The Hatta Government is for the time being secure with strong support in the KNIP and the Army.
2. Communist influence is mainly limited to the labour unions and to a lesser extent to some youth organisations and irregular armed bands. The Communists are ,very active' in extending their influence both geographically and politically and are taking advantage of the favourable opportunities for propaganda in the economic and political situation. They are opposed to any negotiations with the Dutch. Muso is reported to have described the Australian-U.S. proposals  in a mass rally as 'another form of colonialism'.
3. The Government's position has been strengthened by support against the Communists both inside and outside the KNIP from the G.R.R. (the anti-Russian left wing revolutionary movement). The support is not altogether unexpected. Muso on his arrival in the Republic described Tan Malakka (still in jail) as his main opponent. Sukarno's grant of amnesty on August 17th to a number of the Party's leaders who were imprisoned following the attempted Sjahrir coup could be interpreted as an anticommunist move. There have been clashes between irregular troops in Solo, presumably between the G.R.R. and the communist factions. Muwardi, one of the three leaders of the G.R.R., has been kidnapped.
4. The new American proposals have been received by the Republican Delegation with caution and in some cases with suspicion. Their similarity to the Australian-U.S. proposals has of course been strongly commented on but they are 'not as good'. Main criticisms are directed against the control of the army during the interim period and the proposal that the Committee of Good Offices should remain only until the formation of the Provisional Federal Government. Generally, however, the Delegation can accept the proposals as a basis for discussion. There is much to be said for giving this acceptance as early as possible but unfortunately the internal political situation makes it extremely difficult for Hatta to do so.
5. Anti-Dutch feeling following recent incidents in Batavia (see my K. 152 ) is running high and a spirited protest against the incidents is being made to the Security Council. A decision to reopen negotiations at this time would be used by the Communist to the disadvantage of the Government. Hatta may have to show the 'iron hand' before he can proceed with further negotiations and he is reported to be reorganizing the Army and the Police for action against lawless elements. Strong action now would probably lead to a major clash but adequate preparation may enable it to be taken with much less disturbance in some weeks time. Hatta may not therefore be able to accept the American proposals for some weeks.
His position would be much easier if the Dutch were to return 56 Pegangsaan East and offer immunity to the members of the Republican Delegation.
6. Heated debates have followed Hatta's speech in the KNIP (see my K. 154 ). The Government has so far come out of these debates well and it is expected that the Hatta policy will be supported.
Only one clear cut motion has emerged. All parties agree that the Government should be free to extend foreign relations. However, practical problems make this question largely academic. The exchange of consuls with Russia  is not being specifically considered at this stage. It would meet determined opposition from the Masjumi and the P.N.I.