Your 350. [1]

We fully appreciate disadvantages of Kirby's absence from Java at
a crucial time and are doing our best to enable him to return as
soon as possible. Present arrangement is that he will fly back,
leaving here 29th December. His return here was in large part to
consult with us owing to continued delaying tactics of Dutch and
lack of progress of Committee.

2. In the meantime please seek an early occasion to inform Noel-
Baker of our concern at the steady deterioration of the Indonesian
Republican Government's position. While we still hope that
Committee of Good Offices will succeed in persuading both parties
to agree to a settlement, we feel that Dutch tactics of attrition
and delay have given rise to serious danger of complete breakdown
in negotiations, or at best an unjust settlement which will leave
Republican Government temporarily in a greatly weakened position
but with strong feeling of resentment which will in due course
lead to even worse conflicts. We have in mind especially the
following examples of Dutch behaviour:

(1) Their delay in making known their attitude to the truce plan
submitted by Committee of Good Offices to both parties, and their
ultimate acceptance of it in principle but subject to such
modifications as to change its nature completely.

(2) Their continued insistence on acceptance of the so-called 'Van
Mook Line' as the line of demarcation, which was clearly shown by
the Consular Commission to lie beyond the furthest points reached
by the Netherlands advance at the 4th August.

(3) Their efforts to isolate the Republican Government by
continuing to set up so-called 'Provisional Governments' in areas
where they have regained control but where Republican authority
was originally recognised under the Linggadjati Agreement.

3. If the Dutch are to continue to strengthen their hold in this
manner until the Republican Government is no longer politically or
economically capable of carrying on, we are concerned at the
possible long-term consequences throughout South East Asia. An
equitable settlement would no longer be possible and Committee of
Good Offices would inevitably be placed in the position of having
to report failure. The re-assumption by the Dutch of temporary
military control over the whole of Java, Sumatra and Madura, could
scarcely fail to give rise to a feeling of bitter disillusionment
and resentment, finding expression in anti-foreign demonstrations
through the entire area. Such a turn of events would be viewed in
Australia in misgivings which we think would be shared by the
United Kingdom authorities in Malaya.

4. In short, we feel that Indonesian nationalist aspirations have
come so close to satisfaction that their complete frustration at
this stage would end for the time being all hopes of stability and
orderly progress in Southeast Asia. We are convinced that unless
the Dutch are prepared now to show restraint, foresight and real
statesmanship they will not only forfeit all Indonesian goodwill
towards themselves and other western democratic peoples but will
also be committing themselves to a military occupation of bitter
intensity and indefinite duration. We have from time to time tried
to point out to the Netherlands authorities that their as well as
our best interests will in the long term be served by a policy
which recognizes these considerations, and we earnestly hope that
the United Kingdom Government will not lose any opportunity of
putting the same views to the Netherlands Government.