INDONESIA

Judge Kirby is proceeding shortly by air to New York, where
together with his two colleagues on the Committee of Good Offices,
he will report to the Security Council on events leading up to
conclusion of truce agreement between Netherlands authorities and
Indonesian Republic last week.

2. We fully agree with Judge Kirby's view (which is shared by his
colleagues) that Committee must remain in Indonesia to supervise
the implementation of the truce settlement and the establishment
of neutral zones, to assist the parties to reach a settlement on
immediate political and economic questions, and to ensure that the
Indonesian peoples are given absolute freedom from coercion in
determining by plebiscite their future relationship with the
Indonesian Republic and the Netherlands Crown. It is our fear that
unless the Committee is allowed to continue in being, the
Republican position may be made so untenable that the negotiations
will again break down.

3. In this connection, it may be necessary for the Republic to be
assured that it will be in a position to control its own external
trade and to strengthen its economic position by the acquisition
of foreign exchange. The Dutch may oppose any such idea and may
try to insist that all exportable products from Indonesian owned
properties within the Republican area shall be handled by
themselves for their own purposes. We consider that this would be
most unwise from the point of view of a final settlement
satisfactory to the Dutch and there is nothing in the terms
accepted last week by the Republic which would preclude its
exercising direct control over the proceeds of its own exportable
goods. The Dutch have attained almost all their political
desiderata thus far and we believe they could well afford to adopt
a liberal attitude in this matter. if they do not do so we greatly
fear that the forthcoming discussions will break down and the
effect of the present truce agreement will be nullified in
circumstances in which world public opinion would be in full
support of the Republican position.

4. You should put these considerations before the United States
Government and point out to them that any influence they may be
able to exercise within or outside the Security Council towards
ensuring a satisfactory settlement of immediate economic issues
would be helpful.