1. This morning Gani and Tamzil (Vice-Minister for Foreign
Affairs) called to see me and offered an account of the present
situation.

2. The Republican position is that since Commission-General's note
of May 27th [1] Republic has been under the threat of an ultimatum
and this had limited the possibilities of what they could do. They
knew the Dutch did not trust them, and for their part they needed
guarantees from the Dutch before unilaterally withdrawing their
troops from demarcation lines and stopping defensive measures.

This was the whole problem. If however the political air were
cleared by a statement that little distance now separated the
parties, and that both parties intended to settle remaining
differences peacefully, and further negotiations would not be held
under compulsive force of an ultimatum, the Republic could and
would stop border incidents and defensive measures and withdraw
troops to garrisons even before the Dutch did so. The Cabinet and
Working Committee of the K.N.I.P. were of one mind on this. In
fact they had agreed to 4 of the 5 demands made by the Dutch in
their note of 29 June (my telegram 209 [2]), and by their proposal
on the police force [3] (which follows in my telegram 232) had
gone 90% of the way towards meeting the fifth Dutch demand. They
therefore proposed the issue, jointly or separately, of statement
given in my immediately following telegram. [4]

3. Draft statement and police proposal were handed to Dutch
yesterday and Van Mook and advisers and Commission-General met 4
Republican ministers last night. This meeting was apparently
unsatisfactory and rambling, and the Dutch revived all the old
issues, and, Gani says, 'did not behave like gentlemen'. It was
gathered, rather than said, that the proposals were unacceptable,
and Van Mook said he had 'neither the will nor the authority' to
continue negotiations. The statement and police proposal were
telephoned to The Hague while Dutch Cabinet was in session, and
the impression was given that a decision could be expected today.

4. Only development this morning has been that Secretary of
Commission-General has been in touch with Republican ministers
with a view to finding a way to continue negotiations. He can
scarcely be considered an emissary of Van Mook, but some good may
come of it.

5. I was asked whether the Republic could count on the good
offices of Australian Government. Relying on your telegrams 151
and 188 [5], I said yes, pointing out that the offer was meant to
be availed of by both sides.

6. They said that 'if the worst happened' it was their desire to
seek international action. They were thinking of the International
Court, the Security Council or an outside power but did not know
how to set about it and asked my advice. They also sought advice
on how the negotiations could be kept open. There was also some
discussion about Article 17 (2) of Linggardjati arbitration). [6]

7. I told them I should have to communicate with you, and they
asked to see me later on.

8. Glad of instructions.