Many thanks for your letter of October 13th. While I am not in a
position to give assurances regarding the conduct of the Military
Observers, I know of nothing to justify complaints about McCormack
and MacDonald. [1] On the other hand I do know the Dutch have
sought to discredit the Committee and its Military Observers [and
have initiated whispering campaigns against the Military
Observers]. [2] The Military Executive Board is at present
completing a report based on a Court of Inquiry into Dutch
allegations regarding the conduct of Military Observers in
Sumatra. This report will show clearly the many difficulties with
which our Military Observers are contending.

At this stage it would be rash to make predictions as to the
likely political developments in Indonesia. The situation here is
so tangled that it would be easy to make an analysis one day and
wish to contradict it the next. Having emphasised the difficulties
I shall, however, pass on the following comments:-

(1) Following Stikker's return to The Hague, there has not yet
been any clear indication of whether or how the Dutch will resume
political negotiations. Obviously a stiff fight has been in
progress at The Hague with the Catholics siding with the Rig[ht]
Wing parties against Stikker. It is reported that new instructions
will be issued by The Hague and it is strongly hinted that the
Netherlands will maintain their policy of insisting on the
cessation of the truce violations and ask Hatta to clarify the
points he has brought up. It may be expected, therefore, that the
Dutch will continue the approach of informal negotiations with the
Republic designed to obtain far-reaching concessions and, in
particular, a clear statement on the position of the T.N.I.

(2) The present Netherlands policy of avoiding resumption of
negotiations within the G.O.C. and of pursuing informal talks with
Hatta has the following advantages for the Dutch:-

(a) At best, a continuation of pressure may bring about
capitulation by Hatta.

(b) If Hatta does not capitulate, or if there is no settlement
possible which would be satisfactory to the Dutch, the latter
could break off negotiations, charging the Republic with failure
to be reasonable on any one of a number of important points. For
example, they could charge that Republican insistence on
maintaining the T.N.I. during the interim period is impossible and
cannot be tolerated by the other States.

(c) The position is kept obscure, and prevents decisive action by
the Security Council or the Americans.

(d) At worst the Dutch are successful in achieving a series of
delays. Time is on the Dutch side. Economic and political
conditions are deteriorating in the Republic, while the
Netherlands are pressing ahead with their own political plans for
Indonesia. A continued stalemate in the present circumstances
would lead inevitably to disruption in the Republic.

(3) Stikker's visit has brought no improvement in the Dutch
attitude which appears to be hardening towards the Republic, the
Americans and the Committee. The main tenor of Dutch policy still
seems to be directed towards military action against 'the extreme
nationalists'. I am inclined to believe that Stikker will be able
to obtain support at The Hague only on the basis of putting off
Dutch military action until after an agreement with the Republic.

His [supporters] [3] would, therefore, demand Republican
acceptance of a Dutch-dominated interim government, which would
permit the Dutch to take 'security' action against 'extreme'
elements throughout Indonesia.

(4) General Spoor and the Army are obviously set for military
action and are unwilling to consider anything else. A general
background of propaganda from the Army Information Service and in
the local press is establishing an atmosphere in which police
action could be taken with full popular support.

Today the Army Information Service, for example, announced, 'In
the week from the 10th up to and including the 16th November, a
greater number of incidents has occurred than in any preceding
week since the Renville Agreement.' These incidents, of course,
have all occurred in Dutch-controlled territory and do not
constitute, in themselves, breaches by the Republic of the Truce
Agreement, but they are used as anti-Republic[an] propaganda.

(5) Last week provided a glaring illustration of Dutch efforts to
cloud the atmosphere and hinder efforts toward a settlement.

Stikker, on his return to Holland, said at a press conference
'that this week definitely a sharp fall in the curve of incidents
could be noticed, the reason of which he could not explain'.

Immediately the Army Public Relations issued an official press
release contradicting Stikker. This contradiction of a Minister,
which has been reported by 'Aneta' as unprecedented, had the full
approval of the High Representative of the Crown, Dr. Beel.

(6) In these circumstances Hatta is walking a political tightrope.

He is anxious to explore all possibilities for a peaceful
settlement but he must realise the extent of Dutch demands and he
must realise the lack of political support in the Republic for
acceding to those demands.

(7) I understand that Nehru's advice to the Republic is to adopt a
reasonable course without giving way on any essential point.

