1. American Consul-General's interpretation of Indonesian reaction
to their offer [1] is in our view correct. It asked that good
offices be used to secure arbitration.

2. Last night Indonesian Prime Minister accepted our proposal for
joint American-Australian arbitration.

3. It should be clear to American Consul that our proposal is only
one likely to be acceptable to both parties and give prospect of
speedy settlement. He should know too our fundamental interests in
the matter and entertain no fears as to our co-operation with
America.

4. An immediate message from him to his Government recommending
acceptance of Australian proposal as only possible way out would
be most helpful.