Indonesia. Following is assessment of United States position based
on conversations with Lacy and United Kingdom Embassy.

1. State Department are most concerned at suspension of Hatta-
Stikker talks and return of Stikker and Sassen to The Hague. [1]
They do not, however, (and have so informed Indonesians)
anticipate police action by the Dutch. They believe, after careful
investigation, that Dutch are not prepared to take initiative in
breaking off negotiations. In spite of Hatta's statements they
believe Indonesians wish conversations renewed. Dutch may,
however, proceed with inauguration of interim Government on 15th
December.

2. State Department has therefore within the last twelve hours
reiterated in strongest terms to the Dutch that
(A) United States is categorically opposed to any renewal of
military action. This would not only be contrary to Security
Council resolutions, but would not achieve assumed Dutch objective
of stability and increased production in Indonesia. It could only
be followed by prolonged guerilla warfare necessitating
maintenance of large Dutch forces. Moreover it would be a
continuing drain on Dutch financial resources which would not be
to Dutch advantage. (We believe this is intended as a veiled
warning to Dutch that loans and E.C.A. aid will not be forthcoming
if Dutch renew 'police action').

(B) United States considers that talks should continue either in
the Committee of Good Offices, or directly between the parties. To
establish interim Government without Republic would make it most
difficult subsequently to bring the Republic in.

State Department have not informed Indonesians of above approach
to Dutch, which they wish regarded as secret.

3. Indonesian representative today told us he had been informed
from a very reliable source that Marshall was considering asking
Security Council to call for a report from the Committee of Good
Offices. We have been unable to obtain confirmation.

4. State Department believe that the United Kingdom, with their
experience in Malaya, can be of great assistance in bringing home
to the Dutch consequences of attempt to liquidate Republic. United
Kingdom Embassy have been kept informed of United States approach.

5. State Department are puzzled at Australian resolution in
E.C.A.F.E. providing that if no Netherlands-Republican settlement
is reached before the next meeting Republic should then be
admitted to associate membership. [2] They are not so concerned at
threatened Netherlands walk out as at possibility of replacement
of Hatta. Government at some stage e.g. by a Sjariffoeddin regime.

They could not commit themselves so far in advance to support
admission of Government whose composition cannot be certainly
known.