Your memorandum No. 122.JulY 15th.

Japanese Peace Settlement.

Regret that no use every comment being sent regarding likely
attitude of Soviet Government on particular proposal as only
available indication of Soviet views is in official statements
already made, or obvious inferences e.g., Soviet objection to
simple majority decisions of any supervisory commission. In view
of forthcoming Canberra conference, however, I submit with some
diffidence the following general appreciation, based on my
experience here. (For general background of the Soviet policy see
Articles in Foreign Affairs, July 1947, page 566 to 582; Round
Table, June 1947, Page 225 to 230).

1. In the past few weeks the lines of cleavage between U.S.S.R.

(with satellites) and other countries (especially the United
States) have become more sharply drawn. European consideration of
the Marshall plan in spite of Russia's attitude towards it has led
to swift concrete action by Soviet Government to draw closer
Economic ties with Satellites, and between satellite themselves.

In addition there has been daily press criticism of American
policy in Europe and the Middle East, and to some extent in Asia.

No opportunity is lost to play on French and British fears of
American designs in Western Germany or to play up British economic
difficulties as clear proof of mildness or loss of power by any
country which accepts American dollars.

This atmosphere may have contributed to strengthen the words used
in the Security Council by Johnson on the subject of Greece. [1]
2. In these circumstances there seems to me real danger that
Russia on the one hand, and the United States on the other will
regard the interests of other countries as unimportant or
irrelevant when considered in the light of basic Soviet United
States antagonism. This could have serious effects in relation to
Australian interests in Asia and the Pacific.

3. As assembled in confidential American views here, United States
appear to regard Asia as the logical and the most profitable
ground for Communist expansion, largely because the standard of
living of under privileged classes in Asia, is so low, that the
present low Russian standard, accompanied by full employment seems
attractive.

While the Americans admit that Russia will wish to 'consolidate'
in Europe and perhaps the Middle East, they seem to assume that
the main pressure will be in the Far East, though perhaps only by
way of infiltration with remote control.

4. Preoccupation with problems of Security however, tends to make
the Americans see Communist hares behind every Asiatic bush. As a
result there is some danger that the United States may regard
genuine and legitimate aspirations in Asia towards self Government
as necessarily Soviet inspired or controlled, and try therefore to
restrict or suppress Nationalist movements. This could have the
opposite effect to that desired i.e., to make Nationalist[s] see
in Russia their only hope of salvation, and to lead them to regard
United States and supporting powers as antipathetic and ignorant.

5. I suggest therefore that while it may well be in Australia's
interests to support the United States on broad security matters
in relation to Russia, it may also be in Australia's interest to
question from time to time various aspects of United States
political and economical policy towards Asia and when necessary to
take independent action (as in Indonesia).

6. From this post it seems likely that the next four to six months
will determine the final success or failure of attempts to secure
Russian co-operation in solving world problems. In the United
Nations Assembly decision on such an important item as Greece
could in itself be decisive. If November meeting of the Council of
Foreign Ministers fails to secure basic agreement on the German
settlement, it seems hardly likely that the full Council will ever
discuss the matter again. In this event failure of Russia to co-
operate in the Japanese Peace settlement, might be comparatively
unimportant, but if the United Nations Assembly handles
successfully the Greek and other questions, and if agreement is
reached on the German settlement, one could still hope to bridge
also the differences with Russia in the Far East.

The above considerations suggest that the timing of the final
pressure of the Soviet Government may be of considerable
importance and raise some doubt whether the present is the best
moment to press for clear cut decision on the Japanese Peace
conference.