Your telegram 125. [1]

DUTCH SEA RESTRICTIONS

Answers to your respective queries are set out below.

A.1. EXTENT OF BLOCKADE

Pre-war restrictions
According to the Navigation Act of 1936 only specific ports can be
used by ships with overseas flags. Only one such port (Padang,
Dutch-controlled) is on the West Coast of Sumatra, and, although
there are a number in Republican Territory, only one, Tuban, is in
Republican Middle Java. Consequently these regulations severely
hamper the Republican trade of Middle Java and West Sumatra.

Post-war Restrictions
(1) Emergency regulations of January 29th, 1947.

Under these regulations the Dutch insist that all ships moving
between Republican areas (e.g. between Bantam and Sumatra) and
between Republican and foreign territories, must call at specified
Dutch-controlled ports. At these ports the ships are examined for
contraband:-

(a) estate products
(b) military stores
(c) industrial equipment (either imports or exports unless
licensed) which could be looted property from estates.

There is evidence that these regulations are policed and military
stores interpreted so as to kill Republican trade.

(2) 'Police Action' restrictions.

At the time of police action the Dutch extended the January 29th
regulations so as to give the Navy full control of all ship
movements in the Archipelago.

By the regulations of Admiral Pinke large areas, particularly
those around the coasts controlled by the Republic, were closed to
ships. Agreement (which tends to strengthen Dutch control) has
been reached to permit as from May 1st, movements of ships between
Bantam and Batavia and between Tuban and Sourabaya.

(3) Barter Trade.

Provisionally until the political settlement the Republic is
allowed to trade on a barter basis. In practice, however, trade is
controlled by the Dutch who insist on the right of valuing barter
goods at Dutch-controlled ports and are in a position to delay
shipping.

(4) Foreign Exchange.

Since March 1st, 1948, the Netherlands control of foreign exchange
transactions provides for a strict control of all trade, other
than barter trade, with the Archipelago.

(5) K.P.M. Monopoly.

In addition to restrictions, K.P.M., backed by the Government, has
such influence with various shipping conferences abroad that it is
a breach of conference regulations for any ship to accept cargo
from an outport with transhipment at a main port, other than that
carried by the K.P.M. An agreement is, therefore, necessary to
permit cargoes to be moved by Republican vessels on a through Bill
of Lading for transhipment at Dutch and other ports.

2. Dutch justification based on sovereignty of the Netherlands
[2]; responsibility for the protection of foreign property and
particularly interests of estates.

3. Trade in native produce.

Theoretically barter trade is permitted, but all the foregoing
restrictions critically affect this trade in practice.

B. LIMITATION ON FISHING
The Dutch deny this, but in practice off shore activities of proas
[3] have been interfered with by the Dutch Naval Forces,
especially in areas closed to shipping.

C. REPUBLIC ECONOMIC DISABILITIES
HATTA has indicated that restrictions on trade with foreign
countries are most important of these negotiations.

1. Dutch blockade has been discussed informally in technical sub-
committees.

Republic has pressed for-
(1) Import of reconstruction goods and inducement goods.

(2) Right to barter with native produce and preference to control
foreign
exchange earned from the export of native produce from Republican
territories.

(3) Freedom of movement of Republican ships or other ships under
Republican flags. (The Republic is prepared to accept joint
control of Republican ports to prevent trade in contraband, or, if
this is not immediately possible, the
continuation, for the time being, of the Dutch control of ports,
providing that
Republican observers are appointed at these ports).

2. Republican views regarding 1(1) set out in Committee document
S.A.C.10
CONF.2C.3 W23. [4] This paper is being discussed by sub-committee
Six of the Economic and Financial Committee.

3. On 1 (2) and 1 (3) detailed discussions are taking place in
sub-committee Four. Preliminary agreement has been reached which
Republican Delegation optimistically considers meets most of its
points but it does not permit the Republic to earn foreign
exchange. However, the Netherlands have made this agreement
subject to assent of Royal Netherlands Navy which has established
a number of conditions. The most burdensome of these are-
(1) The Navy can only accept infringements of the Navigation Act,
1936, as a transitional measure and has set a time limit of two
months as from May 1st. (The Republic is pressing for an extension
of the two months' period which they say is inadequate to move
native produce held in ports on the West Coast of Sumatra.)
(2) In the case of the violation of any regulations the Commander
of the Netherlands East Indies Navy reserves the right to revoke
partially or wholly the said facilities granted.

(3) The facilities suggested can only be subject of discussions
when, and as soon as, satisfactory settlement regarding aviation
has been obtained. (The Dutch argue that Republic should use Dutch
controlled airports as a check against import or export of
contraband. The Republican Government at this stage is not
prepared to accept this as the issue is [bound up] [5] with
political discussions on sovereignty). This last condition is now
holding up the agreement.

Development of Republican Ports
Attempts are being made but this is a long-term matter and
Republican efforts are being hindered by present Dutch
restrictions.

I have read your telegram No. 131 [6] with interest. Would it be
possible to raise the subject of the Dutch blockade at the meeting
of E.C.A.F.E. at Ootacamund?