MOST IMMEDIATE

We have been informed from Batavia that the local Administration
has agreed to granting visas to two Commercial Attaches to the
Consulate-General. Carne and Hetherington will reach Batavia
Tuesday or Wednesday. When visas are actually issued, we will send
messages to Batavia and to The Hague acknowledging this
arrangement, pointing out that the Supply and Commerce Officers
will be able to carry forward discussions with a view to interim
arrangements for the commencement of trade and that, according to
how discussions develop, we may wish to send forward a financial
adviser and a representative from this Department. It is still
desired however, that you and Ballard persuade both authorities to
permit immediately a financial adviser to visit Batavia, as it is
he who may supply the solution to the present problem pending
agreement between Dutch and Indonesians. For example, he may be
able to suggest means of financing by credit or by payment into a
frozen trust account until such time as Dutch and Indonesians
determine title of goods. You may use this suggestion as an
example advancing the reasons why we particularly desire a third
visa for a financial adviser.

2. One condition is imposed that the officials approach the
Indonesians through the Dutch and do not visit the interior
without Dutch approval. It is not proposed to acknowledge this
condition, as visas are given for members of the staff of the
Consul-General and he will determine whether invitations to visit
the interior should or should not be accepted. We have always
maintained a direct link with Indonesian Cabinet Ministers and
will continue to do so, as in fact do the British whose Consul-
General was recently invited to visit the interior.

3. While these officials are instructed to make no commitments and
merely to explore possibilities of trade, you will appreciate the
importance of their visit leading to some firm arrangement. Van
Mook may be unsympathetic and may not co-operate in seeking an
interim arrangement unless he is instructed from The Hague. In our
view, it should be possible to arrange the physical shipment of
supplies in existence in Indonesia with the concurrence both of
Dutch and Indonesians and thereby removing the ban on Dutch
shipping from Australia without in any way interfering with Dutch-
Indonesian negotiations. The goods are there, we desire them, we
have goods to send which both Dutch and Indonesians desire, and
local disputes over title need not necessarily prevent the
exchange of these goods.

4. It is not proposed that the question of diplomatic
representation should be discussed immediately, either with Dutch
or Indonesians. We would propose in a sense using Dutch desire not
to raise the question and Indonesian desire to raise the question
as bargaining position by which to achieve some practical
arrangement immediately on trade. That is, if Van Mook is
completely uncooperative in respect to trading arrangements, we
should be forced to deal direct with Indonesians which would
involve arrangements on representation. Equally, if Indonesians do
not co-operate in arriving at an interim arrangement which would
help us to get rid, once and for all, of shipping difficulties, we
would be reluctant to make any move suggesting their recognition.

5. If representation is discussed with Indonesians formally or
privately, we propose making it clear that, even as an interim
arrangement we are opposed to idea of any Australian acting as
their agent. We would be prepared, if the Dutch were willing, to
receive an Indonesian representative, either attached to the Dutch
mission in Australia or separately, and we are equally prepared to
send to the Indonesian capital an officer of the Consulate-General
whom we would regard as our representative to the Indonesians.

6. The overriding necessity is to arrive at an immediate trading
arrangement which would completely remove the political
difficulties associated with our relations with N.E.I. These have
during the past year, strained Australian-Dutch relations, in
spite of the fact that, in every other matter and in particular in
the policies the two Governments follow in international affairs
and at international conferences, the two Governments have always
worked closely together and regard each other as having common
purposes and most friendly relations.