250 Critchley to Department of External Affairs
Cablegram K161 KALIURANG, 21 September 1948
Hatta claims that the communists have been using terrorist bands and that unrestrained looting followed the capture of Madiun. The majority of the population of the city are believed to favour the Government but are unorganised. The main airfield was still under the Government's control last night.
2. Hatta and other members of the Government are confident that the uprising will be quickly crushed although shortage of transport and other factors such as the need to eliminate armed bands in neighbouring areas may stretch the military operations to as long as a fortnight. The total force of the insurgents in Madiun is believed to be about 4 battalions.
3. The uprising has given the Republican Government an opportunity to take necessary security measures in a manner which will evoke maximum support. If the Government is able speedily to put down the uprising it will have strengthened its position both internally and externally. The main fear is that the Dutch may cross the status quo line as part of the professed anti-communist drive. Such a move would swing mass support to the insurgent communists.
4. The Americans appear to agree with us that anything that can increase the prestige of the present Republican Government is in the interest of a peaceful settlement of the Indonesian dispute, and that such prestige can best be increased by- a. giving the Government full opportunity to settle their internal problems without Dutch interference, b. lending economic support in ways which would carry the least stigma of Dutch co-operation, (supplies of textiles are most important), c. arranging for the reversal of recent Netherlands policy of provocative incidents against the Republic in Netherlands- controlled territory, d. using all possible pressure to bring about an early and satisfactory agreement with the Netherlands, e. ensuring a proper implementation of A clauses of the Truce Agreement, f. generally lending such moral encouragement as is practicable.
5. The Indonesians will today accept the American proposals as a basis for negotiations. In an immediately following letter on the question of resuming negotiations they will reserve their position regarding- a. the return of 56, Pegangsaan East, b. the withdrawal of eviction notices to Republican families in Batavia, c. the proper immunities for members of the Republican Delegation in Netherlands controlled territory. 
They will also stress the importance of a full implementation of the Truce.
6. It will now be up to the Americans to go to work on the Dutch.