You will by now have learnt that Dutch and Republican Governments have reached agreement on terms of a preliminary settlement  for restoration of Republican Government in residency of Djokjakarta to be followed by round table conference at The Hague to discuss final settlement including transfer of sovereignty to United States of Indonesia. Critchley's telegrams reporting developments leading to preliminary settlement are being forwarded by bag.
2. After having shown evidence early last week of continued intransigence the Dutch at the weekend accepted the main Republican desiderata including (a) restoration to Republic of authority throughout the whole of Djokjakarta residency and not merely city itself (b) release of all political prisoners captured since 17th December 1948 and (c) continued functioning of Republican police and officials in all areas where they have not been replaced. In accounting for apparent change in the Dutch attitude, Critchley emphasises that the Netherlands delegation has obviously been testing out Republican reactions in order to see how far Republican delegation could be pushed, and have been made to realise that breakdown was inevitable unless they changed their line. It is also clear that pressure from Cochran has had some influence on the Dutch some of whom at last realise that in their own interests a settlement must be obtained this time.
3. We have expressed to Critchley satisfaction with result achieved and have authorised him to attend the proposed conference at The Hague. At the same time we are 'keeping our fingers crossed'; this is merely a preliminary agreement and there are still pitfalls and opportunities for delay even before The Hague conference can meet. Nevertheless, the agreement implies a firm commitment on the part of the Dutch to carry through negotiations to a final settlement. In the meantime we have urged that the United Nations Commission should do everything to expedite matters and should ensure that the public is kept fully informed of progress.
4. There are reports that some Republican leaders consider that Republican delegation's handling of recent negotiations has been too weak. We think it is important that Republican leaders should maintain a united front and do everything possible to hold their supporters in line at least until The Hague conference has had a chance to succeed. We have asked Critchley to use his personal influence to this end and we think it would be useful if Indian Government could do likewise.
5. We have been considering in the light of latest developments what course should now be followed in the General Assembly which will have to consider Indonesia as an agenda item within the next few days. Because of the time factor we shall have to leave a certain amount to the discretion of our representatives in New York but our present inclination is to suggest that the Chairman of the ad hoc political committee which has the matter before it, should take the initiative in recommending that the item be held over until the next Assembly session in September. This would avoid unprofitable discussion and possible acceptance of a resolution merely expressing satisfaction with present limited agreement, which in view of our reservations concerning the genuineness of the agreement we would prefer to avoid. Please explore with Indian Government and ascertain their views.