(8) Nevertheless, the Republican Aide Memoire, see my telegram
K.189 [4], has made a large number of unilateral concessions and
in the case of the Army and of security measures seem[s] to have
given way on essential points. The explanation of these
concessions could be based on any of the following:-

(a) a last effort to have the negotiations resumed with the G.O.C.

in the face of threatened military action by the Dutch,
(b) the urgency of some settlement in view of increasing economic
difficulties within the Republic,
(c) a fear that increasing internal difficulties may increase
opposition to the Government and support for the radical parties
in the Republic,
(d) the expectation that the Dutch would refuse to accept further
points required by the Republic and that the Aide Memoire would
therefore strengthen the Republic's moral position in the event of
a breakdown,
(e) clumsy negotiations by the Republic and a failure by their
representatives to see the full implications of the concessions
made. The Aide Memoire is obviously based on a Dutch draft and
Sjahrir has told me privately that he considers the people chosen
by the Republic for the discussions were not the best available
and were not experienced enough to deal with the Dutch.

Hatta is certainly proving co-operative and making a real positive
effort. This is borne out by his speech last night to the
Republic. I quote in full 'Aneta's' report:-

'Dr. Mohammed Hatta told the nation this evening to remain firm in
face of mounting difficulties. A firm attitude will help us
achieve our goal, while a weak attitude will play us into the
hands of foreign countries, he said.

The Republican premier described the Stikker talks as helpful, but
the atmosphere has been impaired by "Batavia". He singled out
especially the reports of the Dutch Army Public Relations.

"We shall defend ourselves if we are attacked", the premier went
on. "But if we are left alone we must carry out our promises."

Dr. Hatta then appealed to the army and police units to carry out
their duties and threatened the heaviest punishment against truce
violations.

Reaffirming his desire to co-operate with the federalists, Dr.

Hatta said it is silly to speak about the "marionette governments"

because "we Indonesians have an end to attain, namely freedom for
all Indonesia."

"There should be no antithesis between us and the federalists", he
said. "We must join forces with them to achieve our goal on 1st
January, 1949."

Going in detail into the Madiun coup which he described as a
national tragedy, Dr. Hatta said the ideological struggle has
cracked national unity while dissension has been caused by the
political tug of war.

Dr. Hatta said the difficulties which are being encountered by the
people were caused by the Dutch blockade, the Madiun affair and
the prolonged drought which has resulted in crop failures.

"But if we remain firm and united, we shall overcome these
difficulties", he said.'

The speech has been received with caution by the Dutch. 'Not
unfavourable' is a typical luke-warm comment. But there are
indications that some at least of the federalists are extremely
pleased.

Hatta will leave tomorrow for Sumatra, reportedly for some weeks.

There are very likely political reasons involved, but it is also
clear that the Prime Minister of the Republic is greatly concerned
with the need of strengthening his Government by tightening the
army and civil administration and by dealing with the economic
difficulties. The latter are considerable, as is evident from the
summary of his speech set out above. On receiving news of Hatta's
intended departure, the Dutch made overtures directly and through
the Committee to have the Republican Prime Minister stay for
negotiations which it was suggested would be resumed shortly.

Hatta replied that his trip was urgent but that if required he
would return from Boekittinggi immediately negotiations were
resumed. It may confidently be presumed that his return would be
required, since I am sure Sukarno would not make decisions in his
absence.

To sum up, it appears that Cochran and the Americans have so far
failed to cope with the Dutch tactics. As long ago as early
September, Cochran presented his plan [5] for urgent
consideration. Now November is drawing to a close with no clear
prospects of a resumption of negotiations on the basis of his
proposals. Cochran seems to be in two minds as to what to tell his
Government. On the one hand he realises the situation is
deteriorating and that it may become impossible. He realises too
that complete submission by Hatta could be as unsatisfactory as no
settlement at all. On the other hand, he is anxious to give
Stikker full opportunity to bring about a settlement and as he
admits the Americans, with this in mind, have been avoiding over
the last two weeks any pressures on the Dutch. I believe that
unless there are favourable developments in the next few days it
is essential for the Americans or the Committee to take a firm
initiative and I believe I can convince Cochran of this.

To pass to a lighter subject, I should be glad if you could
arrange to have sporting news about Australia, such as copies of
Australian sporting papers, sent to the Consulate for circulation
to Indonesian sporting commentators. A number of them have
approached me, saying they would like to include more news about
Australia in their articles in the local press, but that they have
been unable to obtain material.