The Hatta Government is for the time being secure with strong
support in the KNIP and the Army.

2. Communist influence is mainly limited to the labour unions and
to a lesser extent to some youth organisations and irregular armed
bands. The Communists are ,very active' in extending their
influence both geographically and politically and are taking
advantage of the favourable opportunities for propaganda in the
economic and political situation. They are opposed to any
negotiations with the Dutch. Muso is reported to have described
the Australian-U.S. proposals [1] in a mass rally as 'another form
of colonialism'.

3. The Government's position has been strengthened by support
against the Communists both inside and outside the KNIP from the
G.R.R. (the anti-Russian left wing revolutionary movement). The
support is not altogether unexpected. Muso on his arrival in the
Republic described Tan Malakka (still in jail) as his main
opponent. Sukarno's grant of amnesty on August 17th to a number of
the Party's leaders who were imprisoned following the attempted
Sjahrir coup could be interpreted as an anticommunist move. There
have been clashes between irregular troops in Solo, presumably
between the G.R.R. and the communist factions. Muwardi, one of the
three leaders of the G.R.R., has been kidnapped.

4. The new American proposals have been received by the Republican
Delegation with caution and in some cases with suspicion. Their
similarity to the Australian-U.S. proposals has of course been
strongly commented on but they are 'not as good'. Main criticisms
are directed against the control of the army during the interim
period and the proposal that the Committee of Good Offices should
remain only until the formation of the Provisional Federal
Government. Generally, however, the Delegation can accept the
proposals as a basis for discussion. There is much to be said for
giving this acceptance as early as possible but unfortunately the
internal political situation makes it extremely difficult for
Hatta to do so.

5. Anti-Dutch feeling following recent incidents in Batavia (see
my K. 152 [2]) is running high and a spirited protest against the
incidents is being made to the Security Council. A decision to
reopen negotiations at this time would be used by the Communist to
the disadvantage of the Government. Hatta may have to show the
'iron hand' before he can proceed with further negotiations and he
is reported to be reorganizing the Army and the Police for action
against lawless elements. Strong action now would probably lead to
a major clash but adequate preparation may enable it to be taken
with much less disturbance in some weeks time. Hatta may not
therefore be able to accept the American proposals for some weeks.

His position would be much easier if the Dutch were to return 56
Pegangsaan East and offer immunity to the members of the
Republican Delegation.

6. Heated debates have followed Hatta's speech in the KNIP (see my
K. 154 [3]). The Government has so far come out of these debates
well and it is expected that the Hatta policy will be supported.

Only one clear cut motion has emerged. All parties agree that the
Government should be free to extend foreign relations. However,
practical problems make this question largely academic. The
exchange of consuls with Russia [4] is not being specifically
considered at this stage. It would meet determined opposition from
the Masjumi and the P.N.I.