TIMOR

Reference your telegram of 18th March [1] and my telegram 213 of
2nd April. [2]

Japanese have undoubtedly been exercising pressure on Portuguese
through Macao and Portuguese Ambassador [3] has within last few
days been to see Halifax [4], Cadogan [5] and myself. [6]

He told me (a) that the Japanese Charge d'Affaires at Lisbon had
recently told Governor of Macao [7] and the Portuguese Minister at
Tokyo [8] verbally that if Portugal did not satisfy Japanese over
Timor they would make trouble at Macao, (b) that Japanese were now
endeavouring to drive Portuguese out of the island of Macao which
they had always occupied and (c) that the Japanese Minister at
Lisbon [9] instead of trying to get western concession in Timor
was now demanding the cancellation of the eastern concession.

Monteiro agreed that the eastern concession was perfectly valid
and I urged that his Government should resist the Japanese
blackmail and counter it by threats of publication.

The Netherlands Minister [10] also came to see me to express his
Government's deep concern at Japanese pressure re Timor.

Have at last got Cadman's [11] views on commercial aspects; they
are that there is little possibility of finding any oil field of
major importance in Timor though discovery of small quantities not
ruled out, and that in view of the above he could not recommend
any Company and should not make a cash payment of anything like
the amount indicated in order to buy Wittouck [12] out. Am having
a further discussion with him on Monday.

Had further meeting with Butler [13] and Foreign Office officials
today. Butler said that after consideration he felt strongly that
Dutch should be brought in. He feels it most desirable that we
should not reject their spontaneous offer of co-operation vis-a-
vis Japan, also, that if we can get a line-up of Commonwealth,
United Kingdom, Portugal and the Netherlands it will be much
easier to handle the Japanese in this matter. Put on this broad
political basis he thinks that the United Kingdom would be
prepared to consider in conjunction with the Commonwealth and
Netherlands Government providing financial assistance to Oil
Concessions for the purpose of buying Wittouck out-any such
assistance being conditional on Oil Concessions finding a
substantial portion of the amount required.

Arranged that I should ascertain your re-actions and should also
find out from Dodson how much Oil Concessions would be prepared to
put up.

Have seen Dodson who states that his company would be prepared to
put up 10,000 and that Wittouck would probably accept between
30,000 and 40,000.

Please cable your views as soon as possible. Meanwhile regarding
Japanese pressure on Macao the Foreign Office have undertaken to
give the Portuguese Government fullest support in resisting
Japanese efforts to induce them to cancel the eastern concession
and instructions to this effect are being sent to the Ambassador
at Lisbon. [14]

BRUCE