511 Hamilton to Burton
Minute CANBERRA, 18 October 1949
Though agreement has been reached on a large number of problems previously thought to present serious threats to the success of the round table conference, the atmosphere is not as cordial as in the earlier stages, nor prospects of a fully acceptable settlement so bright. There are a number of reasons for this.
1. The Dutch have consistently pressed for detailed agreement on all points. The Indonesians would prefer only agreement in general terms, leaving details for negotiation after the transfer of sovereignty. The prolonged wrangling is causing ill-feeling at The Hague and raising doubts in Indonesia lest the Indonesian delegation be out-manoeuvred by the Dutch.
2. The Dutch appear to have been prepared to make considerable political concessions, but in current negotiations in respect of financial and economic matters their attitude is less conciliatory. The major problems in this connection are- (a) whether or not the R.I.S. (United States of Indonesia) should assume responsibility for liabilities incurred by the Dutch in military operations against the Republic.
(b) the actual size of the debt owed by Indonesia to the Netherlands when the cost of the military campaigns has been deducted.
Compromise proposals  offered by Cochran, U.S. representative on the U.N.C.I., were rejected by the Netherlands. A 3-man committee including Cochran in his personal capacity has now been established to investigate the position. Cochran's move is seen by the Indonesians as prejudicing the potential influence of the U.N.C.I. and the Security Council. The Indonesians who value these influences are now attempting to rectify the situation.
3. The question of Dutch New Guinea has been raised. The Indonesians demand its inclusion in, the Netherlands its exclusion from, the R.I.S.
4. The Netherlands want 'national' treatment in economic matters in the future R.I.S. The Indonesians are only prepared to concede them 'most favoured nation' treatment.
5. Military problems In particular- (a) period for withdrawal of Netherlands forces.
(b) the question of a naval base and the force of the Netherlands Navy.
(c) the future of the K.N.I.L. (Royal Netherlands-Indonesian Land Forces).
6. The Netherlands are demanding special arrangements for the exercise of the right of self-determination by Minahassa and certain Netherlands-sponsored States in Sumatra at present not represented in the B.F.O. (Federal Consultative Assembly).
7. The position in Java is deteriorating owing to the continued freezing of the position as at the cessation of hostilities.
Administration and supply is breaking down and civil discontent increasing. Political tension is growing following reports of Netherlands intransigence at The Hague. Military tension is rising in view of the Dutch belief that the Republican forces are improving their positions in the cease-hostilities interval. The Dutch put forward proposals  to relieve the situation on 20th September. The Republic was unwilling to accept the proposal that Republican forces (T.N.I.) be withdrawn from the Negaras, claiming such a withdrawal would permit the free development of extremist organisations. They agreed, however, to accept the proposals as a basis for discussion. The Dutch have now apparently altered their proposals with the intention of driving a harder bargain. In the Semarang and East Java areas their arrest of numbers of Republican troops and civil officers has caused a critical situation to develop. Fighting is reported to have broken out in the last 24 hours. The Central Joint Board is attempting to restore the position.
In general the deteriorating situation in Indonesia, itself already made worse by failing confidence at The Hague talks, is itself contributing substantially towards the frustration of the round table conference.