Netherlands report of direct talks [1] was received today,
December 11th. The Netherlands delegation emphasised that:

(a) It has become clear that the Republican Government cannot
exercise control over its Armed Forces and therefore that
effective co-operation on part of the Republic to combat
infringements of Truce cannot be expected;

(b) Republican point of view regarding powers of High
Representative of the Crown and particularly regarding his control
over Armed Forces is fundamentally irreconcilable with the
Netherlands sovereignty as formulated in the first Additional
Renville Principle [2];

(c) That refusal to recognise Netherlands Sovereignty during the
interim period nullified acceptance by the Republic of the draft
agreement submitted by the United States delegation [3] on
September 10th, 1948 as a basis for negotiations;

(d) Netherlands Government must now proceed to promulgate decree
setting up Federal Interim Government leaving open, however, the
possibility of future admission of the Republican held areas.

2. Statement concludes 'The Netherlands Government regrets that
negotiations under the auspices of the Committee at this stage are
futile' in that the Republican Government does not 'in fact
recognise either truce or Renville Principles and basis for
agreement is fundamentally lacking'.

I shall endeavour to ensure that Committee's report to Security
Council which will probably be cabled tomorrow is as strong as
possible and makes it clear that further progress towards a
peaceful settlement depends on the Council's decisions. I believe
the United States may support direction from Council that
formation of Interim Federal Government without Republic be
postponed and that parties resume negotiations on basis of United
States plan. At any rate this course will be recommended by
Cochran.

3. Netherlands case depends basically on evoking a part of Article
I of 6 Additional Principles while ignoring the remainder of the
Article calling for guaranteed date for transfer of sovereignty.