Our local relations with the Dutch are getting worse and worse, as was demonstrated over the Indonesian party.  It was regrettable that Teppema rang all other Legations and persuaded them that the holding of the party was a deliberate Departmental attempt to embarrass him. Having, however, done that it was even worse to plant his daughter  in the hotel listing the names of persons attending, and worse again to give the press a completely erroneous account of what transpired. For example, he indicated to the press that the day after the Indonesian party I invited all Heads of Missions to meet the American Ambassador and invited also Usman. In other words this was a deliberate attempt to embarrass those who had refused to go to the party the previous day. In fact, my party was held ten days before-but that slight error constituted a good story.
In spite of strong press campaigning, or perhaps because of it, Teppema came out very badly, and I understand the Dutch community in Australia is somewhat hostile and considers that he has let them down.
However, it is getting worse than this, and Teppema and his off- sider, Schaepman never refrain from taking an opportunity to make libellous and defamatory comments about me in particular, and about many other members of the Department and Government. To make matters worse, their statements are made frequently in public and usually to Australians. They in doing so discredit themselves, but you can imagine it does not help us to resolve difficulties or to carry on useful relations.
De Ranitz, on the other hand, with whom one normally deals as he is First Secretary, and with whom one has had the main arguments, takes a totally different attitude, and we and other members of the Department remain on the most friendly basis-in fact he is coming in to have a drink with us quite informally today.
The moral of this is that I think our difficulties are accentuated by the way in which Teppema and his off-sider are behaving, privately and publicly. A senior man here of De Ranitz's intelligence and outlook would make all the difference, as he could talk to the P.M., Minister and others in an objective and frank way without causing ill-feeling, as Teppema invariably does.
Your reports  on the attitude of the new government are encouraging and I was glad to see Bevin's comments.  At the same time our reports from Batavia are that the situation is rapidly deteriorating and that there seems absolutely no intention on the part of the Dutch to be led into any agreement. If the Republicans accept a compromise with a view to agreement then additional demands are made to make agreement impossible.
I do not think it is fully appreciated the shortness of time left to negotiate a settlement. If the present Republican Government can show no results and has to give way to [the] Left Wing then no settlement is possible and the Dutch will be in the position of finding a Left Wing militant movement which will soon gather strength through Indonesia. The Dutch, I gather, are looking forward to this, as it will give them the opportunity to renew 'police action' against a 'Communist' Republican Government, which 'police action' they think would not be resisted by U.S. and U.K.
They have already prepared regulations to deal with 'Communist' movements.
It is bad enough to have a Malaya situation on our doorstep, and it would be most serious to us, to Britain and the United States as well as to the Dutch if they cause the position to deteriorate in this particular way.
I think the time has come for a bit more frank talking, which I understand from De Ranitz you manage in the most polite way. But do not make it too polite! 
The Minister will naturally not wish to be placed in the position of pressing our interests in this matter during a courtesy call in the Netherlands prior to the Assembly and other meetings in which cooperation with the Netherlands as such is vital. I would think, however, that it is possible to press our point of view with respect to N.E.I. without in any way prejudicing our relations with the Netherlands. Whether that will be so or not, this is probably one of the most vital issues Australia has had to face, and the time factor is important. My own guess is that if there is no settlement, or convincing indication of a desire for settlement, within the next month or six weeks, then Indonesia is lost to a potentially hostile Republican Left Wing movement.
Commercially and in every other way this should be avoided at all costs.