Indonesia.

We have sent you by bag a copy of the United States - Australian
working paper [1] which was submitted informally to Netherlands
and Republican Delegations on 10th June and which was subsequently
referred to in the press, together with the fact that Netherlands
had rejected it.

2. It is possible that substance of Working Paper will come under
discussion in Security Council which is continuing to consider
Indonesian Situation and has called for report on circumstances in
which negotiations were broken off. Although negotiations are
expected to be resumed shortly there is little prospect of early
agreement.

3. While we appreciate that Dutch policy is at present conditioned
to some extent by proximity of elections you should lose no
opportunity of keeping our views continually before Netherlands
Government. We believe that United States - Australian proposals
will provide a sound basis for discussion and early agreement, and
we regret that Netherlands Delegation has so far declined to
consider them. At same time, we do not by any means regard it as
the only possible basis, and we are convinced that Committee of
Good Offices would be glad if the two parties could themselves
reach common ground through bilateral talks. In this connection we
note that the recent meeting between Van Mook and Hatta took place
in a friendly atmosphere.

4. As we understand it, the principal fear of the Republican
leaders is that by accepting current Dutch offers they would find
themselves committed to participation in a provisional government
of Indonesia enjoying only nominal authority and destined for an
indefinite period of tutelage under Netherlands sovereignty. Such
a turn of events would amount to virtual restoration of the status
quo, would quite fail to recognise the position which the Republic
has won for itself within Indonesia and in the eyes of the world.

We believe it was mainly for purpose of allaying these Republican
fears that Australian and United States members of Committee
produced their proposals. If the Dutch were willing to meet the
Republicans to some extent on (a) powers to be exercised by
provisional government and (b) prospective date for elections
and/or handing over of sovereignty to United States of Indonesia,
we feel that other difficulties might be quickly resolved.