Hatta claims that the communists have been using terrorist bands
and that unrestrained looting followed the capture of Madiun. The
majority of the population of the city are believed to favour the
Government but are unorganised. The main airfield was still under
the Government's control last night.

2. Hatta and other members of the Government are confident that
the uprising will be quickly crushed although shortage of
transport and other factors such as the need to eliminate armed
bands in neighbouring areas may stretch the military operations to
as long as a fortnight. The total force of the insurgents in
Madiun is believed to be about 4 battalions.

3. The uprising has given the Republican Government an opportunity
to take necessary security measures in a manner which will evoke
maximum support. If the Government is able speedily to put down
the uprising it will have strengthened its position both
internally and externally. The main fear is that the Dutch may
cross the status quo line as part of the professed anti-communist
drive. Such a move would swing mass support to the insurgent
communists.

4. The Americans appear to agree with us that anything that can
increase the prestige of the present Republican Government is in
the interest of a peaceful settlement of the Indonesian dispute,
and that such prestige can best be increased by-
a. giving the Government full opportunity to settle their internal
problems without Dutch interference,
b. lending economic support in ways which would carry the least
stigma of Dutch co-operation, (supplies of textiles are most
important),
c. arranging for the reversal of recent Netherlands policy of
provocative incidents against the Republic in Netherlands-
controlled territory,
d. using all possible pressure to bring about an early and
satisfactory agreement with the Netherlands,
e. ensuring a proper implementation of A clauses of the Truce
Agreement,
f. generally lending such moral encouragement as is practicable.

5. The Indonesians will today accept the American proposals as a
basis for negotiations. In an immediately following letter on the
question of resuming negotiations they will reserve their position
regarding-
a. the return of 56, Pegangsaan East,
b. the withdrawal of eviction notices to Republican families in
Batavia,
c. the proper immunities for members of the Republican Delegation
in Netherlands controlled territory. [1]

They will also stress the importance of a full implementation of
the Truce.

6. It will now be up to the Americans to go to work on the Dutch.