centering mainly on questions concerning the establishment of the United States of Indonesia and the Netherlands-Indonesian Union. Both parties are in broad agreement on principle, particularly as regards framework of the former, but the Dutch are apparently trying to ensure that the Netherlands-Indonesian Union will be a kind of supra-government which they themselves would control and which would have effect of nullifying Indonesian sovereignty. There are in addition differences regarding steps to be taken to establish U.S.I., and particularly regarding extent of proposed plebiscite. Meanwhile main channels of publicity and propaganda are in Dutch hands and Republicans are being prevented from presenting their case in Dutch-controlled areas.
Critchley is trying to secure general agreement to political proposals which would obviate need for plebiscite and which would in his view provide a short cut to Indonesian sovereignty. He believes he might be able to secure agreement of Committee, though Americans still dislike the idea of Committee putting forward specific proposals. (Critchley reports that American attitude has in general become increasingly pro-Dutch). Proposals would probably be acceptable to Indonesians, but Dutch acceptance is doubtful.
4. While progress has been made towards restoration of internal trade, question of Republican foreign trade still remains unresolved. Dutch have shown no disposition to assist Republicans to import vitally needed goods and equipment from abroad, and appear to be maintaining tight blockade. You should take opportunity of emphasising that Republic is greatly handicapped by inability to obtain goods for reconstruction and ask whether the Dutch are to be allowed to continue to prevent Republic from obtaining those goods direct from abroad if necessary. Republican position has already been considerably weakened, and it is unfair that United Nations, while recognising Republic as a party to a dispute still before it, should be virtually conniving at Dutch action to crush Republic economically.
5. Understand Committee has forwarded to Security Council a progress report of negotiations.