Indonesia Ambassador saw acting director, Far Eastern Office, State Department, this morning to examine situation in light of radio reports that Security Council had failed to order withdrawal of Dutch forces. He asked whether United States was prepared either (a) to make a further attempt before adjournment of Security Council to obtain resolution calling for withdrawal, or, (b) to take further steps unilaterally to put pressure on Dutch e.g., by termination of ECA to the Netherlands.
2. Allison said that in view of opposition of two permanent members, (United Kingdom and France), United States did not believe there was any possibility of securing a resolution now. United States had never had much confidence that a withdrawal order would be complied with, particularly if such a resolution had the minimum majority.
It might even be more damaging to United Nations prestige to pass such a resolution and to have it defied by the Dutch than to have no resolution at all.
3. Allison said categorically that the United States would not proceed unilaterally to impose Economic sanctions against the Dutch. He did not say that in no circumstances would the United States terminate ECA aid to the Netherlands but made it quite clear that no such step was contemplated at the present time.
4. The Ambassador pointed out that the United States had publicly advocated the withdrawal of Netherlands forces. The effect of the present resolution was to allow Netherlands troops to retain their objectives while Republican counter attacks would become a breach of the Security Council Directive. He urged that the United States re-examine the possibility of taking further action in the Security Council and also of terminating aid to the Dutch at least in the NEI. He pointed out that the United States had ample justification for terminating all aid to the Netherlands on the ground that the Netherlands' budget could never be balanced (as required last ECA agreement) while large forces were being employed in the NEI. To leave the Netherlands in military control of the whole of Indonesia would be to abandon a United States objective and would be a further blow to the Security Council.