1. Palar and Choa Indonesian representatives came this morning to tell us in great confidence that unnamed person very close to State Department and previously found helpful and completely reliable had just conveyed an important proposal to them on behalf of State Department but on deliberately non-official basis.
2. Proposal is that either Republican Delegation propose to Committee of Good Offices or Republican Mission here perhaps to Security Council that de jure sovereignty (which is main issue in present deadlock in Indonesia) be given to United Nations pending transfer of sovereignty to United States of Indonesia. De facto sovereignty in present Republican area to be exercised by Republic and in remainder of Indies by Netherlands. United States would support the proposal whether made by Republic in Batavia or at Lake Success.
3. Palar and Choa had not obtained definite information whether de jure sovereignty of United Nations would be over- (a) Whole of Indies, or (b) Java-Sumatra-Madura i.e. disputed territory, or (c) Present Republican-controlled area.
4. They did not know whether Dutch or Republicans had been sounded but sur-mised Van Kleffens' present visit to The Hague and his reported audience with Julianna in company with Beel might be connected.
5. They have cabled their Government and asked us to endeavour to have Critchley informed as early as possible.
6. They believe the proposal would be very advantageous to the Republic as it would, inter alia- (a) Give a United Nations guarantee of sovereignty for the future United States of Indonesia.
(b) Make it impossible for Dutch again to use force against Republic since the territory would be under United Nations sovereignty.
7. They think State Department motives are probably (a) To achieve early economic reorgainsation of Indies and reintegration into world economic system with relevance to E.R.P.
(c.f. United States endeavours in February to induce Republic to enter Provisional Federal Government), and (b) To restore United States prestige in United Nations.
8. Palar used the term 'Trusteeship' but stated this was not used by American source mentioned in paragraph one above. However, this was clearly his own conception of proposal which he thought could be carried out under terms of article 77(1)(c) of the Charter.