213 Hill to Tange
Minute CANBERRA, 15 February 1949
The resolution  adopted by the Security Council contains in para. 3(a) a recommendation for 'the establishment of the interim Federal Government which is to be granted the powers of internal government in Indonesia during the interim period before the transfer of sovereignty'. The resolution further provides that this Federal Interim Government shall be the result of negotiations between the representatives of the Government of the Netherlands and the representatives of the Republic of Indonesia, with the assistance of the United Nations Commission on Indonesia on the basis of principles set forth in the Linggadjati  and Renville Agreements. 
The resolution also provides that if no agreement is reached by one month prior to the date mentioned, i.e. 15th March, 1949, the Commission shall immediately report to the Security Council with its recommendations for a solution of the difficulties. This means that within the next day or so, the Security Council may be called upon to discuss again the situation in Indonesia and the implementation of the Council's resolution.
There is no clear indication of what the nature of the report of the Commission will be. Critchley has indicated that he has been endeavouring to press the Commission to make a further report stressing the failure of the Dutch Government despite several requests to make its attitude clear regarding the Security Council's resolution. These reports, however, have not been forthcoming because of the absence of the United States representative  on the Commission.
The failure of the Netherlands Government to give any indication at all of its attitude to the Security Council resolution, let alone its attitude on para. 3(a), which is the first task to be performed in Indonesia, makes it clear that the Council is faced with the position where the Netherlands Authorities have failed to fulfil a resolution carried by the Security Council under Chapter 7 of the Charter. This means that the Council is now confronted with the position of having to determine what further action it will follow. There seems to be three courses of action open to the Council:-
(1) To give an extension of time to the Netherlands to determine what attitude it will adopt in the light of Cabinet discussions at present going on in that country.
(2) A further resolution indicating that unless definite action is taken by the Netherlands Government before a certain date, the Council will give consideration to methods by which it can implement its resolution.
(3) The Council might give immediate consideration to the problem of implementing its resolution, namely by the application of enforcement action.
In connection with each of these three points, it is considered that methods (1) and (2) would both be unsatisfactory on political grounds. The first suggestion would merely operate as a further extension of time for the Netherlands to accomplish its own ends without reference to the Security Council's resolution. It would merely encourage the policy already successfully pursued by the Dutch in ignoring the authority of the United Nations insofar as Indonesia is concerned. The second suggestion is also not satisfactory in that it would merely act as an encouragement to the Dutch to speed up their own plans and endeavour to reach some finality with the Indonesian Federalists for the establishment of an Interim Government and thus enabling the Netherlands authorities to present the Security Council with a fait accompli.
In view of this it is considered that the Council should give immediate consideration to taking enforcement action within Chapter 7 of the Charter, and to ensure the following out of the Council's proposals. While the implementation of sanctions might not prove immediately effective, at the same time they would combine with the already stiff opposition being experienced by the Dutch in their consultations with the Federalists, and would no doubt encourage further strong guerrilla activities against the Dutch Forces. These three factors combined would increase the Dutch difficulties and no doubt bring about an eventual change in attitude towards the establishment of an effective United States of Indonesia.
The relevant section  of Chapter 7 of the Charter provides for 'complete or partial interruption of economic relations of rail, sea, air, postal, telegraphic, radio, and other means of communication and the severance of diplomatic relations'. Under this provision, extensive measures could be taken against the Netherlands Government provided it was subjected to the severance of all trade and financial relations and the prevention of financial, commercial or personal intercourse with other States, when such actions would probably prove extremely effective.
The only precedent for taking such a course is the application of sanctions against Italy in connection with the war against Ethiopia. In this connection the League of Nations established a Co-ordination Committee and Committee of 18 to consider proposals for depriving Italy of certain products. It will be noted from this that full sanctions were not applied to Italy, and in fact she was subjected to the following restrictions only:-
(1) The prohibition of the exportation, re-exportation or transit to Italy or Italian possessions, of arms, ammunitions, and implements of war. States were also asked:
(a) To suspend any measures that they might be applying for the prohibition or restriction of the exportation, re-exportation or transit of arms, munitions and implements of war to Ethiopia.
(b) To take such steps as may be necessary to secure that such articles if exported to countries other than Italy, would not be re-exported directly or indirectly to Italy or Italian possessions.
(2) States were asked to render impossible all loans to or for the Italian Government, all banking and other credits etc.
(3) There was a prohibition of the importation into the territory of members of the League of Nations of all goods consigned from Italy or Italian possessions and four Governments were asked to prohibit the exportation and re-exportation to Italy and her Colonies of a certain number of articles only. The products selected were those which, being necessary for the prosecution of the war, were mainly exported to Italy by members of the League of Nations and included such things as rubber, bauxite, iron ore, scrap iron, manganese, etc. Italy was not subjected to an interruption of cultural relations.
For a variety of reasons it is well known that these measures did not prove effective.
Applying the experience of the League of Nations in this instance to the present situation in Indonesia, it would appear desirable that every effort be made to secure the fullest possible application of enforcement measures against the Dutch Authorities.
It is suggested, furthermore, that the application of full sanctions involving the prohibition of import and export trade with the Netherlands combined with the total severance of diplomatic relations would, in the present circumstances, prove most effective. It is unlikely that the Netherlands itself, would be capable of withstanding the effect of the withdrawal of European aid by the United States Authorities.
It is further suggested that instructions immediately be sent to the United Nations Delegation in New York proposing that the Security Council should be called together immediately the Commission's report is received from Indonesia.
The Australian representative  at the Security Council discussions might be instructed to press for the early establishment by the Security Council of a Committee to consider the application of sanctions to the Netherlands and the completion of a report by this Committee within a restricted period of time, say one week from the date of its establishment.
It is also suggested that the Australian representatives  in London, Washington and Ottawa, should take the matter up with the Governments to which they are accredited with a view to seeking support for the Australian proposals.
Finally, in accordance with Resolution 2  adopted at the New Delhi Conference, which provided for close co-operation on the Indonesian question amongst the States participating in the Conference, it is thought that these Governments should be informed of the measures proposed above, and, that support should be sought for these proposals.