Following is a summary of comments which we have made to the United States Government, through its Embassy at Canberra, with respect to the present situation.
2. We understand that United States State Department is anxious that we should play our part in ensuring that United States interest in preventing spread of Communism in Indonesia and United States pressure on the Dutch are not exploited by the Republicans.
We are fairly confident that we could still use our influence effectively with the Republicans if we were absolutely assured that the Dutch are not only willing to negotiate on the basis of existing proposals but really intend to reach a settlement on the basis of those proposals and with no change in fundamentals. If, however, we were now to put pressure on the Republic, and events proved that the Dutch were not genuinely prepared to negotiate, Republican faith in our assurances, together with any influence that we may have on the Republic, would be destroyed to the detriment of Australia's future relations with Indonesia and other South-East Asian peoples.
3. We are therefore disinclined to bring any persuasion to bear on the Republicans until we have specific assurances of Dutch sincerity backed up by evidence of their good intention. The latter should include unconditional lifting of the blockade (subject to proper safeguards against traffic in arms, etc.).
4. The matter is urgent since the Republican authorities, although they have been able to combat Communist uprising (despite lack of supplies and equipment), still regard the Dutch as their main enemy and are likely to join forces with all other Republican interests against the Dutch unless there is unmistakable prospect of an agreement within the next few days. The Dutch reaction to this would be another police action, which they have always regarded as the only satisfactory solution. This could cause a general flare-up through all South-East Asia and result in the pinning down of Western forces in the area. In the event of a European conflict Australia would doubtless feel its resources committed to South-East Asia and the position of the Western powers would be weakened.
5. Because of Netherlands dependence on United States support materially and politically, the United States Government can resolve the present situation by using its influence to ensure that negotiations begin immediately and that the Dutch do not render them futile by putting forward unacceptable counter- proposals. If this could be done, and if the Dutch could be persuaded to lift the blockade, we would immediately make a determined approach to the Republic and follow through the negotiations in consultation with United States to the limit.