INDONESIA

1. Lack of progress negotiations between Dutch and Indonesians
with a view to reaching a peaceful settlement of the Indonesian
problem is very disturbing. Dutch appear to be making no real
effort to negotiate, but seem instead to be playing a waiting game
in hope that
(a) Indonesian nationalist movement will disintegrate into
different factions which can be played off against one another or
dealt with separately,
(b) Dutch forces can be built up to a strength sufficient to deal
alone with Indonesian forces after British forces have been
withdrawn.

2. It seems essential that immediate steps should be taken to try
to convince Dutch that this policy is misguided, may alienate
world sympathy and is not likely to be successful. While British
forces remain in Java, United Kingdom Government has a lever which
they can use, if they so desire, to help shift Dutch from their
present attitude. Once British forces leave, the issue will be
entirely in hands of Dutch and all the present signs are that
heavy fighting will ensue which could have far-reaching
consequences for Australia.

3. I understand that when the Indonesian question came before the
Security Council in London early this year, Bevin stated that
British troops were sent to Indonesia for two purposes only viz.,
(i) to disarm and other-wise deal with Japanese forces and (ii) to
rescue prisoners of war and civilian internees. Precise
information is not available here, but I should have thought that
these two tasks had now been substantially completed, or that they
could be completed in the very near future. If so, there does not
seem to be any sound reason to justify retention of British forces
in Indonesia; indeed, if these forces remain in Java after
completion of the above-mentioned two tasks, the United Kingdom
Government may incur severe criticism particularly if, as is quite
possible, the question of Indonesia again comes before the
Security Council. Retention of British forces in Java, not for
these two purposes, but for the purpose of sustaining Dutch
interests while the Dutch are building up their own forces with a
view to military action and in the meantime not making any real
effort to reach a peaceful settlement would seem to be a heavy
responsibility for the United Kingdom Government to undertake.

4. Recently the Royal Netherlands Navy asked our Navy Department
to supply for a period of 6 to 12 months goods and services for
six Dutch destroyers and one escort carrier. The supplies asked
for included not only Australian ammunition but also a
considerable quantity of Royal Navy ammunition lying in Australian
store-houses which the Admiralty had apparently indicated could be
made available to the Dutch. In effect, we were being asked for
permission to base a small fleet in Australia. The matter was
discussed informally in Cabinet, and the following decisions were
reached which have not, of course, been made public or
communicated formally to the Dutch:

(a) The Dutch should not be prevented from withdrawing from
Australia their own stores (including ammunition) which they can
load into their own ships with their own labour. (b) Dutch
requests to be supplied with Australian munitions and war-like
equipment should not be granted.

(c) As far as practicable, no encouragement or facilities should
be given in connection with transportation by Dutch vessels of
British Admiralty or foreign munitions or war-like equipment
stored in Australia. As regards Royal Navy stores now in
Australia, it should be brought to the notice of the United
Kingdom Government that supply to the Dutch of Royal Navy stores
in Australian ports is embarrassing. If, however, after such
reference the United Kingdom Government still decides to grant
Dutch requests for such stores, then Dutch labour must be used in
all loading operations. Australian labour is only to be used in
regard to identification, sorting of stores from Australian
material and security.

(d) While fuel and food should not be refused to Dutch warships in
Australian waters, no encouragement should be given to the Dutch
to expect that they can regard Australian ports as a base where
fuel and food can regularly and in all circumstances be obtained.

Requests by the Dutch for major repairs to Dutch warships should
be refused.

Underlying these decisions was the feeling that the Dutch were not
making a bona fide effort to negotiate a peaceful settlement and
that if Australia facilitated the building up of Dutch military
strength under these conditions we might well stir up lasting
resentment amongst the Indonesians.

5. I suggest you should see Bevin or other appropriate British
representative in Paris as soon as possible and discuss with him
the present situation in Indonesia. You could inform him
confidentially of the Australian decisions, referring specifically
to the embarrassment we feel at the apparent readiness of the
British Admiralty to make available to the Dutch Admiralty
ammunition stored in Australia. This last point is rather urgent,
as our Service authorities wish to raise the matter with the
Admiralty as soon as possible, but are waiting until an approach
has first been made on the political level. in addition, however,
I suggest you should emphasise the points set out in paragraph 3
above, and urge that it is necessary for some positive initiative
to be undertaken by the United Kingdom at once. [1] As I see the
position, the only move which may still conceivably stir the Dutch
to make an urgent and bona fide effort to reach a peaceful
settlement is for the United Kingdom Government to make it clear
that if no such effort is made forthwith, present arrangements for
temporary retention of British troops may have to be reviewed. Any
undertaking which may have been given to permit British forces to
remain after completion of the only two tasks which justify their
presence in Indonesia must surely have been based on the implied
condition that the Dutch were making a real attempt to negotiate.

6. Please telegraph as soon as you have taken the matter up, so
that I may know any preliminary United Kingdom reactions to the
general question and so that I may inform the Acting Minister for
the Navy that the Navy Department can take up with the Admiralty
on the official level the question of Admiralty supplies stored in
Australia.