Hatta has reaffirmed that in recent informal talks Van Mook went
no further than I have already reported. [1] Hatta personally
believes that Van Mook is looking towards a settlement but is
restricted by the reactionary policy of The Hague.

2. The Dutch may now be expected to concentrate on setting up a
provisional Government to their liking. After the Dutch elections
next week and following amendments to the Netherlands constitution
in preparation for the United States of Indonesia and the consent
of the Provisional Government of the Indonesian Union, a bill will
most probably be introduced into the new Parliament giving the
Indonesian Provision[al] Government its first constitutional
powers. The support of the Federal Government for such a bill has
been specially brought to the attention of prominent Netherlands
politicians who recently visited the country. [2] The bill would
be introduced whether or not the Republican Government agreed to
participate in the Provisional Federal Government, but in the
event of Republic [participating] [3], Van Mook would probably
insist on selecting both Republican Representatives and their
portfolios. Van Vredenburch will probably discuss provisions of
the bill with the Dutch Government when he returns to Holland on
Thursday.

3. This outline indicates the real nature of present Dutch
delaying tactics. They are keeping up the appearance of
negotiating with the Republic but in fact are pursuing
unilaterally their own programme.

4. The Dutch will endeavour to keep a firm control of the
Provisional Government. Nevertheless there may be a possibility of
a settlement with the Republicans if the Dutch are prepared to
bind themselves to a programme of elections to a constitutional
assembly and creation of a fully sovereign United States of
Indonesia as outlined in our proposals.

5. The major difficulty will be the Dutch insistence on the
restoration of law and order in the Republic before the elections
are held. Even the minimum difficulty could possibly be overcome
if the Dutch would give a guaranteed date for the final transfer
[of] [4] sovereignty as required by principle one of the six
additional principles. [5] Unfortunately the Dutch appear to
underestimate the intensity of national spirit in the Republican
youth who would revolt if the Dutch were to enter into Republican
territory.

6. Both Masjuma and P.N.I. have accepted the United States -
Australian proposals.

7. Following impasse in meeting of the Steering Committee on
Tuesday, June 29th, I tried to persuade the Committee of Good
Offices to report fully to the Security Council and to ask for
further instructions. Other members of the Committee were however
extremely reluctant and only agreed to report amendment of my
immediately preceding telegram.