Your 164. [1]

1. Our guess had been, from the attitude of Dutch here, Dutch at
Batavia, and reports from New York, that, for the time being, the
decision had been taken there could be no further military moves.

2. Eaton has reported fully and conditions in Djokjakarta. are
encouraging and the whole question of alleged breaches of 'cease
fire' has been observed by other representatives who are now
inclined to believe that the so-called mopping up operations of
the Dutch is the chief cause.

3. We are at present giving thought to the line the Australian
representative on the Committee of Three should take. We are
fairly confident that we can sell any solution we think is just to
the Indonesians, and recent Dutch attitude to us makes us believe
that they too wish to find a solution through the Committee of
Three.

4. The Cheribon Agreement approached independence of Indonesia in
a roundabout way, first of all giving independence to a United
States of Indonesia, and then forming a Netherlands-Indonesian
union. In our view, this procedure toward independence is now
outmoded. There must be independence for the Republic, that is,
Java, Sumatra, and Madura, as a first initial step, association
with other parts of Indonesia being left to subsequent
arrangements.

5. Our second observation at this stage is that the Cheribon
Agreement leaves unsolved all the major questions, for example,
the economic arrangements, and that the Committee of Three must
attempt to solve these questions if a solution is to be found.

6. For these reasons, it would seem futile to return to the
Cheribon Agreement, and we ha[ve] in mind a combination of the
Cheribon Agreement and the Philippines -United States Agreement.

[2] Under [the] latter, if you can obtain a text, you will see
that complete independence is granted, subject to agreements
between the Philippines and the United States contemplated in a
protocol to the main agreement. In our view, if the Dutch can be
persuaded to offer independence along the lines offered by the
United States to the Philippines, and by the United Kingdom to
India, Burma, and Ceylon, and if Indonesians, on the other hand,
can be persuaded to offer subsequent agreements satisfactorily
governing economic and administrative arrangements, there is every
prospect of final agreement.

7. The location of the meetings of the Committee of Three is not
yet decided.

New York has been suggested, but we think this unrealistic and
would prefer Singapore. We are convinced also that our
representative must go with concrete proposals generally
acceptable to both parties.

8. I will be speaking informally and on a personal basis to
Teppema along these lines and therefore there is no objection to
you taking similar action at The Hague. Our impression is that the
Dutch are now willing to believe that we are sincerely desirous of
a satisfactory settlement and that, in arriving at this
settlement, do not wish to prejudice their fundamental interests.

Proposals along the lines outlined above would satisfy the
objective interests of both parties. It would be interesting to us
if you could think aloud along these lines to whatever Dutch
authorities are available to you and to report their reactions.

9. As regards procedure of the Committee, we had contemplated
that, while the Committee was considering an overall draft
agreement based on Cheribon and perhaps also on Philippines,
members of their staff would discuss with Dutch and Indonesian
representatives further agreements dealing with detailed economic
and other relationships. We envisage also that the Committee of
Three, after its first meeting, should meet subsequently from time
to time until all agreements had not only been completed but
carried into effect, thus maintaining the supervision of the
Security Council over all negotiations and ensuring that both
parties carry out the terms of the agreement.

10. The granting of immediate independence to the Republic will
come to the Dutch as a new suggestion, as Cheribon contemplated,
as indicated above, a more roundabout procedure. There can be
little doubt, however, that the British technique, which has met
with such success, can, with our influence, meet with equal
success in respect of Indonesia, and that, in place of the
Cheribon Agreement, there should be the immediate offer of
independence, subject to certain subsequent agreements. We can
sell this to the Indonesians and, from the Dutch point of view,
there would be tremendous beneficial effects throughout the whole
world.

11. You will realise this is the important stage of all
negotiations we have initiated in this matter and therefore wish
you to do everything possible to have accepted this general
approach, maintaining always that events have proved the course we
adopted to be the correct one and that, with Dutch co-operation,
we can see the whole matter through to a successful and
satisfactory conclusion.