Your telegram of 28th August, No. 256. [1]

The Portuguese Government have made it clear both here and in
Lisbon that they are most anxious to re-establish their authority
in Portuguese Timor with a minimum delay and that they are equally
anxious, if possible, to do this by their own efforts and without
any intervention by third parties. With this end they have already
despatched one sloop which is due at Colombo almost immediately
and are contemplating sending three or four more sloops very
shortly. Furthermore, the transport 'Angola' with Portuguese
troops on board will be ready to sail from Lourenco Marques in the
next day or two. In addition, the Portuguese Government claim to
have been informed through the Japanese Minister in Lisbon [2]
that the Japanese Government are now ready to return Portuguese
Timor to full Portuguese control though whether this arrangement
can, in fact, be implemented must be open to doubt.

2. Our attitude has hitherto been to assure the Portuguese
Government that we wish to place no obstacle in the way of re-
establishment of their authority over Portuguese Timor, but may
persuade them for operational reasons to route their first sloop
via Colombo instead of as they wished, sending her direct to
Timor. We do not feel, however, that we shall have any
justification, once the Japanese surrender has been signed, for
delaying this sloop at Colombo or for preventing 'Angola' and
other sloops from sailing from Lourenco Marques direct to Timor if
and when the Portuguese Government so desire.

3. Despite the attitude of the Portuguese Government described
above, we fully understand your desire that the surrender of
Japanese troops in Portuguese Timor should be made to an
Australian force and we are quite prepared to approach the
Portuguese Government accordingly. In view, however, of their own
feelings on the subject, we anticipate that they will certainly
wish to stipulate that the local Portuguese authorities and
probably the first of the Portuguese sloops should be associated
with the surrender. We think, too, that the Portuguese Government
will certainly insist on an undertaking being given that the
Australian forces which may enter Portuguese Timor to accept the
Japanese surrender will be withdrawn as soon as the Japanese have
effectively surrendered and been rounded up and Portuguese
authority re-established, and in any case, not later than the
arrival of the Portuguese troops in the 'Angola'.

4. In this last connection, we feel that a clear distinction
should be drawn between the surrender of the Japanese forces in
Timor which is essentially a military act and the restoration of
civil administration in the Colony which, in our view, should
clearly be left to the Portuguese especially since, as explained
above, they are already taking action to re-establish their own
position. A suggestion that Australian troops should temporarily
occupy Portuguese Timor or that interim arrangements for the
administration of the Colony should be made as suggested in
paragraph 6(c) and 6(d) of your telegram under reference would, we
feel, certainly be rejected by the Portuguese Government, would
arouse great suspicion in their minds and would seriously
prejudice the prospects of any future negotiations such as you
have in mind. Furthermore, the Portuguese Government, would, we
anticipate, certainly claim that any such proposal was contrary to
the undertaking given to them in the name of the Commonwealth
Government by the British Ambassador in Lisbon on 14th September,
1943 [3], regarding the maintenance of Portuguese sovereignty in
her Colonial possessions after the war. They would reclaim that,
in their reply of 4th October, 1943 [4], they expressed their
readiness to discuss with the Australian Government matters
relating to defence, commercial relations, etc. but would maintain
that such discussions were impossible until their sovereignty over
the island was fully re-established.

5. Any dispute between the Commonwealth Government and the
Portuguese Government over Timor would inevitably react on the
relations between the United Kingdom and Portugal and might have
very embarrassing reactions here. The United Kingdom Government
regard the maintenance of good relations with Portugal as of great
importance at the present time, both for economic and financial
reasons and on account of the facilities which we still enjoy
under the Azores Agreement. [5] Anything which might interfere
with the smooth working of this last agreement might, too, have
unfortunate repercussions on United States interests. Besides,
whatever may have happened in Timor in 1941 the United Kingdom
cannot overlook the very considerable services subsequently
rendered to the Allied cause by Portugal through the grant of
bases in the Azores which have been of assistance to both the
European and Far Eastern theatres of war and through the provision
of credit facilities. Nor can it be overlooked that Portugal was
ready and eager to take part in any operation to recover Timor.

6. We suggest, therefore, that it would be best to concentrate on
the question of surrender and that His Majesty's Ambassador in
Lisbon [6] should be instructed to make the following proposals to
the Portuguese Government:-

(1) The Portuguese Government should be asked to agree that the
military surrender should be made to Australian forces on the
understanding that this force should be withdrawn as soon as the
surrender arrangements had been completed.

(2) The Portuguese Governor, who we understand is still in the
Colony, should be associated in the surrender.

(3) The sloop 'Bartolemeu Dias' now on its way to Timor via
Colombo should also be associated in the surrender.

(4) If the Portuguese Government agree to these proposals,
detailed arrangements should be made at once to provide for the
synchronisation of plans.

7. We trust that no action to despatch Australian troops to
Portuguese Timor will be taken in the meantime since any such
action would seriously prejudice the chances of success of the
Ambassador's representations.